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Property Widens Its Lead Over ‘Big Government’ as U.S. GDP’s Top Driver

EconomyAug 16, 2019 03:47PM ET
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(Bloomberg) -- Real estate beats government again.

Real estate had the largest annual gain last year since 2008, solidifying its position as the biggest segment of the U.S. economy, reflecting the evolution of America Inc. since the depths of the great recession a decade ago. Manufacturing remained third in importance.

Bloomberg assessed the economic composition and changes in all 50 states based on 20 broad sectors. The analysis offers snapshots of the macro economy -- which exceeded $20 trillion for the first time last year -- while highlighting the stark differences in structure and growth from state to state.

This report is a follow-up to the release of the inaugural Herfandahl index for economic diversity by state.

Activities related to property, rental and leasing accounted for 13.3% of national GDP in 2018, up from 12.8% in 2008. Overall, the sector generated $2.73 trillion last year. The combined contribution from federal, state and local government agencies to gross domestic product was $2.5 trillion, or 12.2% of the total in 2018, compared to 13.5% in the earlier period.

Twenty states got their biggest GDP contribution from the real estate sector in 2018, double the number in 2008. Figures for this sector also include activities such as the those for rental and leasing of vehicles and commercial and industrial machinery, in accord with Bureau of Economic Analysis groupings.

Government’s role as the No. 1 economic driver fell to just 9 states -- from 18 the year Lehman Brothers Holdings Inc. collapsed. Meanwhile, the relative importance of manufacturing on a state-by-state count was unchanged at 16 -- though there were multiple additions and subtractions within that category.

Among the states where “big government” no longer rules was Washington, home to Microsoft (NASDAQ:MSFT) Inc. and Inc (NASDAQ:AMZN)., and the sole state where the “information” sector lead in GDP.

Alabama and South Carolina also saw their primary economic allegiance shift away from government, with both leaning more on manufacturing last year.

Not all states were weaned from the public sector.

Alaska and Oklahoma relied most on the government in 2018. That’s a change from the earlier period, when both earned the biggest proportion of GDP from mining and oil extraction. Among the 20 sectors analyzed, mining and energy was the sole category that contracted. Alaska and Wyoming were the only two states whose economies shrank.

Three states led by manufacturing in 2008 are now led by real estate: Connecticut, Ohio and Pennsylvania.

New York was one of three states, along with Delaware and South Dakota, that got its largest slice from financial services. In 2008, New York was included alongside Arizona, California, Colorado, Florida, Illinois, Massachusetts, Nevada, New Hampshire and New Jersey as states dominated by real estate.

The most consistent economies were those of Pennsylvania, South Carolina, Wisconsin, and Maine. Their GDPs expanded in each of the 20 sectors used in the Bloomberg News review of the data.

READ MORE: Top three contributing sectors by state, 2008 vs. 2018

READ MORE: Biggest absolute and relative sector changes by state, 2008 vs. 2018

Property Widens Its Lead Over ‘Big Government’ as U.S. GDP’s Top Driver

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