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Wednesday, June 29, 2011

State GDP Growth Reflects Weak Recovery

Earlier this month, the U.S. Bureau of Economic Analysis released its latest estimate of real GDP by state.

The good news was that real state GDP grew in 48 states last year, compared to only 10 states experiencing positive growth in 2009. Nationally, real GDP by state expanded by 2.6 percent in 2010, after shrinking by 2.5 percent in 2009 and declining by 0.3 percent in 2008.

In 2010, the top growth states were North Dakota at 7.1 percent (benefiting from energy production), New York at 5.1 percent (getting a big boost from finance and insurance), and Indiana at 4.6 percent (aided by durable goods production).

Meanwhile, only Wyoming and Nevada suffered declines in real state GDP - with Wyoming at -0.3 percent and Nevada at -0.2 percent. Nevada was hit hard by another big decline in construction.

However, while growth was uneven across the nation, these state-by-state numbers reflect the reality of an overall under-performing economic recovery. During years of economic recovery and growth, annual real GDP growth should be in the range of 4.5 percent.

Most sobering, though, is the reality that real GDP by state in 2010 came in below the level it was in 2007 -- $13.144 trillion in 2007 versus $13.1 trillion in 2010.

At the state level, 22 state economies were smaller in 2010 than they were in 2007.

More than three years of activist government, particularly at the federal level, has taken a heavy toll on the economy. State level lawmakers, Congress and the White House need to lift the burden of government activism (including unprecedented increases in spending and regulation), so that the private sector - in particular, entrepreneurs and small businesses - can lead the economy back to robust growth across all 50 states.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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