America’s 10 Worst State Economies
As the U.S. economy continues to recover from the pandemic, fears of a recession have subsided. Although the outlook is brighter than a year ago, the nation’s economic landscape remains uneven, with some states struggling to keep pace with the robust growth experienced in others. CNBC’s annual ranking of America’s Top States for Business considers numerous factors, including economic growth, job creation, fiscal soundness, and housing market health, to assess each state’s economic competitiveness. This ranking reveals a stark contrast between the top 10 and the bottom 10 state economies, highlighting critical challenges and opportunities.
Key Takeaways:
- Mississippi reigns supreme as the state with America’s worst economy. This dismal ranking stems from sluggish growth, weak job creation, and the lowest labor force participation rate in the nation – a staggering 53.8%.
- Hawaii takes the second spot on the list, struggling to recover from the pandemic’s crippling impact on tourism and the devastating wildfires that ravaged Maui.
- States like New Hampshire, Louisiana, Kansas, Kentucky, Rhode Island, Maine, and Illinois face their unique economic struggles ranging from sluggish home appreciation, worrisome pension obligations, and insufficient budget reserves.
- Vermont rounds out the unfortunate top 10 with a lack of major corporations and a slow-growing economy.
**Mississippi: A Slow-Growing Economy With A Labor Force Participation Crisis**
The Magnolia State is facing a multitude of economic challenges, primarily fueled by a severe labor force participation crisis. Mississippi boasts the lowest labor force participation rate in the country, with only half of its working-age population employed or actively seeking employment. This dramatic shortfall hampers the state’s economic potential, hindering its ability to attract investment and grow jobs. While Governor Tate Reeves celebrates record job numbers, the reality is that Mississippi’s job growth remains among the lowest nationwide.
Signs of Hope, But Uncertainty Lingers
Despite the bleak picture, there are some glimmers of hope. Mississippi’s University Research Center suggests that the state may avoid a recession this year, with positive economic growth forecast for 2024. This positive outlook is attributed to increased immigration helping to ease the state’s chronic labor shortages. However, the researchers warn that this growth may come at the expense of future years, casting a shadow of doubt over Mississippi’s long-term economic prospects.
**Hawaii: A Tourism-Dependent Economy Struggling to Bounce Back**
Hawaii’s economy, heavily reliant on tourism, has been battered by a series of crises. The pandemic initially dealt a devastating blow, crippling visitor numbers and leading to widespread economic hardship. While the state was experiencing a rebound, the August 2023 wildfires in Maui delivered a second, catastrophic blow, destroying homes and businesses, and further undermining tourism. State forecasters predict that tourism, the lifeblood of the Hawaiian economy, will remain flat this year, compounding existing economic challenges.
Resilience and Optimism for the Future
Despite the formidable obstacles, Hawaii’s economic projections for 2025 are optimistic. With tourism numbers anticipated to climb again, the state is hopeful for a rebound in economic activity. The key to Hawaii’s recovery, though, lies in fostering a more diversified economy less dependent on tourism to weather future storms, whether natural or economic.
**The Other Struggling Economies**
The ten lowest-ranked state economies face a unique set of circumstances that contribute to their relatively weak economic performance.
Vermont, despite its idyllic charm, struggles to attract major corporations, leaving its economy vulnerable to limited growth.
Illinois, burdened by the nation’s lowest pension funding ratio and inadequate budget reserves, is plagued by a challenging fiscal situation.
Maine grapples with a flat revenue picture, a problem worsened by its less-than-stellar credit rating.
Rhode Island, plagued by a long-standing pension crisis, faces a backlash from retirees seeking restored benefits.
Kentucky, hindered by a sluggish housing market and slow job growth, struggles to attract new businesses.
Kansas, though boasting solid economic growth, lacks major corporations and foreign direct investment, undermining its long-term prospects.
Louisiana, grappling with a high underwater home equity rate and low labor force participation, is experiencing a stagnant job market.
New Hampshire, facing severe labor shortages, sees economic growth hampered by a combination of an aging population, child-care issues, and limited housing availability.
These states face unique obstacles that hinder economic progress. Addressing these challenges is vital for these states to achieve sustainable growth and improve their ranking in the national economy.
**Improving State Economies: Unlocking Opportunities**
While each state faces its own distinct challenges, there are common themes in their economic struggles.
- Attracting Investment and Businesses: Many of these states lack a strong track record of attracting major corporations or significant foreign investment. This weakness exposes their economies to vulnerability and limits their ability to build a diverse and robust ecosystem of businesses.
- Addressing Labor Shortages: The labor force participation crisis, particularly pronounced in Mississippi, is a pervasive problem in many of these struggling economies. Aging populations, childcare difficulties, and high housing costs are contributing to this issue.
Strengthening Fiscal Management: Several states face significant fiscal challenges, including inadequate budget reserves, strained pension obligations, and high borrowing costs. Effective fiscal management and responsible budgeting are essential for building stability and attracting investment.
Developing strategies to address these shared challenges is crucial for these states to propel economic growth, create more jobs, and improve their standing in the national economic landscape.
