Why State Populations Matter for the Economy

For U.S. states, Census Bureau data is more than just a bragging right.

For U.S. states, Census Bureau data is more than just a bragging right. Population changes matter for economic growth.

The map below shows year-over-year population growth and declines for the year ended July 2015. Click here for an interactive version that shows changes since 2010.

Census Bureau Data

West Virginia and Illinois reported a pronounced yearly decline in population between 2011 and 2015. West Virginia's economy has been hit hard by the decline of the coal sector during the last few years. The state is projected to lose 23,000 residents over the next 20 years, according to a 2016 report by the Bureau of Business and Economic Research at West Virginia University's College of Business and Economics. "A positive shock to encourage in-migration is essential to lessen the severity of natural population decline," the report said.

Illinois has struggled with rising pension costs and a budget impasse that has forced government services to make cuts. College students in the state have even been deterred from attending the in-state schools that have been affected by budget cuts, according to a Bloomberg story earlier this year. That could further threaten the state's population growth.

North Dakota saw its population grow a whopping 2.28 percent in 2015, the highest year-over-year increase of any state. Once the Census Bureau releases 2016 data, though, North Dakota could see a fate similar to Illinois and West Virginia. The state has been bruised by the oil bust as of late.

Population growth plays a key role in states' economic growth. For example, states that have increased their size are also expected to perform well economically, S&P Global Ratings found in an April report. The reverse is true as well, S&P found. The scatter plot below shows how this played out over the past year.

GDP data is as of end of 2014; population data is as of July 2015. Source: U.S. Bureau of Economic Analysis, U.S. Census Bureau

S&P points to Arizona, Colorado, Florida, Nevada, Texas and Utah as states that will benefit from strong population growth. They have ranked in the top 10 in this regard since the end of the recession and have projected economic growth rates through 2020 that are more than one standard deviation above other states, S&P analysts led by Gabriel Petek wrote.

The factors that influence population flows are complex, as the below look at city migration shows. From July 2014 to July 2015, the 20 largest metropolitan statistical areas in the U.S. saw positive international migration, data compiled by Bloomberg's Wei Lu show. However, 11 metropolitan statistical areas, including the Chicago and Los Angeles areas, saw declines in domestic migration.

Source: Census Bureau

This StoryChart was produced by Bloomberg Brief and originally ran online here.

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