Economic Perspectives - 06/12/26

State level Real GDP (GDP) results are another example of the bifurcation that exists within the US economy. The good news is that 49 out of the 50 states experience positive year-over-year growth. The data also highlights the role that spending on technology has had for both state and national GDP. The state data also highlights why the national data does not accurately reflect what is happening for each individual state. The takeaway from the data is that you are not crazy if you are not experiencing what the national GDP data is showing for US economic growth. At the micro level, I continue to counsel to believe what you are experiencing if it is different than the national data that is reported in the media. Plan your business or personal financial strategies based on what is happening in your local economy.

Real GDP (GDP) is the way the US measures its economic growth. The headlines focus on the national GDP data. What does not make the headlines is the state-level GDP data even though each reader probably cares more about how their state economy is doing versus the national economy. This edition of Economic Perspectives examines the year-over-year growth of those states whose GDP outperformed that national number as well as the 10 states that underperformed that national number the most.

Let us start by examining the cumulative growth states that experienced faster year-over-year GDP growth than the US. As you can see from the graph below, there is no clear evidence that location or political leanings drive outperformance. The Bureau of Economic Analysis divides the US into eight regions. Out of the 18 states that outperformed the US year-over-year GDP growth, all regions have at least one state that outperformed the US. The Plains region had the most states with four. Two regions had three states, three regions had two states, and two regions had one state. The well-established and resected Cook Political Reports Partisan Voting index identifies states by three political categories: Republican leaning, Democrat leaning, or Split. Out of the 18 states, nine are classified as Republican leaning, six are classified as Democrat leaning, and three are classified as Split states.

Let us examine the contributions of each industry sector towards the state GDP to see if there are patterns revealed. Examining this data reveals more of a pattern, but not a clear and distinct pattern. As you can see from the table below, the Information industry dominated as the top contributor to total state GDP. Out of the 18 states, 11 had the Information industry sector contributing the most to the state's total GDP. What is just as interesting is the percentage of total year-over-year GDP growth for the top contributing sector. The lowest percentage is 22.3% for the Information sector in Texas, while the highest percentage is The Agriculture, Forestry, Fishing, and Hunting sector in Nebraska at 71.4%. High concentrations raise the risk that if something happens to that industry sector, the state could face high financial stress.

The telling metric to consider is how much of the year-over-year US GDP growth did the 18 states comprise? What the data reveals is how concentrated the US GDP growth is. The 18 states that outperformed the US accounted for 81.4% of the total year-over-year US GDP growth. That may help explain the divergent views that people have about the health of the economy.



Now let us examine the 10 states that underperformed the US the most. As the below graph highlights, the 10 states with the weakest year-over-year GDP growth grew 1% or less. One state-Maryland-had negative growth. Of the three states where Washington Trust Bank has offices, two fell into the bottom 10. Some might be surprised to see Idaho in the bottom 10. What you must remember is that Idaho has consistently had stronger year-over-year growth than the US. Since 2014 Idaho has only underperformed for one quarter in 2021 and three quarters in 2023. Since the current underperformance has only existed for two quarters it is too early to tell if this is another temporary underperformance.

Examining the data in the table below reveals that there is no clear dominant industry in the way the Information industry dominated the top 18 states. The concentration in the top performing industry is more pronounced. As you can see from the table, on a net basis, one industry made up over 100% of the year-over-year performance. That is because there were other industries that had severe negative growth. The best example of this is Maryland, where Information makes up 458.4% of Maryland's total year-over-year GDP growth. This is because Maryland's total growth was negative with many industries showing negative growth. That means that since the Information sector had growth, the percentage becomes a big number. 

The important thing to note for the bottom ten is that they make up 2.64% of total year-over-year US GDP growth.