The United States economy has never provided a unified picture. On the contrary, economic development has always varied widely from one region to another, forming a potpourri of states with weak economies and thriving economies. With a myriad of factors like job growth, the state of the housing market, entrepreneurial activity, investment opportunities, technological progress, local resources and policies impacting each state’s economy, it’s virtually impossible to have similar rates of economic growth all across the country.
The emergence of new financial instruments like Bitcoin, Ethereum and other digital currencies adds another layer of complexity to the issue, especially since these markets tend to be extremely volatile, as the ETH price chart proves.
Therefore, it’s no news that some areas in the U.S. are doing better than others in terms of economic performance. However, what is rather surprising is the way in which economic activity has shifted across the U.S. in recent years. According to Bloomberg, for the first time in history, states in southern America are leading the nation for economic strength, while the traditional economic powerhouse of the Northeast is lagging behind.
The rise of the south
Based on internal migration data, southern states have become prime destinations for Americans looking to relocate. With lower taxes and cost of living and plenty of sunshine all year round, states like Texas, Florida, South Carolina, North Carolina or Georgia have registered a large inflow of US residents in recent years, most of them fleeing from states like California, New York, or Pennsylvania.
This exodus to the South has been going on for quite some time now, but despite the population growth the region’s economic performance couldn’t compete with that of Northeastern states up until recently when the balance started to tilt in the South’s favor. The latest figures reveal that the economic growth of several states in the Deep South has outpaced that of Northeastern states, indicating that after years of people and companies moving to the South, money is moving along with them.
There are six states that are driving the wealth migration to the south — Florida, Texas, Georgia, the Carolinas and Tennessee. Apparently, the trend started during the height of the Covid pandemic and it shows no signs of slowing down. If we take a look at the numbers, we can see that in 2005, states in the Northeast had a contribution of 23.5% to the national GDP compared to the six states in the South which only contributed 21.8% to the country’s economy. Fast forward to 2022, the situation has reversed: the South is now in the lead with a 23.8% share while Northeast economic output has declined to 22.4%.
Blomberg informs there’s been an inflow of income to the Southeast in 2020 and 2021 amounting to $100 billion. In the same period, the Northeast had lost approximately $60 billion. Data from the Census Bureau comes to complete the picture, revealing that nine of the U.S.’s 15 fastest-growing cities are in the South.
The factors driving the changes and discrepancies in the U.S. regional economic growth
In the past, we’ve seen cities and states in the Northeast leading economic growth year after year. Nowadays, we see the same thing happening with states in the Southeast. This raises the question of why is the South’s economy flourishing while the Northeast is failing to live up to its reputation.
There are multiple factors at play that can explain this shit. First of all, there’s a correlation between a region’s amenities and productivity which has a visible impact on cost of living and income. States in the Northeast like New York have always been known for providing better amenities and higher wages in all sectors of activity. However, this also translates into a higher cost of living which overshadows the advantages of having a better-paid job. People gain no benefits if they earn more but they need to pull more money out of their pocket for rent and everyday expenses.
For the longest time, the South has relied on low-productivity agriculture jobs to support its local economy. However, the labor market has shifted over time toward manufacturing and service sector jobs which provide higher wages for employees. Therefore, the South finally managed to keep up and eventually overcome more developed regions.
Despite the many perks that Northeaster states have been providing to their residents, there’s one aspect that they could not control: the weather. It seems like U.S. citizens, especially the retiree demographic, prefer to flee the cold weather in Northeastern cities to enjoy the mild and warm climate of the South. However, that wouldn’t have been possible without a bit of help from tech advancements. The comfort and convenience brought by the widespread use of air conditioning allowed people to relocate to places where high summer temperatures posed an issue previously.
As for economic opportunities, which play a crucial role in the equation, the lower tax rates and favorable economic policies increase the South’s appeal, attracting more residents to the region and boosting economic growth. By comparison, Northeastern states have higher tax rates on individual taxpayers and worse business tax climates which present an impediment for many companies activating in the area.
Last but not least, the housing situation also causes significant discrepancies between the two regions. Real estate policies in Northeast cities such as New York City, Boston, Providence, and Washington are highly restrictive, whereas it’s a lot easier to purchase or build new properties in the South.
All the above factors combined have put southern states in the lead in terms of economic growth. Since it’s unlikely for regional differences regarding housing, tax policies, housing regulations or weather to change anytime soon, the South’s financial domination will probably continue in the years to come.