The U.S. economy grew by 2.5% in the third quarter which was its best performance in a year, but no one is breaking out the party hats just yet after the first half saw microscopic growth of 0.9%. Economic problems are still seemingly everywhere.
Unemployment is too high at 9.1% with underemployment running at a recent 16.2%. Housing prices continue to fall. U.S. corporate income taxes remain the second highest in the world. The Greek debt crisis is not going anywhere and gridlock in Congress continues unabated. It is enough to make anyone want to scream.
Yet for businesses or employees struggling with the question of where to relocate (or expand in the case of businesses), we offer a scorecard on what states have the best business climates.
Utah repeats this year as Forbes Best State for Business and Careers in our sixth annual look at the business climates of the 50 states. No state can match the consistent performance of Utah. It is the only state that ranks among the top 15 states in each of the six main categories we rate the states on.
In Pictures: The Best States For Business
Complete Coverage: The Best States For Business
Utah highlights include energy costs 31% below the national average and employment growth that has averaged 0.6% the past five years. Compare that to the U.S. as a whole where job growth has averaged negative 0.6% since 2005. Utah's 5% corporate tax rate is well below western neighbors Arizona, Idaho and New Mexico. Utah ranks sixth in a new Tax Foundation study that looks at the tax burden on business in each state across different industries. As part of the ranking, we included the study which will be released to the public in the coming months.
Businesses are getting the message on Utah. Procter & Gamble, ITT, Home Depot and Boeing all announced expansions in Utah this year. The Goldman Sachs office in Salt Lake City is its second biggest in the Americas with more 1,000 employees and significant expansion expected over the next four years.
Technology companies particularly have had Utah on their radar as an affordable alternative to California with overall business costs in Utah 10% below the national average. Adobe Systems, eBay, Electronic Arts and Oracle have all expanded in Utah in recent years.
Companies are also attracted by Utah's population growth which is one of the fastest in the country and provides a burgeoning workforce. "Utah has a young, dynamic economy with a vibrant high-tech sector," says Mark Zandi, chief economist of Moody's Analytics.
The Utah story is far from over. Job growth is projected to be 2.4% annually through 2015 according to Moody's, sixth best in the country (for more states with strong job growth forecasts, see "The Best States for Jobs").
Our Best States ranking measures six vital categories for businesses: costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. We factor in 37 points of data to determine the ranks in the six main areas. Below is a breakdown of each category.
Business Costs
Business costs incorporate Moody's Analytics cost of doing business index which include labor, energy and taxes in our rankings. Moody's weighs labor the most heavily in its index. We also included a new state tax index from the Tax Foundation that looks at the tax burden on business in each state across different industries. The new study will be released to the public in the coming months. Business costs are the most heavily weighted component in the Forbes Best States for Business.
Labor Supply
Labor supply measures college and high school attainment based on figures from the Census Bureau. We also consider net migration over the past five years and the projected population growth over the next five years. Lastly we included the percentage of the workforce that is represented by a union.
Regulatory Environment
Regulatory environment includes metrics influenced by the government. We factor in an index from Pollina Corporate Real Estate that measures tax incentives and the economic development efforts of each state. Other metrics include the Tort Liability Index from Pacific Research Foundation, as well as the regulatory component of PRI's U.S. Economic Freedom Index. Other factors include Moody's bond rating on the state's general obligation debt and the transportation infrastructure including air, highway and rail. We also gave credit to those states that are right-to-work states.
Economic Climate
The economic climate category measures job, income and gross state product growth as well as unemployment during the past five years. Other metrics include the 2011 unemployment rate and the number of big public and private companies headquartered in the state.
Growth Prospects
The growth prospects category measures job, income and gross state product growth forecasts over the next five years from Moody's Analytics. Other factors include business opening and closing statistics in each state from the Small Business Administration. We also measured venture capital investments per PricewaterhouseCoopers and the National Venture Capital Association.
Quality of Life
Quality of life takes in to account poverty rates per the Bureau of Economic Analysis and crime rates from the FBI. Other factors include cost of living from Moody's, school test performance from Department of Education and the health of the people in the state per the United Health Foundation. We considered the culture and recreation opportunities in the state per an index created by Bert Sperling as part of our annual Best Places for Business. We factored in the mean temperature in the state as a proxy for the weather. Lastly, we included the number of top-ranked four-year colleges in the state from Forbes' annual college rankings.
For more information on these matters, please call our office at 305 548 5020.
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