These 10 U.S. states have America’s worst economies

Fears of a U.S. recession have eased considerably compared to a year ago as jobs and the economy have continued to grow, and inflation has slowly subsided. But the nation is not out of the woods, and some states are in greater jeopardy than others.

Companies that are making decisions about where to locate or expand their facilities are acutely aware of this. They know it is good business to locate in a state where the economy is growing and diverse, fiscal policies are solid, and the real estate market is strong. That is why CNBC looks at state economies in ranking America’s Top States for Business. Economy is one of ten categories of competitiveness in the annual study, each one weighted to reflect how frequently states use it as a sales pitch when courting companies. Under this year’s methodology, Economy accounts for 14% of a state’s total score.

We consider economic growth and job growth. We look at state finances, fiscal reserves, pension obligations and credit ratings. We also look at the overall health of the housing market. We measure the breadth of each state’s economy by looking at how many major corporations are headquartered there. We evaluate the entrepreneurial economy based on new business formations. And, new in 2024, we measure foreign direct investment in each state, both in absolute terms and as a percentage of gross domestic product (GDP).

Some states are at the top of their economic game — home to America’s 10 best state economies. But these ten states are in a relative slump.

10. Vermont

The fact that there are no major corporations headquartered in The Green Mountain State may track with Vermont‘s idyllic vibe, but it is not positive for the state’s economy. Couple that with lackluster growth, some troubling pension obligations, and flat to lower tax revenues, and you get an economy facing an uphill climb. Republican Gov. Phil Scott has sought to address the state’s many challenges with a strategic plan to “grow the economy, make Vermont more affordable and protect the most vulnerable.” A key to meeting all those goals is to attract more workers to the state. Jobs did grow a tiny bit last year, but it is a small start.

2024 Economy Score: 144 out of 350 points (Top States Grade: D+)

GDP (2023): $35.1 billion (+1.3%)

Job Growth (2023): 0.9%

Debt Rating & Outlook (Moody’s): Aa1, stable

Foreign Direct Investment (2022): 0

Major Corporations: None

9. (tie) Illinois

Give The Land of Lincoln some credit. It has seen nine credit rating upgrades in the past three years, according to Democratic Gov. JB Pritzker, and all the major rating agencies have the state in their “A” categories for the first time in years. That is the good news. The bad news is that Illinois still has the worst credit rating of any state. The resulting higher borrowing costs add to the state’s many fiscal challenges, including the nation’s lowest pension funding ratio, and inadequate budget reserves. The Pew Charitable Trusts figure Illinois could last all of 28 days on its total balances (the state’s rainy day fund and its ending general fund balance). That is worse than any other state.

2024 Economy Score: 133 out of 350 points (Top States Grade: D-)

GDP (2023): $875.6 billion (+1.3%)

Job Loss (2023): -0.3%

Debt Rating & Outlook (Moody’s): A3, stable

Foreign Direct Investment (2022): $10.9 billion (1.3% of GDP)

Major Corporations: GE Healthcare Technologies, Mondelez International

9. (tie) Maine

Upon signing a $10.47 billion supplemental state budget into law in April, Democratic Gov. Janet Mills warned of what she called “flattening revenues.” Nonetheless, the biennial measure tacks 1.3% onto the previously approved spending for this year. Spending next year would jump 6.2%, according to the National Association of State Budget Officers.

“This budget makes vital investments in things Maine people need right now,” Mills said in a statement. And indeed, there was bipartisan support for the additional spending on mental health services, child care, housing, storm relief, and more.

But Mills was also right about flattening revenues, according to data from the Pew Charitable Trusts. Maine‘s budget picture could be much worse, but it is less than ideal. It is one of the reasons Maine heads into the upcoming challenges with a less-than-stellar credit rating.

2024 Economy Score: 133 out of 350 points (Top States Grade: D-)

GDP (2023): $73.8 billion (+1.9%)

Job Growth (2023): 1%

Debt Rating & Outlook (Moody’s): Aa2, positive

Foreign Direct Investment (2022): $0

Major Corporation: IDEXX Laboratories

9. (tie) Rhode Island

The Ocean State has had a sea of pension issues for decades. In 2011, when the state retiree benefit system was 50% funded and faced $7 billion in unfunded liabilities, then-State Treasurer Gina Raimondo — now U.S. Commerce Secretary — championed reforms including benefit cuts. The changes saved the state $2.75 billion, according to the current state treasurer’s office. But pension problems don’t go away overnight. Rhode Island’s certainly haven’t. And now, the state is dealing with a backlash from retirees who have not had a raise in 12 years. A state pension advisory group has offered a range of options including restoring all or some of the cost of living adjustments that the reforms did away with.

2024 Economy Score: 133 out of 350 points (Top States Grade: D-)

GDP (2023): $63.2 billion (+1.6%)

Job Growth (2023): 2%

Debt Rating & Outlook (Moody’s): Aa2, stable

Foreign Direct Investment (2022): $5 million (0.008% of GDP)

Major Corporations: CVS Health, Hasbro

6. Kentucky

The housing market is sluggish in The Bluegrass State. Home values appreciated about 6.4% last year, according to the Federal Housing Finance Agency, slightly below the national average. Inventory, while still tight, is building, and homes for sale are sitting on the market longer. While the apparent slowdown could help what housing advocates say is a critical supply gap, the housing market is in many ways setting the tone for a somewhat moribund Kentucky economy. While the economy did grow at a healthy pace last year, job growth and new business formations are low. So is the state’s pension funding ratio, according to the Pew Charitable Trusts.

2024 Economy Score: 132 out of 350 points (Top States Grade: D-)

GDP (2023): $225.2 billion (+3.5%)

Job Growth (2023): 0.8%

Debt Rating & Outlook (Moody’s): Aa3, positive

Foreign Direct Investment (2022): $2.3 billion (1% of GDP)

Major Corporations: Humana, Yum! Brands

5. Kansas

Housing inventory is extremely sparse in The Sunflower State, according to Redfin, with just one month’s supply on the market in May. But with slow price appreciation — the median sale price rose just 0.7% in the past year — homebuilders are not exactly rushing to build there. The result is a somewhat unbalanced market.

The Kansas economy did turn in solid growth last year — the 10th best in the nation. But with no major corporations and no appreciable foreign investment, the Kansas economy is not exactly on fertile ground for the future.

2024 Economy Score: 129 out of 350 points (Top States Grade: F)

GDP (2023): $182.3 billion (+4.3%)

Job Growth (2023): 0.5%

Debt Rating & Outlook (Moody’s): Aa2, stable

Foreign Direct Investment (2022): $0

Major Corporations: None

4. Louisiana

The Pelican State has a serious home equity problem, with nearly 11% of home loans underwater, meaning the owner owes more on their mortgage than the home is worth. That is the highest rate in the country, according to real estate data firm ATTOM. Job growth is low, exacerbated by a decline in labor force participation, according to a Louisiana State University study last year. Researchers found the same factors driving down participation nationally, like child care concerns, an aging population, and school enrollment. But they also found that some Louisianans who left the workforce following Hurricane Katrina never returned. The hurricane, which devastated the New Orleans region, struck in 2005.

2024 Economy Score: 120 out of 350 points (Top States Grade: F)

GDP (2023): $238.2 billion (3%)

Job Growth (2023): 0.2%

Debt Rating & Outlook (Moody’s): Aa2, stable

Foreign Direct Investment (2022): $0

Major Corporations: Entergy, Pool Corporation

3. New Hampshire

Growth softened considerably in The Granite State last year, in part due to severe labor shortages. As of last August, the U.S. Chamber of Commerce found that New Hampshire had just 28 available workers for every 100 jobs. As in other states, labor force participation has declined due to an aging population and child-care issues. Researchers at the New Hampshire Department of Labor found that while the pandemic made things worse, the trends have been in place since 1990. The New Hampshire Tech Alliance also blames high housing prices, which it says are pushing workers to leave the state.

2024 Economy Score: 119 out of 350 points (Top States Grade: F)

GDP (2023): $91.3 billion (+1.2%)

Job Growth (2023): 1.4%

Debt Rating & Outlook (Moody’s): Aa1, stable

Foreign Direct Investment (2022): $0

Major Corporation: Iron Mountain

2. Hawaii

The economic shocks that have hit The Aloha State over the past few years would set any state economy on its heels, and Hawaii‘s was vulnerable to begin with. Just as the state was recovering from the pandemic, which of course dealt a body blow to the all-important tourism industry, the August 2023 wildfires in Maui delivered the second part of a devastating one-two punch.

State forecasters predict tourism will be flat this year, both in terms of the number of visitors and the money they will spend. That ripples into the job market, cripples state finances, and dampens economic growth in general.

They do expect the numbers to start bouncing back again next year, as long as Mother Nature — and the global economy — cooperate.

2024 Economy Score: 117 out of 350 points (Top States Grade: F)

GDP (2023): $86.9 billion (+2%)

Job Growth (2023): 1.7%

Debt Rating & Outlook (Moody’s): Aa2, stable

Foreign Direct Investment (2022): $57 million (0.07% of GDP)

Major Corporations: None

1. Mississippi

The Magnolia State‘s economy is hardly thriving. Growth was among the slowest in the nation last year. Job growth was weak, too. Underlying it all: the lowest labor force participation rate in the nation, by far, at a seasonally adjusted 53.8%, according to the Bureau of Labor Statistics. That’s right. Only about half of Mississippi’s working age population is working or seeking a job. That alone is bound to be a drag on the economy. Combine that with record low unemployment, and it spells worker shortages that are paralyzing the state.

Last month, Republican Gov. Tate Reeves hailed the latest job numbers.

“Our economy is firing on all cylinders,” he proclaimed, noting that there are more jobs in Mississippi than ever before. That may be technically correct, but it is some creative spin, leaving out, for example, that Mississippi job growth continues to rank among the lowest in the nation.

There is a glimmer of positive news, according to the latest economic outlook published by Mississippi’s University Research Center. Forecasters no longer expect a recession this year, and they’ve raised their 2024 growth forecasts, in part due to more immigration than expected easing labor shortages. But they say that growth will come at the expense of 2025 and 2026, suggesting that Mississippi may remain the state with America’s worst economy.

2024 Economy Score: 90 out of 350 points (Top States Grade: F)

GDP (2023): $114.9 billion (+0.7%)

Job Growth (2023): 0.1%

Debt Rating & Outlook (Moody’s): Aa2, stable

Foreign Direct Investment (2022): $3 million (0.003% of GDP)

Major Corporations: None