Economic Recovery Looms but States Still Stressed, CFED Says

Despite more than a year of economic recovery, the economies of well-performing states are still stressed by higher unemployment, lower wage jobs, slower pay growth and declining employer-provided health coverage, reports the Corporation for Enterprise Development (CFED). In its seventeenth annual Development Report Card for the States, the nonprofit, nonpartisan think tank observes many American families also are still struggling financially.

CFED uses 68 measures to provide a relative, state-by-state assessment of economic development in three main areas — performance, business vitality and development capacity. Massachusetts, Minnesota and Virginia were the top performers in 2003, all earning straight A's. Five other states – Colorado, Connecticut, New Jersey, Pennsylvania and Utah – joined them on an honor roll with all A's and B's. Eleven states got an F in at least one of the three categories.

One of the longest-running barometers of state economic development policies and their impacts, the CFED study asserts that, while overall American productivity is growing, some experts have rushed to proclaim economic good times and ignored the fact that unit labor costs have fallen by more than 3 percent. The fall in unit labor costs means American businesses are producing more goods and services, but with fewer well paid workers, CFED states. Six guidelines are provided to help state policymakers and economic developers in making decisions that will counter this trend:

• Understand that investments in education, health, natural resources, and research/innovation are part of comprehensive, effective approaches to growing the state’s economic internal market.
• Make resources available to groom entrepreneurs and help them grow their fledgling businesses.
• Help existing businesses modernize and stay competitive.
• Work to build the assets, not just incomes, of the families in the state.
• Address the unique needs of dislocated workers and businesses in disinvested communities; respond immediately and encourage nontraditional approaches such as long-term educational support for retraining older workers.
• Stop giving away the state’s tax base to attract jobs that may not last and may not provide real, adequate wages and benefits for working families.

The 2003 CFED report card reflects some changes over the 2002 edition. Three measures were eliminated due to changes in industrial codes, from the Standard Industrial Classification system to the North American Industry Classification System. The eliminated measures include the change in traded sector strength, competitiveness index and dynamic diversity. Additionally, 11 measures were renamed "because they either draw from new data sources, or the traditional data sources have changed their methodology."

The 2003 Development Report Card for the States, as well as past editions of the report, is available at http://drc.cfed.org.