These Are The States Best (And Worst) Prepared For Another Recession

When the US economy finally starts to cool, and the inevitable recession arrives, the slowdown will affect different states differently. Some states, like Texas, are well-positioned to ride out the downturn thanks to the diversity of industry and low per-capita debt. Others, like Hawaii, will likely bear the brunt of the downturn, a “disaster” that we have discussed in the past.

Inspired by surveys claiming that a majority of executives at Fortune 500 companies expect a recession in 2020, Fit Small Business recently conducted a study to determine which states are best-equipped to survive the next recession, and which states are particularly vulnerable to a downturn. To arrive at their conclusions, the researchers factored in a wealth of data about states’ economies, including their product exports, housing costs, economic strength and diversity, individual debt-to-income ratios and median home values.

Using these data, they concluded that nearly all of the best states for surviving the recession are spread across the south and midwest. Why? Because these states benefit from diverse economies, and their low cost of living and low property prices make them more liveable.

Meanwhile, all the way down at the end of the list, we find Hawaii, the 48th most well-equipped state to survive the next recession.

Why is Hawaii so vulnerable? Well, for one, the state must import nearly all of its fuel, food and consumer staples, which drives up prices.

But that’s not the only reason. Another recent study warned that the slowdown in Hawaii’s economy started around the time when JPM’s Global Manufacturing PMI topped out in late 2017.

And that slowdown is getting more serious, as Hawaii’s tourism-dependent economy struggles with a slump in bookings, and by extension, a slump in tourist spending. The culprit is clear: the strong dollar has hurt tourism from abroad, while anxieties about a slowing economy have caused domestic spending to contract slightly.

And researchers with the state have forecast an increase in Hawaii’s unemployment rate over the coming years, expecting it to climb from its current level (2.8%) to 3.9% in 2022.

For Hawaii, the downturn has already begun.

Read Fit Small Business’s full report here.