The future of the US economy might be in the South — but some states in the region are at risk of being left behind.
What constitutes the Southern region of the US is up for debate, but the Census Bureau defines it as 16 US states — including Delaware, Maryland, Virginia, and West Virginia — plus the District of Columbia.
In June, the financial services company WalletHub ranked the 50 states and DC across three categories: economic activity, economic health, and innovation potential. Twenty-eight metrics, including the share of fast-growing firms, the unemployment rate, and entrepreneurial activity, were used in the analysis.
Five of the 10 states with the lowest rankings were located in the South: Mississippi, West Virginia, Arkansas, Louisiana, and Kentucky.
Additionally, the six states with the lowest GDP per capita — the size of a state’s economy, divided by the number of people living in the state — are all in the South: Mississippi, West Virginia, Arkansas, Alabama, South Carolina, and Kentucky. GDP per capita is one indicator that’s used to gauge economic prosperity and living standards across the US — it’s calculated using the latest state-level GDP data from the Bureau of Economic Analysis and population estimates from the Census Bureau.
In some ways, the Southern economy is booming. Cities like Houston, Dallas, Miami, and Nashville could be poised to become economic powerhouses as more companies invest there and create jobs. Additionally, warmer weather, lower taxes, cheaper housing, and job growth have persuaded many Americans to move South in recent years — boosting the region’s labor force and consumer spending.
However, some economic measures show the South is lagging behind other regions of the US. And even if some of the region’s cities and states prosper in the years to come, other areas could miss out on the economic boom.
Workers in Southern states tend to have lower wages
An analysis of 2021 current population survey data published in July by the Economic Policy Institute, a left-leaning think tank, found that workers in the South earned less than those in other regions.
The median Southern worker earned $20.30 an hour, compared to $21.05 in the Midwest, $22.08 in the West, and $23.81 in the Northeast. Additionally, the analysis found that 22% of Southern workers earned less than $15 an hour, compared to 17% in the Midwest, 12% in the Northeast, and 10% in the West.
The Economic Policy Institute pointed to low minimum wages and unionization rates in Southern states as two factors keeping pay down.
Of course, workers in some Southern states earn less than others. In July, the Economic Innovation Group, a centrist think-tank, published an analysis by Jacob Funk Kirkegaard, a nonresident fellow with the Peterson Institute for International Economics. Using US Bureau of Economic Analysis and Bureau of Labor Statistics data, the analysis highlighted the average annual wages across US states as of 2022.
Mississippi had the second lowest average annual wage in the US at roughly $60,000 — only Hawaii ranked lower. Texas was the only Southern state in the top 10, ranking 8th with an average annual wage of about $80,000.
The South’s low unemployment rate is misleading
In recent years, the South has had a low unemployment rate compared to other US regions. But an analysis published in June by the Economic Policy Institute called the low jobless rate “misleading.”
That’s because only people who are actively looking for work are counted in official US unemployment statistics. And there’s evidence to suggest many Southerners have given up looking or faced obstacles to employment, Chandra Childers, senior policy and economic analyst at the Economic Policy Institute, wrote in the analysis.
As of 2022, the share of people aged 25 to 54 with jobs was lower in the South than the rest of the US, according to the Economic Policy Institute’s analysis of Current Population Survey data. That so-called prime-age employment rate — an oft-cited indicator of labor force strength — was 78.9% in the South, 79.2% in the West, 80.6% in the Northeast, and 81.9% in the Midwest.
It’s possible these figures could change as more updated data becomes available. But if people in the South are less likely to have jobs than people in other regions, then the region’s low unemployment rate doesn’t tell the full story.
There are reasons to be optimistic about the South’s economy
To be sure, it’s not all doom and gloom for the South.
A thriving economy needs people to work jobs and spend money, and the South is boosting its population in all sorts of ways.
While the US has experienced a population slowdown in recent years, the South has the highest birthrate of any region. And when people are born there, they often don’t leave. Eighty-two percent of native-born Texans still resided in the state as of 2021, the highest rate in the US, according to a Dallas Fed analysis published in August 2023. North Carolina and Georgia rounded out the top three.
Many Americans not born in the South have moved there as well. Between July 2022 and 2023, the states with the largest population growth were all located in the South: Texas, Florida, North Carolina, Georgia, South Carolina, and Tennessee. Only two Southern states — Louisiana and West Virginia — were among the eight US states that saw their populations decline between 2022 and 2023.
Overall, there’s plenty of reason to be optimistic about the future of the South’s economy. However, it’s still a work in progress, and some states are thriving considerably more than others.
Have you moved into or out of the South over the past few years and are willing to share why you relocated? Or, are you a Southerner who is willing to talk about the influx of new residents? If so, reach out to this reporter at jzinkula@businessinsider.com.
