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Massachusetts ranked first in WalletHub’s 2025 survey of state economies, driven by its strength in innovation, research investment, and high-tech employment. The annual report evaluated all 50 states and the District of Columbia across 28 metrics covering economic activity, health, and innovation potential. After Massachusetts, Utah and Washington followed in second and third place, while Iowa placed last overall. Hawaii and West Virginia also ranked near the bottom. The state economy results point to sharp differences in how states are attracting talent, growing industries, and responding to federal economic priorities.

WalletHub’s 2025 state economy rankings offer a detailed snapshot of where capital and talent are flowing. They also reveal where structural challenges remain. The analysis scores all 50 states and the District of Columbia using 28 weighted indicators across three key areas: economic activity, economic health, and innovation potential. For investors, the findings highlight which regions are converting policy shifts into sustained business growth and which ones lag behind.

State Economy Rankings: Frontrunners Convert Innovation into Returns

Massachusetts leads the rankings with a strong combination of research infrastructure, skilled labor, and firm-level performance. The state ranks first in innovation potential and has the highest share of jobs in high-tech industries. It also maintains a large number of companies recognized for rapid growth, including many on the Technology Fast 500 list. This ecosystem continues to attract capital and talent.

Utah follows closely, offering a strong blend of GDP growth, employment resilience, and business formation. It ranks first in economic activity and maintains one of the lowest unemployment rates in the country. Household income, when adjusted for cost of living, is among the highest nationwide. Utah’s private sector also shows rising momentum in high-tech employment and small business creation.

Washington ranks third and stands out for its high level of research and development spending per capita. The state benefits from both public and private sector support for innovation. It also attracts highly educated in-migrants and shows strength in STEM job creation. These factors contribute to a business climate that supports long-term scalability.

States rounding out the top ten include California, New Hampshire, North Carolina, Idaho, and Texas. Each combines workforce strength with measurable output gains. They also show above-average startup activity and capital inflows. Most importantly, they align with sectors that are growing under current federal policy priorities, such as advanced manufacturing, software, clean energy, and biotech.

Lower-Ranked States Reflect Outdated Growth Models

At the bottom of the rankings, Iowa ranks last in overall performance. It shows weak growth across economic activity, low labor market expansion, and limited innovation investment. The state has not diversified beyond traditional industries and appears to have missed federal opportunities related to infrastructure and reshoring.

West Virginia, Hawaii, and North Dakota also appear near the bottom. These states face challenges of low export capacity, weak startup ecosystems, and slow demographic growth. They share a common problem of limited capacity to attract or retain high-growth sectors and trail in metrics tied to future workforce strength and entrepreneurial formation.

Alaska and Nebraska fall into the bottom tier despite favorable past balance sheets. Both are constrained by weak business formation and low R&D investment. Their exposure to commodity cycles, without broader industry diversification, limits their forward-looking appeal.

For investors, these states present higher relative risk. Exposure to narrow economic bases, volatile sectors, or stagnant labor markets adds uncertainty to capital deployment and weakens return potential over time.

Federal Economic Policy Is Favoring Certain State Models

The current administration’s push to reshore manufacturing and reduce reliance on foreign supply chains has reshaped which state economies attract interest. Utah and North Carolina benefit from this policy environment as both combine modern industrial capacity with workforce readiness. More importantly, they’re currently promoting a business climate that’s suited for capital expansion.

Meanwhile, California remains a high-output economy with strong innovation credentials but also struggles with labor market inefficiencies and fiscal pressures. The number-four-ranked state’s economic health score is among the lowest despite its overall size. Still, for investors seeking exposure to large-scale innovation, it remains a focal point.

On the other hand, states tied to legacy sectors or limited trade exposure have not benefited from new policy levers. Iowa’s export structure, for example, is vulnerable to tariff shifts and commodity price shocks. Without reforms in infrastructure, talent pipelines, or business ecosystems, states in the lower half of the rankings may find it harder to attract long-term capital or grow internal demand.

Which states do you believe offer the most stable long-term value for investors? Tell us what you think.

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