With California outranking Japan in 2024 as the world’s fourth-largest economy, the personal-finance website WalletHub has released its report on 2025’s Best and Worst State Economies, as well as expert commentary.
In order to determine America’s top economic performers, WalletHub compared the 50 states and the District of Columbia across 28 key indicators of economic performance and strength. The data set ranges from change in GDP to startup activity to the share of jobs in high-tech industries.
Best State Economies
Taking the top spot for the best economy was Massachusetts, followed by Utah at number two, Washington, California, New Hampshire, North Carolina, Idaho, Texas, Maryland and Colorado at number 10.
In the bottom 10 were Wyoming, Nebraska, Mississippi, Alaska, Louisiana, South Dakota, North Dakota, Hawaii, West Virginia and, taking the last place in terms of economy, Iowa.
Best vs. Worst
Louisiana has the highest value of exports per capita, which is 59 times higher than in Hawaii, the state with the lowest.
New Hampshire has the lowest share of the population living in poverty, which is 2.7 times lower than in Mississippi, the state with the highest.
South Dakota has the lowest foreclosure rate, which is 22 times lower than in Delaware, the state with the highest.
Massachusetts has the highest share of jobs in high-tech industries, which is four times higher than in Arkansas, the state with the lowest.
South Dakota has the lowest unemployment rate, which is 3.1 times lower than in Nevada, the state with the highest.
“A strong state economy doesn’t guarantee success for the state’s residents, but it certainly makes financial success more attainable. Factors like a low unemployment rate and high average income help residents purchase property, pay down debt and save for the future. The best state economies also encourage growth by being friendly to new businesses and investing in new technology that will help the state deal with future challenges and become more efficient,” said WalletHub Analyst Chip Lupo. “Massachusetts has the best state economy, and it invests a lot more in both industry and academic R&D than most other states, which leads to big payoffs in economic growth. This has led to the state having the second-most invention patents per capita. The Bay State has a lot of workers in industries that propel the economy forward, too. It has the highest share of jobs in high-tech industries, the third-highest share of STEM professionals.”
To view the full report, visit: https://wallethub.com/edu/states-with-the-best-economies/21697
Expert Commentary
What are the most effective ways for state and local officials to help their local economies?
“By setting up a good infrastructure for businesses to operate. Lower the requirements for starting a new business. Limit things such as occupational licensing that prevent workers from moving to a location. Create outstanding K-12 and higher education schools that focus on putting students first and creating an educated workforce that is attractive to businesses. Limit distortion such as unions, minimum wages, and local taxes on wages.”
Kenneth Troske, PhD – Chair, Department of Economics, University of Kentucky
“The most effective ways for state and local government officials to help their local economies is by tending to the basics, meaning safe and clean streets, reliable local services, and an attitude of commitment to public service. This may seem self-evident, but in fact more than one government below the federal level has gotten in trouble because leaders get carried away with themselves. Today, that translates into pro- or anti-DEI. Leave ideology alone, attend to potholes. Plain old-fashioned corruption is mercifully less common but still a problem.”
Arthur I. Cyr – Director, International Political Economy Program; Professor, Carthage College
What can states do to prevent “brain drain” and develop, attract and retain highly skilled workers?
“One of the fundamental things that economic development officials fail to grasp is that ‘brain drain’ is not the issue. The issue is that people from outside the area are unwilling to locate their business and workers in an area because of a poor infrastructure. States and local areas need to focus on making the state or local area an attractive place for people to relocate to and not focus on holding on to people in the area. Outsiders bring new ideas and new technology that help areas thrive and grow. If you do this, then many people who leave when they are young will return later in life bringing with them ideas for how to succeed.”
Kenneth Troske, PhD – Chair, Department of Economics, University of Kentucky
“States can attract skilled workers – and desirable citizens generally – by … treating the public sector, and civil servants and other government workers, with respect. Traditionally, Americans emphasize the private sector, with the exception in modern times of the period starting with the Great Depression, going through World War II and the Korean War, and ending with the Kennedy-Johnson administrations.”
Arthur I. Cyr – Director, International Political Economy Program; Professor, Carthage College
States often compete for business investment by offering tax breaks and other incentives. Do such efforts more often result in a net positive or net negative impact on state economies? Do such efforts create a “race to the bottom” across states?
“These efforts often have little effect, either good or bad … Unfortunately, the successful policies are ones which require a significant long-term investment, so policy makers prefer to focus on the short-term fixes which produce little benefit.”
Kenneth Troske, PhD – Chair, Department of Economics, University of Kentucky
“Tax breaks and other carrots to attract business, especially long-term capital investment, are highly desirable and can be unpopular with electorates at large. Pointing to the long-term benefits of such policies is easier said than done. The transformation of the Middle West – ‘the Rust Belt’ – into today’s economic powerhouse reflects state government efforts to attract transportation, storage and related business. Half the total traffic in North America now goes through or near the Chicago-Milwaukee corridors. In formal rankings of states, Florida today is number one, followed by Nevada, South Carolina, Texas and Utah among the top five. The South is rising thanks to climate plus modern air conditioning, decline of trade unions generally along with ‘right to work’ laws, and general social modernization in that region.”
Arthur I. Cyr – Director, International Political Economy Program; Professor, Carthage College
