Characterizing state economies: sectoral shares of GDP

Overall U.S. gross domestic product (GDP) has steadily increased over the past decade. However, the growth in the sectors which drive it has been uneven. Data from 2014 through 2023 reveals that sectoral contributions to private industry GDP have shifted from manufacturing (down 1.57 percentage points since 2014) and mining, quarrying, and oil and gas extraction (down 1.05), to professional and business services (up 0.85) and construction (up 0.72). Differences in the sectoral makeup of private industry GDP at the state level show that most states share similar primary sectors but vastly different second-largest sectors. Significant changes in federal policy may affect GDP composition going forward. 

All data used in this article comes from the U.S. Bureau of Economic Analysis’ (BEA) GDP and Personal Income tables. Data used for GDP is in millions of current, not adjusted for inflation, USD, and is for private industries. All sectors and industries referenced are based on the 2017 North American Industry Classification System (NAICS) used by the BEA.

National overview

Over the past decade of available data, from 2014 through 2023, the makeup of the U.S. national GDP broken down by industry sectors has not seen much change in its largest contributors. 

The largest sector—finance, insurance, real estate, rental, and leasing—combines two 2-digit NAICS sectors and includes jobs in portfolio management, insurance, and equipment rentals, etc. The sector is responsible for nearly a quarter of the nation's private industry GDP and has slightly increased over the last decade. 

The next largest sector by share, professional and business services, increased just short of a full percentage point over the same period while manufacturing decreased by over a percentage point. Previous Digest articles have discussed various positions regarding the roles generative AI and automation may play in the manufacturing and professional and business services sectors.

The top sectors have remained largely the same, while others have ebbed and flowed over time. Construction, for example, has increased nearly a full percentage point in share over the past decade, growing from 4.24% in 2014 to 5.14% in 2020 before decreasing to 4.96% of overall private industry GDP in 2023. Refer to Figure 1 for more details on this trend.

Note that an increase or decrease in the share of overall GDP does not necessarily mean an increase or decrease in the dollar value thereof. For example, an industry growing at a slower rate than others would decrease in share of total.

Figure 1: Sectoral breakdown of private industry GDP, 2014-2023

State overview

Similar to the national breakdown, most states’ private industry GDPs come from the finance, insurance, real estate, rental, and leasing sector. There are, however, several exceptions; in 2023, six states—Alaska, Indiana, Louisiana, North Dakota, West Virginia, and Wyoming—and Washington, D.C., did not. 

Manufacturing was the largest contributor in two of these six states in 2023, Indiana and Louisiana, while mining, quarrying, and oil and gas extraction was the largest in the remaining four. Professional and business services was the largest sector in Washington, D.C.

This data and that of 2014 is visible in Figure 2 below. 

Figure 2: Top industries by contribution to GDP, by state and selected year

Shifting to the second largest sectors by contribution to private industry GDP, more interesting data and trends are available due to the greater variance between states. 

In 2023, professional and business services was the second largest sector in 22 states, while manufacturing was the second largest in 13. These numbers represent a paradigm shift in sector contributions from just 10 years prior in 2014, where manufacturing was the second largest sector in most states, 17, trailed by professional and business services’ 15.

The past decade also brought about greater diversification, with just six different sectors represented among the second largest private industries across the 50 states and D.C. in 2014, expanding to nine in 2023.

With this diversification, there are four sectors in 2023 for which just one state each is the second largest: transportation and warehousing in Alaska, agriculture, forestry, fishing, and hunting in South Dakota, mining, quarrying, and oil and gas extraction in Oklahoma, and information in Oregon. 

The second largest sector in two states, Hawaii and Nevada, is arts, entertainment, recreation, accommodation, and food services due to their heavy tourism focus. 

Geographically, there is some concentration by the second largest sector, with, in 2023, many of the professional and business service-heavy states located along the West Coast and New England areas and many manufacturing-heavy states in the Midwest and Southeast.

Figure 3: Second largest industries by contribution to GDP, by state and selected year

This article was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.