A Snapshot of U.S. Regional Growth in 2007

Of the top 15 states listed, Utah was a clear leader, recording GSP growth of nearly 8% on the year. Utah enjoyed substantial growth across many key sectors, but benefited particularly from exceptional performances in the manufacturing, retail trade, and business services sectors. Texas has clearly become a top performer, developing one of the largest and most diverse state economies in the country. Like Utah, the Lone Star State has also benefited from thriving business services and manufacturing sectors, as well as strong oil and natural gas markets.

Although there is no singular driving force behind the strong economic growth across this selection of states, good performances in each of the top states’ manufacturing sectors has been one key factor. As indicated in the table, a significant proportion of the 15 states earned high ranks for manufacturing output growth last year, notably Utah, Montana, Texas, Washington, South Dakota, and New Mexico, all of which ranked among the 10 best nationally. In contrast, many slower-growing states have seen their economic growth prospects severely constrained by eroding manufacturing sectors, including severe declines in employment levels and the near dissolution of many traditional industries. It is no surprise that several of the perennially weak states in the nation’s infamous Rust Belt—including Michigan, Indiana, and Ohio—can be found in the bottom ranks for 2007 manufacturing output growth.

New York and Washington, D.C. are two exceptions to the connection between manufacturing growth and overall economic health. The two economies benefited immensely from success in their financial sectors last year; even though the fourth quarter marked the beginning of a significant downturn, financial sector growth during the previous three quarters was more than adequate for generating impressive annual gains. Professional and business services have also boosted both employment and GSP growth in many states.

Ultimately, consistent healthy growth patterns cannot be sustained by a single sector or industry, and instead require good contributions from several components of an economy. Many of the successful states have emerged as ideal locations for business growth thanks to faster population gains, low-cost operating environments, favorable policies to attract new businesses, and rising levels of educational attainment that can attract prominent firms from other states. Looking forward, the national economic downturn will undoubtedly lead to reduced growth rates in many of these states for 2008. But given the established recipes for success in many of them, their performance rankings relative to the rest of the United States are likely to remain consistent in the near future.