Update: We have posted a follow-up that shows the performance of major industry sectors in every state in an interactive format.
By Hank Robison and Rob Sentz. Illustration by Mark Beauchamp.
In many ways, individual U.S. states are like 50 laboratories where differing public policy, industry focus, and economic development strategies are tried and tested. Different approaches yield different results and some states become more competitive – gaining a larger share of total job creation — while others struggle and lose share. This phenomenon has been evident over the past few years as our nation struggles to recover. Some states have been doing quite well while others are still limping along.
In this post we have produced a side-by-side analysis of every state to show how they stack up against each other. The goal is to see which states are becoming more competitive (that is, gaining a larger share of the total job creation), and which are losing their share of the jobs being created. The table and graphic each rank the states based on the overall competitive effect and what percentage of jobs (from 2007-2011) are based on competitive effects.
HOW WE DID IT
To produce this analysis we used “shift share,” a standard economic analysis method that reveals if overall job growth is explained primarily by national economic trends and industry growth or unique regional factors. Shift share analysis, which can also be referred to as “regional competitiveness analysis,” helps us distinguish between growth that is primarily based on big national forces (the proverbial “rising tide lifts all boats” analogy) vs. local competitive advantages.
Read more on shift share in this article: Understanding Shift Share.
ABOUT THE DATA
The chart (see the full version here) and table display aggregate industry data (2-digit NAICS) for every state plus Washington, D.C. from 2007-2011. To generate our ranking, we summed the overall competitive effect for each broad 2-digit industry sector (e.g., agriculture, manufacturing, health care, construction, etc.) and added them together to yield a single statewide number that indicates the overall competitiveness of the economy as compared to total economy. We calculate the competitive effect by subtracting the expected jobs (the number of jobs expected for each state based on national economic trends) from the total jobs. The difference between the total and expected is the competitive effect. If the competitive effect is positive, then the state has exceeded expectations and created more jobs than national trends would have suggested. It is therefore gaining a greater share of the total jobs being created. If the competitive effect is negative, then the state is below what we would expect given national trends. In this case the state is losing a greater share of the total jobs being created.
There’s no surprise at the top: North Dakota is the clear leader. If North Dakota grew at the rate of the national economy, we would have expected about 470,000 total jobs in the state for 2011. Instead, there are an estimated 520,000 jobs in the state. The difference between the two is the competitive effect. In other words, North Dakota is ahead of what we would expect by 47,000 jobs, or nearly 10% greater than it should be.
Second on our list is Texas, which is 6% (or 880,000 jobs) ahead of where we would predict given national trends. Alaska, Louisiana, and South Dakota are about 4% above their expected jobs totals. Better-than-expected performances in construction — and in some cases, oil and gas extraction and government — are major driving factors for this growth. More importantly, oil is driving lots of other economic activity within some of these states and they are pulling a greater share of jobs to support the resultant industry growth.
Bolstered by significant government spending, Washington, D.C, also gained a greater share of jobs since the recession. The region is nearly 3% ahead of where we would expect.
Other states with solid competitive effects (about 1%) are Nebraska, Oklahoma, Vermont, Utah, Iowa, Arkansas, Massachusetts, Washington, Pennsylvania, New York, Colorado, Virginia, and Wyoming.
Nevada is last on our list. The difference between total jobs and expected jobs is -110,000 or nearly -8%. For Nevada and Arizona, second-last in competitiveness, the construction sector is the major culprit.
In terms of total job expectations, Florida and California are losing the greatest share of the jobs. They are both about 400,000 below what would be expected. For Florida, that is a much more significant figure (4.25% below expected growth).
Michigan is nearly 200,000 jobs below where they should be.
Other states that are losing a significant share of jobs are Tennessee (-1%), Indiana (-1.24%), Hawaii (-1.28%), Ohio (-1.41%), New Mexico (-1.57%), Georgia (-1.84%), Alabama (-1.85%), Idaho (1.91%), California (-1.94%), and Rhode Island (-2.33%).
The big lesson: states that gained a greater share of the total job creation from 2007-2011 have characteristics that make them more competitive and healthy from a job creation point of view. If a state is losing, then it stands to reason that there are factors within the state that make it less competitive. As the economy recovers, the states with higher competitive effects could have an advantage over states that haven’t been able to create or pull their fair share of the jobs. If a state is hemorrhaging jobs faster than the national economy, there should be cause for concern. There are likely toxic conditions within industry sectors and economic policies that make it very difficult for employment and economic activity to flourish. As the nation recovers these states will likely recover much slower, and other states might just keep pulling more jobs away from them.