“Watch not just GDP, but also your individual markets.”
We frequently repeated this advice to our readers and clients as the current period of slowing macroeconomic growth was approaching. We continue to repeat it, because two quarters of slight GDP decline are less than 100% relevant to you if your business is in the nonresidential construction space or manufactures medical equipment, to give two examples of sectors that are outperforming the overall economy.
It is also important to watch the US state-level trends. Inflation-adjusted GDP data is a good starting point. For example, in New Hampshire, where ITR Economics is headquartered, first-quarter GDP came in 0.3% above the fourth quarter of 2021. If a business operates in that state and largely draws its income from it, that rise will be more relevant than the 0.40% decline in overall US GDP during that time. (Please note that we are comparing first-quarter results because second-quarter GDP data has not yet come in for the individual states.)
By contrast, the state of Texas, economic powerhouse that it is, declined 0.6% on a GDP basis in the first quarter, outpacing the national decline.
Every edition of the ITR Advisor™, a monthly periodical included in our ITR Insider™ subscription, includes an overview of key state data and insights.
Clearly, state GDP metrics will not give an all-revealing picture of economic activity – or opportunity – within a given state. In her recent webinar, Identifying Regional Trends and Business Opportunities Throughout the US, ITR Economist and Speaker Lauren Saidel-Baker delves into not just the economic health measures but also some of the opportunity measures that vary across states.
Did you know, for example, that Massachusetts is the number one state in venture capital investment per capita, coming in at $5,053 in investment per resident, but 45th in startups, with just two new businesses for every 1,000 residents? That is a curious spread.
Other measures of opportunity include education level, which may be of interest to employers seeking a highly skilled and adaptive workforce. Furthermore, education correlates with income, so the metric may also be of use to retailers seeking a receptive consumer base. The top five states in terms of population percentage with a high school education are Montana, Wyoming, Vermont, Minnesota, and New Hampshire, respectively. Of course, the impact and utility of having a high percentage of educated people in a state will also depend on the number of people who live there.
While the opportunity metrics are compelling, the more traditional measures of the economy are hard to beat when it comes to useful insights. Just as we leverage national data on employment, consumer activity, manufacturing, construction, and more for our larger clients, we use similar data – but at the regional, state, and local levels – for our more localized clients. After all, hospital construction trends in Dallas will almost certainly differ from those in Boise, Idaho.
In many cases, watching your specific markets (or potential markets) is a key first step in understanding your place in the economy. The next piece of the puzzle involves examining your geographic markets.
Lauren’s webinar – which includes many more insights on state-level economic trends – is available to ITR Insider™ subscribers. Our DataCast™ platform includes regional-, state-, and city-level data for numerous metrics. For those who would prefer to sit down with an expert economist to see how all the pieces fit together for a clear road map for the future, we would encourage you to contact us.