Western Dynamism

Report: Nine of the 10 most dynamic states in the country are located west of the Mississippi River

By Dillon Tabish
Illustration by Steve Larson | Flathead Beacon

When the going gets tough, the unemployment rate usually gets going in the wrong direction, unless your state features a dynamic economy.

There are growing concerns that the U.S. is becoming fundamentally less dynamic, a term that accounts for an economy’s rate and scale of change across various measures, including the pace that businesses open and close and the frequency that workers change jobs or move to different states. Essentially, dynamic economies — and the commercial institutions that occupy them — can roll with the punches amid constantly changing market forces.

The West is home to some of the most dynamic states in the country, according to new research.

According to a new study conducted by the Economic Innovation Group, a Washington, D.C.-based bipartisan public policy organization, the region is the nation’s most dynamic with nine of the 10 highest-ranking states located west of the Mississippi.

Nevada ranks atop the list by a wide margin, ahead of second-place Utah. The Mountain West is home to the densest cluster of high-dynamism states, the report says. Montana did not land in the top 10, but the state is trending upward with one of the highest rates of new business investment from 1992 to 2014, according to the report.

The nation’s most dynamic states are often characterized by a flourishing of enterprise and entrepreneurial activity, the report says. Utah best exemplifies this model: the number of firms operating in the state climbed by 23,000 over a 23-year period.

Manufacturing-intensive labor markets have become associated with low levels of economic dynamism, according to the research.

More dynamic state economies also tend to be “newer” and feature a younger demographic profile and a higher rate of foreign-born residents, the report shows. Dynamic states tend to successfully attract young and more mobile workers and their families.

As the report states, “The relationship between youth and dynamism encapsulates one of the most pressing questions emerging from this report: How can we rekindle dynamism and reinvention in parts of the country that came of age during earlier waves of economic development?”

The national economy has navigated a tumultuous path over the last 20 years, experiencing multiple tech booms, the decimation of manufacturing jobs in the early 2000s, a housing bubble, a financial crisis and a protracted recovery, the report shows. These seismic events, and the continuing technological advancements on the horizon, have punctuated the importance of economic dynamism. As a prime example, the Great Recession accelerated a long-term decline in dynamism nationwide and the average state lost one-third of its dynamism to the recession, according to the report.

Though the West stands out as a shining example of adaptive strength, the current U.S. as a whole ranks well below previous generations in terms of dynamism. Nevada’s top-ranking score today would have ranked 34th in 1992, the report shows.

“There is growing concern that the United States is becoming fundamentally less dynamic, raising questions about what such a shift holds for the nation’s prosperity and competitiveness in the years ahead,” the report says. “The entrepreneurial and restless energy that once defined the United States seems to be evaporating as the economy grows more static, top-heavy, and concentrated.”

Researchers studied several factors when creating the latest dynamism rankings, including year-by-year change in private employer firms, total jobs in new companies and incumbent companies, labor market churn and net domestic migration.

Researchers concluded their report by recommending that policymakers address issues in the regulatory environment that have “often inadvertently established artificial barriers to entrepreneurship, geographic mobility, and a flexible labor market.”