Gross Domestic Product (GDP) Per State

Although the United States is not the largest country in the world (either by landmass or population), it is the world's biggest economy in terms of gross domestic product (GDP), a position it has maintained since 1871.

GDP measures the total value of goods and services a country produces over a given period. This offers a simple metric for gauging the overall economic health of every nation to each other. There are several variations of GDP measurements; the figures featured in this article are real GDP, which is an inflation-adjusted measure reflecting the number of goods and services produced by an economy in a given year.

In addition to the country's overall GDP, each state within the U.S. has its own GDP, a few of which are larger than the GDP of entire other countries. GDP can be recorded down to the city level, though only the District of Columbia's GDP is typically reported at the state level.

According to the Bureau of Economic Analysis (BEA), the top five states by real GDP in the United States were California, Texas, New York, Florida, and Illinois as of the first quarter of 2023.

Understanding Gross Domestic Product (GDP)

Gross domestic product is the total monetary or market value of all the finished goods and services produced within a region's borders over a specific period. A location's GDP is composed of all private and public consumption, government outlays, investments, additions to private inventories, paid-in construction costs, and the foreign balance of trade (BOT).

Although GDP gives a good impression of the U.S. economy's status as a whole, it doesn't explain which states contribute the most or the least to the total. For example, Texas's real GDP in Q3 2023 was approximately $2.6 trillion. Conversely, Vermont's GDP for the same period was substantially (relatively speaking) lower at $43.38 billion.

Determining which regions of the U.S. are the most economically healthy by making the distinction among state contributions becomes substantially easier. It's less informative to analyze GDP on an even smaller scale, considering our research finds that there were 19,500 cities, towns, and villages in the U.S. as of 2023, compared to just 50 states.

Several factors contribute to how much GDP a state can generate. One such element is the size of a region's workforce: A state like California with over 19 million laborers as of December 2023 is naturally going to have a higher output than Oklahoma with almost two million as of December 2023.

There are also differences in the availability of physical capital (i.e., man-made goods used to create a product or service), the amount invested in human capital (i.e., education, experience, or unique skills), and readily accessible natural resources, in addition to the level of technology available to most workers.

Although GDP isn't completely indicative of economic prosperity because typically there are still poor people in countries with high GDP (and vice versa), several studies have shown a correlation between the two. In 2017, the Federal Reserve Bank of St. Louis found that economic growth and rising income levels are key for both citizens and nations seeking to escape poverty; for the latter, this means outputting a larger GDP.

Additionally, a 2017 report from the Crawford School of Public Policy found that high poverty negatively impacts GDP, as it limits the availability of both physical and human capital as well as delays the adoption of modern technology.

Meanwhile, a 2019 report from the London School of Economics and Political Science found that a one-percentage-point increase in the top 20%'s income can reduce GDP growth over the medium term, whereas a rise in the bottom 20%'s income typically boosts growth.

GDP Per Capita

GDP on a per capita basis paints a slightly different picture. Upon dividing the GDP of each state by its population, the list of the five economically healthiest states changes with two exceptions. New York and California are still in the top five, but they are now joined by Connecticut, Massachusetts, and Washington.

GDP per capita is often presented alongside standard GDP because it enables analysts to better determine how much of a location's economic output is the result of each individual citizen. For instance, although California might generate more money overall than any other state, the GDP attributable to each resident isn't much more than North Dakota, which has one of the lowest overall GDPs.

If a state has a smaller population and a high GDP per capita, it typically means the local economy is based on an abundance of particular natural resources.

As mentioned previously, human capital is an important contributing factor to a territory's GDP. As GDP per capita is inherently a cross-sectoral measurement, it's incredibly valuable for helping economists understand how both a location's GDP and its population are contributing to the area's overall economic health and rate of growth.

The Bottom Line

GDP and GDP per capita are imperfect measures of a state's economic health, considering that they ignore the value of informal or unrecorded economic activity, count unprofitable costs and waste as economic benefits, and prioritize material output over the public's general well-being; however, both values are still useful for judging whether the local economy is contracting or expanding, in addition to serving as early warnings of a recession or inflation.