Is the next economic recession just around the corner? Some economists think so, according to Fit Small Business, an online publication that serves small-business owners.
If so, where a business is located can mean the difference between continuing viability and having to close down when the next crisis hits, the publication said.
It noted that in the 2008–2009 recession, 170,000 small businesses went under, citing U.S. Census Bureau data.
Fit Small Business has released a ranking of the 50 states to determine the most resilient ones to weather an economic crisis.
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Using data from the Bureau of Labor Statistics, the Bureau of Economic Analysis and the Federal Deposit Insurance Corp., researchers analyzed 10 categories that influence a state’s ability to withstand an economic downturn and weighted them as follows:
- State’s existing debt level: 17.5%
- Unemployment rate: 17.5%
- State’s fiscal balance (deficit vs. surplus): 15%
- Stability of housing market: 10%
- Dependence on exports: 10%
- Economic diversity: 10%
- Per capita savings/checking account deposits: 7.5%
- Per capita credit card debt: 5%
- State income tax rate: 5%
- 10. State’s GDP levels during 2008 recession: 2.5%
“From this list, we can strongly predict from where your business is located whether it will be able to survive the next recession,” David Waring, the site’s editor-in-chief, said in a statement.
Following are the top 10 states best prepared to weather the next downturn, according to Fit Small Business:
- Debt-to-income ratio: 1.34
- Unemployment rate: 3%
- Fiscal balance — revenue as share of expenses: 102%
- Average house price: $186,751
- Exports going to one country: 33%
- Top industry’s share of state GDP: 29%
- Deposits per capita: $18,000
- Average credit card debt: $5,288
- State income tax rate: 3.4%
- State’s GDP gain/loss from 2008 to 2009: -6.3%
- Debt-to-income ratio: 1.46
- Unemployment rate: 3.9%
- Fiscal balance — revenue as share of expenses: 129%
- Average house price: $277,355
- Exports going to one country: 17%
- Top industry’s share of state GDP: 22%
- Deposits per capita: $26,000
- Average credit card debt: $5,716
- State income tax rate: 0%
- State’s GDP gain/loss from 2008 to 2009: -1.7%