PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Covid-19 ECONOMIC UPDATE: Are Some State Economies Better Equipped to Withstand the Downturn?

By at 10 April, 2020, 2:47 pm

by Raymond J. Keating-

Make no mistake, no part of this country will escape the economic pain being inflicted by the coronavirus and related economic shutdown measures. But are some states in a better position to weather the storms than others? That’s a difficult question to answer, but we can consider some important pieces of information or analyses.

First, the U.S. Bureau of Economic Administration released its estimate for fourth quarter GDP by state on April 7. This provides a look at how each state was doing heading into this crisis. For example, 11 states grew at a real rate of 2.5 percent or better in the fourth quarter of 2019:

Growth Rank    

    State Real State GDP Growth Rank – 4th Qtr 2019             

1     Washington      3.4%
2     Utah      3.4%
3     Arizona      3.3%
4     Texas      2.9%
5     Florida      2.6%
6     Colorado      2.6%
7     Nebraska      2.6%
8     South Carolina      2.5%
9     Idaho      2.5%
10     Nevada      2.5%
11     Maryland      2.5%

 

At the other end, 11 states grew at less than 1.5 percent in the fourth quarter 2019:

Growth Rank  State Real State GDP Growth Rate – 4th Qtr 2019
40      New York      1.4%
41      Iowa      1.3%
42      Indiana      1.1%
43      Louisiana      1.1%
44      Connecticut      0.9%
45      New Jersey      0.7%
46     Oklahoma      0.6%
47     North Dakota      0.5%
48      Alaska      0.4%
49      Wyoming      0.0%
50    West Virginia      -0.1%

Clearly, there was a wide disparity of economic growth rates among the states in terms of where they were coming into the coronavirus crisis.

Second, it’s also worth considering where each state ranked on SBE Council’s “Small Business Policy Index 2019: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth.” The Index captures which states offer the best and worst public policy environments for entrepreneurship, small business and investment. It ranks the 50 states according to 62 different policy measures, including assorted tax, regulatory and government spending measures.

The most entrepreneur-friendly states under the “Small Business Policy Index 2019” were: 1) Texas, 2) Nevada, 3) Florida, 4) South Dakota, 5) Wyoming, 6) Indiana, 7) Utah, 8) Alabama, 9) Arizona, 10) Washington, 11) Tennessee, 12) Colorado, 13) Ohio, 14) Michigan, and 15) North Carolina.

In contrast, the most anti-entrepreneur policy environments were offered by the following: 36) Arkansas, 37) Nebraska, 38) Massachusetts, 39) Rhode Island, 40) Maryland, 41) Maine, 42) Iowa, 43) Oregon, 44) Connecticut, 45) Vermont, 46) Minnesota, 47) New York, 48) Hawaii, 49) California, and 50) New Jersey.

The Index gives us an idea of which states, from a basic policy standpoint, make matters worse or relatively better for small businesses during this pandemic and economic downturn.

Third, on March 31, Wallethub.com released a report titled “State Economies Most Exposed to Coronavirus.”

One can debate some of the criteria used, but there were 10 metrics, including most notably, GDP generated by high risk industries, share of employment in high impact industries, share of employment from small business, states prepared for the digital economy, share of workers working from home, and work-from-home telecommunications infrastructure.

According to this measure, the 10 most exposed states to coronavirus are:

Rank      States Most Exposed To Coronavirus
1      Louisiana
2      Rhode Island
3      Nevada
4      Maine
5      New Hampshire
6      Pennsylvania
7      Montana
8      New Jersey
9      Massachusetts
10      Illinois

 

As for the least exposed states (eliminating the District of Columbia (ranking 16th) from the list):

Rank      States Least Exposed To Coronavirus
41      Arkansas
42      Nebraska
43      Alabama
44      South Dakota
45      Wyoming
46      Utah
47      Oregon
48      Alaska
49      California
50      Georgia

 

These three reports or studies can provide some valuable information about the states heading into and during this coronavirus outbreak and economic downturn. Two states are particularly worth highlighting:

●  First, Utah ranks well on all three measures.

●  Second, New Jersey ranks poorly on all three.

Hopefully, this kind of information can help policymakers, businesses owners and investors during these tough times.

Stay safe, healthy and innovative!

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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