Forbes Rates Utah #1 Best State for Business
"Utah Ranks at the top of Forbes' list of Best States for Business for the fifth time since 2010."
“I will be the greatest jobs president that God has ever created,” declared Donald Trump in June when announcing his presidential candidacy. “I’ll bring back our jobs from China, from Mexico, from Japan, from so many places … and I’ll bring back our money.”
Trump’s blustery rhetoric aside, his four-month stay on top of the polls as a political outsider is a reflection of the dissatisfaction with the current political environment, as well as the economic climate in the United States. Americans want change. They are fed up with real personal incomes climbing a scant 0.35% a year between 2007 and 2014 and with the share of unemployed and underemployed workers still north of 10%.
But there are parts of the U.S. that are thriving thanks to strong workforces, low business costs and pro-business regulatory environments. With that in mind, Forbes embarked on its annual look at which states have the best business climates.
Utah leads Forbes’ ranking of the Best States for Business for the second straight year and fifth time since 2010 (Virginia ranked No. 1 in 2013). The Beehive State benefits from light regulation and energy costs that are 23% below the national average. Employment has expanded 2.2% annually the past five years, the third best rate in the country. Utah fares well across the board in the metrics we used, landing in the top six in five of the six broad categories we used to determine the Best States for Business.
Utah has been a tech destination for years, with companies like eBay EBAY +0.97%, Oracle ORCL +0.30%, MicrosoftMSFT +0.79% and Twitter TWTR +5.59% building up a heavy presence in the state as a low-cost alternative to California. However, the tech scene is evolving in Utah. “Places like Salt Lake City have been successful as the back office to Silicon Valley, but because of investments the talent pool has improved over time and now they’re ready to provide the workforce for more complex operations,” says Jeff Lessard who works with Cushman & Wakefield clients on their occupancy and location strategies.
Forbes’ tenth annual Best States ranking factors in 40 data points across six main areas: business costs, labor supply, regulatory environment, economic climate, growth prospects and quality of life. Business costs, which include labor, energy and taxes, are weighted the most heavily. We added several new criteria this year, including the number of millennials as a percent of the population. “Finding highly educated millenials is top of mind for all of our clients,” says Cushman’s Lessard. We relied on 14 data sources; research firm Moody’s Analytics was the most-utilized resource (click here for a detailed methodology).
North Carolina moves up one spot to rank second. The Tar Heel State is the only one to appear in the top five every year of our Best States study. North Carolina has the smallest union workforce in percentage terms in the U.S., which keeps costs down. Labor costs are 10% below the national average and fifth lowest in the U.S., according to Moody’s Analytics. The state also boasts a strong labor force and business-friendly incentive, legal and regulatory environments.
North Carolina attracted more new facilities and expansions in 2014 than any other state, according to Site Selection magazine. The influx has continued in 2015 with multiple major expansions. Novo Nordisk announced plans in August to invest more than $1 billion for a bio-manufacturing facility and more than double its workforce in North Carolina with an additional 700 jobs. A month earlier software firm Interactive Intelligence ININ -1.73%detailed plans to create 200 new jobs in Durham. Both companies cited the benefits of the Research Triangle Park area with its wealth of technical talent and strong universities.
Nebraska is one of the biggest movers among the top states. It ranks third, up from No. 7 last year (its previous high-water mark was sixth in 2012 and 2013). The state’s climb in our ranking is due in part to the addition of two new factors in our regulatory score: fiscal health and legal climate. Nebraska ranked fourth among states in the Mercatus Center’s “Ranking the States by Fiscal Condition” thanks to the lowest ratio of long-term liabilities to assets of any state. Nebraska also has low levels of unfunded pension liabilities and revenues exceed expenses.
Nebraska fares well in the Institute for Legal Reform’s “Ranking the States” report, which measures how reasonable and balanced the states’ tort liability systems are perceived by U.S. businesses. The Cornhusker State ranks behind only Delaware and Vermont. One tricky part for employers in Nebraska: finding workers. The state’s 2.6% average unemployment rate in 2016 is the lowest of any state.
The biggest gainer this year is Michigan, which moved up 12 spots to No. 30. Michigan has undergone massive changes since Gov. Rick Snyder took office in 2011. The state became the 24th right-to-work state in March 2013. Snyder also repealed the Michigan Business Tax and initiated a phase out of the personal property tax on businesses. Michigan still has its issues. Net migration out of the state was the second highest in the country and the economic outlook is also weak over the next five years.
Maryland had the biggest drop, falling 13 places to 33rd. Job, income and economic growth have all slowed relative to the rest of the country. The state also got dinged based on tweaks to our quality of life scoring. We eliminated poverty rates, which correspond very closely with two other Forbes criteria: health scores and crime rates (Maryland has the second lowest poverty rate in the U.S.). Forbes added commute times as a measure of quality of life, and Maryland residents have the second longest commutes in the U.S. at an average of 32 minutes. Only New York is worse.
West Virginia ranks last, down two spots from 2014. It is the only state to experience a population decline over the past five years and its college attainment rate is the lowest in the country, with only 19% of the adult population holding a post-secondary degree. The state’s legal climate also ranks dead last in the Institute for Legal Reform study. Another black mark is its unemployment rate of 7.3%, the highest in the nation. One plus: West Virginia’s corporate tax rate dropped from 9% to 6.5% between 2007 and 2014.