Study Ranks States Best-Equipped to Weather a Recession

If you’ve been paying any attention to financial news over the past several months, you’ve undoubtedly heard talk about a potential recession on the horizon. With the United States currently in its longest-ever period of economic expansion, it’s only logical to speculate on when our good fortunes might taper off. But, if a recession were to arrive in the next year, what parts of the U.S. would fare the best?

A new study from FitSmallBusiness compiled various data points to determine which states are best prepared to survive a recession if one were to begin in 2020. To arrive at this list, the site considered such criteria as economic diversity and financial stability. Specifically some of the factors that weighed in the final rankings include the amount of stabilization funds available, debt to income ratio, unemployment rate, median home value, exports per capita, state income tax rate, the state’s performance during the 2008 “Great Recession,” and more.

Under those guidelines, the study found that Texas is the state best equipped to weather a 2020 recession. This high ranking is partially thanks to the Lonestar State’s 1.16 debt to income ratio (the second-lowest in the nation), its 0% state income tax rate, and its mere 0.6% GDP decease during the previous recession. Additionally Texas has the third-highest exports per capita while also being home to an array of industries.

Behind Texas at the top were West Virginia, Nebraska, Indiana, and Alabama. Interestingly third-place Nebraska actually slipped from the number two slot it held when FitSmallBusiness previously compiled this data in 2017. Taking its place, West Virginia rose from its eighth-place ranking last time around, partially due to its geographically diverse export partners — Canada, India, and the Netherlands.

As for the rest of the top 10, North Dakota, Michigan, Iowa, Georgia, and Tennessee all made the cut. Of those the most notable performance was North Dakota, which fell to number six after topping the list in 2017. That fall can be explained by relatively low “rainy day fund” coupled with the state’s reliance on exports to Canada. In fact, a whopping 88% of North Dakota’s exports are to our northern neighbors. Meanwhile the states least prepared for a 2020 recession include Montana, Hawaii, Arizona, New Mexico, and New Jersey.

Discussing the intentions behind this latest study, FitSmallBusiness chief content officer Eric Noe said, “Our purpose with this study was to shed light on economic indicators that could be key-difference makers in the future.” With that said, considering some of the major ranking moves that have occurred in just the past two years, it would seem that timing might just be the most important factor of all. To that point, here’s hoping that 2020 proves to be recession-free after all.

For those states which did not make it to the top 10 need not to worry much, these studies can be an indicator but could also change.

No matter which state we live, its important to be be prepared at all times. Save up for emergency fund and hope for a better economy.

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Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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