Throughout the last five decades, the economy of the United States has approximately tripled in size, from $4.5 to $18.6 trillion. While the US economy grew steadily over the previous 50 years countrywide, the state-level economic transformation has been far more dynamic.
To see how the economic geography has changed over the last five decades, we accessed data from the US Bureau of Economic Analysis to track the real GDP rates of the largest state economies.
Key Economic Trends of the Past Five Decades
The key economic movements of the last decades comprise various long- and short-term shifts that have radically transformed the local economic environment. The transition from industry to the finance sector is one of the primary changes in the industrial mix of the US economy. Manufacturing output fell by more than 20 percent, while the service sector grew by 25 percent. However, consequently, the major parts of the Rust Belt, regions of New York and the Midwest dependent on outdated factories and technology, have suffered economically in the recent decade. Competition from Asian steel-proceeding economies and oil price shock also facilitated the deindustrialization in the US.
The expansion of the United States' Sun Belt area, known for its warm and sunny environment, cheap cost of living, and low unemployment, has been one of the most significant movements in the previous 50 years. The economy in Arizona expanded from 33rd to 17th during 2007, while Texas overtook New York as the country's second-biggest economy in 2006.
Post-World War II Development
For most Americans, the mid-twenties were characterized by tremendous economic development and a significant increase in real wealth. The United States GDP increased by more than 50% percent, and this is the biggest 10-year growth in the prior 60 years.
High labor efficiency, notably in industry and agriculture, growing federal spending on LBJ’s Great Society programs (such as the Older Americans Act or the Elementary), and the Vietnam War were significantly responsible for the extended period of postwar economic prosperity. However, while a greater fiscal deficit kept the US country out of the depression for over a decade, hyperinflation began to climb in the early 1970s, contributing to the end of the after-war economic boom.
In economics books, the mid-1970s is well-known as a period of competition from newly industrialized Asian nations and a great recession after World War II, a decade of strong economic expansion. Mostly, the recession was triggered by an economic embargo applied by The Organization of the Petroleum Exporting Countries on the US and other Israel allies suppliers, causing an oil price increase of more than four times. Steel-producing states across the US experienced an economic slump as a result of extremely high oil costs and a flood of inexpensive steel from China and other Asian countries. Manufacturing-reliant states like Ohio, Michigan, and Indiana trailed behind the rest of the country in terms of GDP growth. The decade finished as it began, with an oil shock contributing to a multi-year slump.
The 1980s recession gave rise to reasonably substantial economic expansion in the 1990s. Oil shortages resulting from the Iranian Revolution at the end of the 1970s triggered the recession, which was compounded by the Federal Reserve's reaction to the price hike by enacting deflationary monetary policy. The state of Georgia commenced a phase of considerable economic growth, surpassing the rest of the United States in yearly population growth during the century and climbing from the 15th to the 12th biggest state economy by GDP. The DOW (The Dow Jones Industrial Average) passed through the greatest single-day percentage decline in history on a Monday in 1987. The incident is widely known as Black Monday and is regarded as the modern stock market meltdown due to its speed and breadth of impact.
The Longest Era of Growth
From July 1990 through March 1991, the United States experienced a recession triggered by a subprime mortgage crisis and a drop in the consumer confidence index resulting from the Gulf War. However, the wide availability of capital investment and excessive speculation around the expanding information technology industry also referred to as the dot-com bubble, supported economic development.
The Greatest Recession/ Terrorist Attack
The 2000s were distinguished by two recessions and the terrorist events on September 11, 2001. The first recession was triggered by the fall of the dot-com boom in March 2001, and it marked the end of the United States' longest run of economic expansion without a recession. The terrorist events on September 11, 2001, hampered economic growth even further. The Great Recession was triggered by the housing bubble blow up in 2006, followed by the banking system crisis and the stock market meltdown in September 2008. In 2009, the US economy shrank by 2.5 percent, the most remarkable drop in 50 years.
Only several Sun Belt states were less impacted by the Great Recession than other regions of the country. Moreover, they showed comparatively high GDP growth in the second half of the decade. Even in 2006, Texas became the second-largest state in the US, surpassing New York. North Carolina made its first appearance in the top ten states in terms of GDP only in 2008.
Recovery and Ambiguity
The economic recovery from the Great Recession, accompanied by the viable influence of Trump's administration, dominated the decade of the 2010s. Just in September 2018, unemployment hit its lowest level in over 50 years, and the United States started its second phase of economic upturn without any recession. However, the recovery process occurred highly unevenly all across the country since many regions beat the unemployment rates far more slowly than others. Like Indiana and Pennsylvania, most states in the Midwest and Northeast showed quite a slow GDP extension over the last decade. In contrast, those in the South and West, like Texas and California, have regularly outperformed the country.
In 2018 the tax session became much more efficient with the new acts integrated into law - Tax Cuts and Jobs Act (TCJA). TCJA implied a lower company tax rate; however, many economists believed that this act wouldn't have either short or long-term economic production in the United States.
A Policy Shift in the Economy
The United States is now experiencing its second-longest stretch of post-recessionary expansion, with an unemployment rate around a 50-year low. While certain parts of the US have significantly profited from the key economic trends of the previous five decades (a transition from manufacturing to services in the local economy and a growing trend of globalization in the international markets), others have suffered. Donald Trump won the 2016 election on an America First platform, capitalizing on the economic angst felt by unemployment and marginalization in the Rust Belt and other disenfranchised communities. Although it would be too early to assess the economic impact of Trump's administration, some of his policy concepts, such as protectionist trade policy, reduced taxes, and the repeal of Obama-era health and environmental programs, represent a significant departure from previous decades' economic policy.