US Economy: Which States Face Shrinking Economies In 2020?

The Federal Reserve Bank of Philadelphia this week ranked the top 10 states which are expected to see their economies contract in the next six months. Bloomberg noted that the data research shows that the number of states at risk of slipping into contraction could be the highest since July 2009.

At the top of the list is West Virginia, which is expected to see a 2.6% contraction over the next six months. West Virginia is extremely reliant on the coal industry, which has seen job losses as mines have closed down. Another issue is young people leaving the state for other opportunities, which means a loss in tax revenue.

West Virginia University business professor John Deskins told local media in October that West Virginia needs to diversify its economy away from coal.

“One of our key priorities has to be fostering growth in other sectors like tourism, like manufacturing, like health care,” he said.

Oklahoma is expected to decrease 1% due to poor job growth and higher unemployment. The state also struggles with poverty and wealth inequality. Delaware's economy will decrease 0.7% as farmers in the state have expressed discontent with Trump’s trade war with China.

Pennsylvania's economy is expected to decrease 0.5% over the next six months, with the state facing poverty in its western region. The state is facing manufacturing difficulties, and the hardwood industry there has been hit by the U.S.-China trade war.

Vermont is expected to fall 0.3% as the state faces an aging population. The state is even offering monetary incentives for remote workers to live there.

Montana is expected to decrease 0.2% due to fewer jobs in the mining and logging industries, along with fewer manufacturing jobs. New Jersey is also expected to decrease 0.2% as the state faces fiscal issues and high affordability.

Iowa, Kentucky, and Connecticut are all expected to see between -0.2% and 0.2% in the first half of the year, but all face unique challenges. The Iowan agricultural sector faces major uncertainty amid the ongoing U.S-China trade war. Kentucky’s manufacturing sector could be hit by the trade war, with the state’s economy also taking a hit from likely budget cuts this year. Connecticut is also dealing with the effects of an aging population, like Vermont.