By the numbers
Population distribution in the United States has shifted over most of the past decade, and if the COVID-19 (coronavirus) pandemic has made anything clear, it is that shifting demographic and population trends have accelerated. Net migration out of high income-tax states, such as New York, New Jersey and Illinois, has fueled annualized population, establishment and employment growth in other regions of the United States, such as the Southeast, West, Rocky Mountains and Southwest.
This mostly corresponds with the seven states in the United States that do not impose any income tax, which include Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. However, other states, such as Colorado, Georgia, North Carolina and Virginia, have attracted residents and businesses due to favorable income tax environments and other enterprise formation incentives. Overall, the West region has begun to lag behind the Rocky Mountains, Southeast and Southwest regions in terms of annualized population, employment and establishment growth, indicating that its prominence is being challenged.
Population growth
According to data from the US Census Bureau, the Rocky Mountains and Southwest regions lead the United States in terms of annualized population growth. Further, both regions’ populations have grown an annualized 1.4% between 2010 and 2019 to a respective 12.4 million and 42.3 million people (latest data available). Following this, the Southeast’s population has increased an annualized 0.9% to 84.9 million people between 2010 and 2019, while the West region’s population has risen an annualized 0.8% to 56.6 million people during the same period.
Both regions’ populations are growing at faster rates compared with the national average, which has grown an annualized 0.7% between 2010 and 2019. States such as Texas, Colorado, Florida, Nevada, Arizona and Idaho have exhibited some of the strongest increases in population since 2010.
Employment growth
Furthermore, annual data from the Bureau of Labor Statistics indicates that the Rocky Mountains region has led the United States in terms of employment growth, with the region’s nonfarm employment rising at an annualized rate of 2.0% to 5.8 million employees between 2015 and 2020 (latest data available). The Southwest region trails closely behind, with its nonfarm employment increasing an annualized 1.4% to 17.8 million workers during the same period. Furthermore, employment in the Southeast region has grown an annualized 1.2% to 35.5 million employees between 2015 and 2020. However, employment growth in the West region has stagnated since the region has been hit particularly hard in regard to the coronavirus pandemic.
Overall, IBISWorld estimates that key states in these four regions have outperformed the United States as a whole during the pandemic, demonstrating how a growing population leads to enterprise formation and job growth, increasing overall economic performance.
West is not best
While the West region only includes Alaska, California, Hawaii, Nevada, Oregon and Washington, these six states encompass one of the largest regions in the United States. California is the largest state economy in the region and the United States, with a gross state product totaling an estimated $2.8 trillion in 2021. However, in terms of population growth, California has barely kept pace with national population growth, while employment growth has stagnated as a result of the coronavirus outbreak.
In fact, during the pandemic, California’s employment levels in the manufacturing, trade, transportation, utilities and leisure sectors declined at a faster rate than at the national level. As a result, employment in the state fell 7.3% in 2020 alone, and has declined an annualized 0.2% between 2015 and 2020 (latest data available).
No power here
No longer is Silicon Valley’s dominance of the technology sector assured. Burgeoning technology hubs, such as Charlotte, NC, Raleigh, NC, and Austin, TX, have attracted young professionals and businesses, particularly in the Information Sector, which has been fostered by low taxes, positive enterprise policies and relatively lower costs of living.
North Carolina and Texas actually added jobs within the 54, 55 and 56 sectors during the coronavirus pandemic, while California experienced a decline in overall employment.
Between 2015 and 2020, California’s Information sector has grown at a faster rate than Texas and North Carolina’s; however, the lead is quickly narrowing. California’s establishment formation has slowed, while Texas and North Carolina have experienced faster growth.
Lights, camera…move to Georgia
The largest concentration of employment and establishment formation in the Motion Picture and Sound Recording subsector has long been in the West, with California alone accounting for 34.8% of total Film and Music Production subsector establishments. However, states such as Georgia and Texas have challenged California, with Georgia specifically outpacing California in terms of subsector establishment formation during the coronavirus pandemic.
Together, Georgia and Texas account for a greater share than the third-most concentrated state, Florida, and is close behind the second-most concentrated state, New York. Georgia, in particular, has worked to attract film and production companies via various state-sponsored tax incentives and business formation incentives, such as the Made in Georgia program. While it is unlikely California will lose its top spot in the subsector, subsector employment and establishment gains have begun to accelerate in other states, demonstrating broad-based employment and establishment gains while California experiences decelerating growth.
Grounded
Due to a strong state university system, the University of California feeds a highly skilled workforce into California’s various research centers and engineering companies, including Ames Research Center, the Armstrong Flight Research Center, the Jet Propulsion Laboratory and, more recently, Space Exploration Technologies Corp., also known as SpaceX.
Though California exhibits a particularly high concentration of aerospace engineering and research and development companies, Washington State also plays an important role in the West region as the headquarters of the Boeing Company’s (Boeing) manufacturing operations. Consequently, many suppliers have set up operations in Washington and surrounding regions. A total of 26.0% of all establishments involved in the Aircraft, Engine and Parts Manufacturing industry are located in the West, with Washington accounting for the fifth-most share of facilities.
However, these operations were devastated by the coronavirus pandemic, as demand for air travel sharply declined. Between grounded flights and plummeting demand for new aircraft manufacturing, both California and Washington demonstrated above average declines in manufacturing employment during the height of the pandemic. Moreover, the West region’s manufacturing employment as a whole has exhibited the largest annual decline, falling 10.5% in 2020, compared to a national average of 4.8%.
Southeast
Ironing out the wrinkles
The Southeast region encompasses the 12 states bound by West Virginia in the north and Louisiana and Arkansas in the west. However, the economic picture of the Southeast is difficult to generalize due to the heterogeneity of economic activity throughout the region. For example, tourism is crucial to Florida and Georgia, while coal mining is mostly done in West Virginia and Kentucky. Broadly speaking, this region’s economy has diversified into knowledge-based industries in advanced manufacturing, technology, finance and energy over the past three decades.
In particular, states such as North Carolina and Virginia have diversified their employment gains, with Raleigh, NC, and Charlotte, NC, becoming a burgeoning technology hub. Additionally, Virginia has expressed plans to rely less on government contracting, but to ensure aerospace and defense contracting is still a major employer within the state. Perhaps most importantly, Crystal City, VA, was selected by Amazon.com Inc. for its “second headquarters,” adding 25,000 jobs to the state, and standing as a testament to Virginia’s ability to attract leading technology companies.
Furthermore, Georgia has also demonstrated a burgeoning technology, video streaming and production hub in Atlanta, with major companies such as Netflix Inc., the Walt Disney Company, AT&T Inc.’s WarnerMedia, NBCUniversal Media LLC, AMC Entertainment Holdings Inc., Sony Corporation of America and ViacomCBS Inc. all having production operations for their respective streaming services located in Georgia.
Aerospace and defense
Aerospace and aviation is another important cluster in the Southeast region; various NASA facilities, such as the Kennedy Space Center in Florida and the Stennis Space Center in southern Mississippi, are located in the region. Virginia is also home to some other leading technology and aerospace and defense companies such as Northrop Grumman Corporation and Lockheed Martin Corporation. IBISWorld estimates that the region is home to 20.5% of space vehicle and missile manufacturing facilities in the United States.
In the Aircraft, Engine and Parts Manufacturing industry, the Southeast is second only to the West regarding manufacturing facilities. In 2015, Boeing opened a $6.0 million technology and research facility in Huntsville, AL. Other operators in the region include the Raytheon Company, Airbus SE (Airbus) and Embraer SA. Mobile, AL, is home to the final assembly line of Airbus’ A320 jetliner; the facility, which began aircraft assembly in July 2015, is the company’s first production site in the United States.
Boomtowns in the Southwest
Texas turns on the tap
The Southwest comprises Arizona, New Mexico, Oklahoma and Texas. Texas is the undisputed heavyweight of the region, with it being the nation’s second-largest economy and second-most populated state, second to California. However, whereas California has experienced marginal declines in employment and population, Texas has been adding residents at more than double the national average and has been adding jobs at nearly three times the national average. Gross state product in Texas is estimated to be valued at $1.8 trillion in 2021.
The Mining sector is one of the largest economic clusters in the region, spurring employment and wage growth in resource-rich areas. A huge boon to Texas was the 2015 lifting of the ban on United States crude oil exports, which permitted Texas to ramp up exports of crude oil to the global market. Furthermore, the advent of hydraulic fracturing, also known as fracking, permitted unprecedented access to the rich gas deposits in West Texas, specifically in the Permian basin. In particular, Midland, TX, has become a boomtown, with its population rising more than 30.0% between 2010 and 2020, and an unemployment rate of less than 2.0% prior to the coronavirus pandemic (latest data available). Major companies such as Houston-based Halliburton Company and Oklahoma City-based Devon Energy Corporation, are highly active in the region, while oil and gas extraction operations also feed into Petrochemical Manufacturing, another major industry in both Texas and Oklahoma.
Let’s get technical
Traditionally, the Southeast region has relied on agriculture and mining industries, though recently its economic base has grown to include more varied industries such as aerospace manufacturing and financial services. Recent mergers and acquisitions have made Arizona an important state for the Domestic Airline industry, with the state accounting for a larger share of industry employment and establishments between 2015 and 2020 (latest data available). Commercial lending has also been growing in the region, with states such as Texas and Arizona taking on a larger share during the same period.
Furthermore, Austin, TX, has become one of the fastest growing technology hubs, with many companies fleeing Silicon Valley’s high costs of operation, living and taxes. Overall, cities such as Austin have attracted technology companies via low taxes and inventive and grant programs, such as the Grant for Technology Opportunities Program. The city has successfully attracted some big-name and big budget companies to set up operations and headquarters, such as Oracle Corporation, Palantir Technologies and SpaceX. Furthermore, companies such as Google LLC and Facebook Inc. already employ thousands of people in Austin, and Apple Inc. has stated that it will invest $1.0 billion to create 15,000 new jobs at its North Austin Campus.
