My most recent blog post (of June) addressed the challenge of labor productivity coming out of the COVID pandemic. This post shifts the focus to Gross Domestic Product (GDP) - a measure of the value of all goods and services in the U.S. economy — from three perspectives:
Overall U.S. GDP trend — generally slower since the Great Recession except for the big fiscal blowout of 2021.
Comparative state-by-state per capita GDP — showing wide variations across the U.S.
A quick look at the state-level relationship between worker productivity and GDP — some but not as much correlation as one might expect.
National GDP Trend
Over the last 25 years, U.S. GDP has increased at an average rate of 2.2% per year. As illustrated by the following graph, higher rates of growth were experienced from the late 1990s to 2007. The Great Recession of 2008-09 was followed by renewed GDP growth — but at a slower pace up through 2019.
Unfolding of the COVID pandemic in 2020 resulted in negative GDP performance followed by strong growth of nearly 6% a year later in 2021 with economic recovery aided by U.S. fiscal stimulus measures. The experience of 2022 indicates a return to the more typical change pattern as averaged over the last 25 years.
State-By-State Experience
State-by-state GDP comparisons are made on a per capita basis — first for the most recent year of 2022 and then for changes experienced in the last three years from 2020-22.
2022 Per Capita GDP Comparison
As shown by the following map, the 2022 range of state-by-state GDP is from over $35,500 to nearly $79,500 on a per capita basis — with the highest state at more than twice the per capita GDP of the lowest state.
Source: U.S. BEA.
New York has the distinction of the highest per capita GDP — followed by Massachusetts, Washington (state), California and Connecticut. The lowest per capita GDP figure is noted for Mississippi, followed by West Virginia, Arkansas, Alabama, and South Carolina.
2020-22 Changes in Per Capita GDP
A somewhat different picture emerges when considering changes in per capita GDP over the last three years from 2020-22 — illustrated by the map below.
Source: U.S. BEA.
The #1 gainer from 2020-22 is Tennessee — with per capita GDP up by 11.7%. Ranks 2-5 are held by New York, Nevada, Illinois and Michigan, respectively.
The biggest laggard is Alaska — with per capita GDP declining by 2.2% from 2020-22. Other states experiencing declining per capita GDP are Oklahoma, North Dakota and Wyoming.
Comparing GDP with Productivity Perforance
Since my last blog dealt with the topic of America’s labor productivity challenge (per link to left), I thought it might be useful to compare state-by-state recent changes in productivity versus per capita GDP. Results are as depicted by the following scatter-plot.
Sources: U.S. BEA / BLS. State names (as abbreviated) are as noted for a representative portion of the 50-state experience.
As indicated by the earlier state-by-state analysis and confirmed by this scatter-plot, Alaska (AK) is again represented as a low performer (in terms of worker productivity and per capita GDP gains with Tennessee (and Idaho) as high performers.
The data suggests that there is somewhat of (but a not very high) correlation between worker productivity and per capita GDP increases. Overall, increasing productivity appears to be loosely associated with commensurate and generally even greater gains in per capita GDP.
The R-square value of 0.2567 indicates that between 25-26% of changes in per capita GDP may be associated with (though not necessarily caused by) changes in worker productivity from 2020-22. In effect, there appears to be some connection between productivity and per capita GDP across the 50 states. However, other factors are likely at play, as well.
And as a final note, while the data indicates that there are definite outliers (like Alaska and Tennessee), the majority of states are fairly tightly clustered in a middle space indicating meaningful but modest gains with both labor force productivity and per capita GDP through and subsequent to the pandemic.
