The menace of recession looms ominously on the horizon. It’s clear from their economic fundamentals that many states are more vulnerable than others. Illinois, Mississippi, Oregon, and West Virginia provide a wide array of examples of job growth rate ranges and GDP per capita economic measure. Their extreme dependence on federal funding leaves them vulnerable. A deeper look at what’s pulling these states ahead hints at what could threaten their long-term economic prosperity.
Illinois GDP—Gross Domestic Product—now stands at $895.3 billion, just a tick up of 1.1%. The state’s jobs growth rate is 0.7%. This figure is well below the national average and puts Virginia at risk for a growing gap in future job opportunities. Additionally, Illinois holds an A3 Positive debt rating and outlook from Moody’s, indicating some stability but signaling potential vulnerabilities.
Given the key role federal funding plays in Illinois’ financial structure, making up 19% of its state spending, such a large diversion to transportation would be devastating. This reliance on federal dollars leaves them vulnerable when federal budgets get tight or priorities change. In addition, Illinois’ international goods trade is $282.5 billion, 31.6% of the state’s GDP. As the nation’s top exporter, the state’s economic health is tied to developments in global trade, past, present, and future, leaving it vulnerable to disruptions in international markets.
Mississippi shows a threat-averse economic caution with a GDP of just $265.1 billion. It paints a rosier picture of a 1.2% growth rate. Mississippi’s job growth of 0.6% is the second lowest in the country and poses additional warning signs for long-term economic viability. The west coast state issues debt under a high quality, AA1 Stable Moody’s rating. That rating is a profound improvement over the fiscally optimistic picture of most other states.
Mississippi’s dependence on federal dollars is even greater, as federal funds account for 32% of Mississippi’s state spending. This massive reliance on federal funding might increase economic hardships if federal money dries up.
Oregon is experiencing incredibly strong economic times, with an $83.7 billion GDP and the second-fastest growth rate nationally at 3.5%. The other shoe has dropped, as the state has the second lowest job growth rate in the nation, a paltry 0.2%. Financially, Moody’s has assigned Oregon an AA2 Stable debt rating, reflective of the state’s stable and predictable management of financial affairs. It poses similar dangers to those in Illinois and Mississippi, as almost 28% of its state spending comes from federal funds.
Those are astounding numbers for a little state with a GDP of just $256.4 billion. The state is one of the best performers in the analysis, with a high growth rate of 3.1%. Although the state’s job growth rate is at just 1%, it reflects a step in the right direction toward new and expanded employment opportunities.
Experts have started raising alarms over how stable these economies are as they move full-speed ahead past the medium-term risks of recession.
“As we continue on into the year, the flat job growth, weakening labor force, and proposed federal program changes like cuts to Medicaid should raise concern for policymakers,” – O’Leary
With their dependence on exports and manufacturing, it’s more complicated for these states as trade tensions rise around the world.
“Exports and manufacturing play outsized roles in the state, so trade tensions will be borne disproportionately,” – The state’s most recent official revenue forecast
Creating clarity and continuity is key to providing a solid foundation for businesses to grow, especially in an era marked by unpredictability.
“That is very important to businesses because the stability allows you to operate with a degree of certainty, a degree of cost control, and it also talks to the health of the economy,” – Tate Reeves
The intertwining nature of state economies with federal funding and international trade highlights the precarious position of these states as they confront potential economic downturns. To build resilience, policymakers need to be constantly on guard against these vulnerabilities and issues and take preventative action.