These 10 states are America’s worst economies, at high recession risk

Charting the future of the U.S. economy is hard enough nowadays. Recession? Soft landing? Something else? It gets even harder when you consider regional differences.State economic performance in 2022 ranged from 4.9% growth in gross domestic product in Idaho to a 2.4% GDP decline in Alaska, according to the Commerce Department. That means some states are better positioned to weather an economic downturn than others.Companies know that, which is why they consider the health of a state’s economy when they are deciding whether to do business there. CNBC’s annual competitiveness study, America’s Top States for Business, considers it too.Given this year’s economic uncertainty, the Economy category is among the most important in our 2023 methodology.To determine which states have the best and worst economies, we look at overall economic growth, annual job growth on a percentage basis, as well as the health of state finances. We also look at the overall health of the housing market. We measure the breadth of each state’s economy by looking at how many major corporations are headquartered there. And, new in 2023, we are evaluating the entrepreneurial economy based on new business formations.Some states are doing great. But these ten states are the most at risk of falling into a recession even if the rest of the country avoids one.Southwest Airlines celebrated five years of airline service to Hawaii at the Long Beach Airport with a new plane painted to honor the islands of Hawaii, in Long Beach on Friday, April 28, 2023.Brittany Murray | MediaNews Group | Long Beach Press-Telegram via Getty Images10. HawaiiThe pandemic hit the Aloha State hard. The loss of tourism, Hawaii’s most important industry, led to $18.7 billion in lost production between early 2020 and the middle of last year, according to researchers at the University of Hawaii. Thankfully, the tourists are back, and then some. But factor in inflation, the researchers say, and the state is still recovering.2023 Economy Score: 145 out of 360 points (Top States grade: D+)GDP Change (2022): +1.2%Nonfarm Jobs: +3.6%Debt Rating and Outlook (Moody’s): AA2 StableRoddy Grimshaw works on his family’s lobster boat, catching lobsters in the coastal waters, outside of the fishing village of Stonington, Connecticut.Andrew Lichtenstein | Corbis News | Getty Images8. (tie) ConnecticutThe Nutmeg State has made great strides getting its fiscal house in order, with a growing budget surplus this year. That will help shore up reserves that are still lagging, according to data from the Pew Charitable Trusts. Connecticut’s GDP grew solidly last year, which is also a plus. Jobs are coming back too, but still not quite to pre-pandemic levels, according to the Labor Department.2023 Economy Score: 141 out of 360 points (Top States grade: D)GDP Change (2022): +2.4%Nonfarm Jobs: +1.6%Debt Rating and Outlook (Moody’s): AA3 StableContestants have their cattle judged at the Iowa State Fair on August 20, 2021 in Des Moines, Iowa.Scott Olson | Getty Images8. (tie) IowaRising interest rates and inflation are not good for an Iowa economy that is heavily dependent on agriculture, and the numbers in the Hawkeye State bear that out. Economic growth last year was the third-slowest in the nation. Job growth was not much better. New business formations were low, according to the Census Bureau. Fortunately, Iowans are thrifty. So, Iowa’s debt rating is solid, and the state’s balance sheet could be a lot worse.2023 Economy Score: 141 out of 360 points (Top States grade: D)GDP Change (2022): –1.5%Nonfarm Jobs: +1.8%Debt Rating and Outlook (Moody’s): AAA StableA customer browses guns at RTD Arms & Sport in Goffstown, New Hampshire on June 2, 2022.Ed Jones | AFP | Getty Images7. New HampshireWhile there are signs the economy in the Granite State is finally getting solid again, people don’t seem to be feeling it yet. Of the 1,105 New Hampshire residents polled in the latest BIA Report on Consumer Confidence released in May, 49% said their household’s financial condition is worse than a year ago. Just 11% said they were better off. The state’s sluggish economic performance might help explain why.2023 Economy Score: 132 out of 360 points (Top States grade: D)GDP Change (2022): UnchangedNonfarm Jobs: +3.3%Debt Rating and Outlook (Moody’s): AA1 StablePatrons eat at Pere Antoine Restaurant after restrictions were eased from two months under the coronavirus disease (COVID-19) lockdown, including allowing for 25 percent of permitted occupancy in stores and restaurants, in New Orleans, Louisiana, May 16, 2020.Kathleen Flynn | Reuters6. LouisianaWhile job growth resumed in the Pelican State last year, economic growth has been much slower. The housing market is troubled as well. As of the first quarter of this year, more than 10% of Louisiana mortgages were underwater, according to Attom Data Solutions. That is the worst figure in the nation. Pew estimates that if the state were forced to live on its fund balances alone, it would last for just over three weeks.2023 Economy Score: 120 out of 360 points (Top States grade: D-)GDP Change (2022): –1.8%Nonfarm Jobs: +1.6%Debt Rating and Outlook (Moody’s): AA2 StableTrucks are parked in front of newly built duplexes in a subdivision in Williston, North Dakota.Andrew Burton | Getty Images5. North DakotaThe Peace Garden State is another place where heavy exposure to agriculture — not to mention energy — is bad for the economy in a rising rate and inflationary environment. New home construction is sluggish in North Dakota, according to Census Bureau data, but if that is constraining supply, it is not doing much to boost prices.2023 Economy Score: 108 out of 360 points (Top States grade: F)GDP Change (2022): –1.3%Nonfarm Jobs: +2%Debt Rating and Outlook (Moody’s): AA1 StableIn this aerial, homes are surrounded by floodwater from the Mississippi River on May 03, 2023 in Albany, Illinois. Scott Olson | Getty Images4. MississippiA report by a state legislative watchdog released in May said that each of the funding metrics for the Magnolia State’s public pension system had reached “red signal-light status.” If that sounds ominous, it’s because it is. Because of the underfunded condition, the pension system’s board voted to increase the required contribution from employers, which include local governments, by 5%. But that is money that many municipalities say they do not have. And it is indicative of the kind of hole the Mississippi economy is in.2023 Economy Score: 102 out of 360 points (Top States grade: F)GDP Change (2022): +0.2%Nonfarm Jobs: +1.6%Debt Rating and Outlook (Moody’s): AA2 StablePeople walk by ongoing construction on April 08, 2021 in Providence, Rhode Island.Spencer Platt | Getty Images2. (tie) Rhode IslandThe Ocean State posted sluggish economic and job growth last year, exacerbated by the state losing population, according to Census data. Rhode Island is running a budget surplus. Nonetheless, it could only last about a month on its current fund balance, according to Pew.2023 Economy Score: 99 out of 360 points (Top States grade: F)GDP Change (2022): +1.5%Nonfarm Jobs: +1.6%Debt Rating and Outlook (Moody’s): AA2 StableHouses in Harper’s Ferry, West Virginia.Robert Knopes | UCG | Universal Images Group | Getty Images2. (tie) West VirginiaThe Mountain State added only about 1,400 jobs all of last year, leaving employment still below pre-pandemic levels, according to the Labor Department. West Virginia’s housing market is showing signs of stress, with an increase in foreclosures at the start of the year.2023 Economy Score: 99 out of 360 points (Top States grade: F)GDP Change (2022): +0.4%Nonfarm Jobs: +0.2%Debt Rating and Outlook (Moody’s): AA2 StablePeople walk through a snowy downtown on November 04, 2022 in Anchorage, Alaska.Spencer Platt | Getty Images1. AlaskaThe Last Frontier was dead last in economic performance last year, with its economy shrinking by 2.4%. Declining oil production was a big reason. Last year’s output was the lowest since 1976, according to the Energy Department. That has forced some tough choices. Last month, Gov. Mike Dunleavy vetoed more than $200 million from the state’s Fiscal 2024 budget, including more than $87 million in school funding. Alaska is looking at new revenue sources to make up for declining oil demand, including selling carbon offset credits to protect the state’s vast public lands. But it could be years before the idea is viable — if it ever is.2023 Economy Score: 57 out of 360 points (Top States grade: F)GDP Change (2022): –2.4%Nonfarm Jobs: +2.9%Debt Rating and Outlook (Moody’s): AA3 Stable

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