State winners and losers in race to woo business

Try to tell most people that Michigan is an economic powerhouse and they're likely to think you are a time traveler from 1955.

But believe it or not, the Wolverine State is back. And all indications are that this is no flash-in-the-oil pan. Led by a resurgent automotive sector that set a record with more than 17 million units sold last year, the Michigan economy is among the best performing in the nation.

The state economy grew by 2.7 percent last year, one of the best rates in the nation. The state has added more than 78,000 jobs in the past 12 months, outpacing the national growth rate. Unemployment — which peaked at 14.9 percent during the worst of the financial crisis in 2009 — is down to 4.7 percent, same as the national rate.

Employees work on a Cadillac CTS on the production line at the General Motors' Lansing Grand River Assembly plant in Michigan.
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That helps boost Michigan's America's Top States for Business rank to No. 7 in 2016, up from 22nd place last year, making it America's Most Improved State for Business.

It is a far cry from our first study in 2007. With the auto industry on the skids, the state finished 41st that year, and all indications for the future were bleak. The state would remain mired in the 40s for the next three years as General Motors and Chrysler emerged from bankruptcy and the federal rescue package took hold. Then the state's slow climb back began, leading to the big jump this year.

The solid economic numbers help Michigan notch an impressive seventh-place finish in our Economy category, up from 29th place last year. And with $328 million in venture capital flowing into the state last year, Michigan comes in fourth for Access to Capital.

The fact is, when the auto industry is doing well, so is Michigan. And it's not just manufacturing at the Detroit automakers and the hundreds of suppliers that dot the state. The auto industry drives innovation statewide. Michigan boasts the nation's largest concentration of engineers and claims an average of one automotive patent every day. Only a healthy auto industry can keep that activity moving. U.S. automakers are on track for another record this year, with the National Automobile Dealers Association forecasting 17.7 million units sold.

An employee checks the wheel frame of a bicycle at the Shinola production facility in Detroit, Michigan.
Jeff Kowalsky | Bloomberg | Getty Images

Also on the move: the city of Detroit. Its finances restructured in a deeply controversial $18 billion bankruptcy plan orchestrated by Michigan Gov. Rick Snyder, Detroit emerged from Chapter 9 bankruptcy — the largest in U.S. history — at the end of 2014. But even now, the jury is still out on whether the Motor City can fully recapture its past glory. One thing is fairly certain though: Detroit was not going to rebound under the previous system.

Michigan has other issues. High crime and poor environmental quality are hurting quality of life. And the Flint water crisis, in which cost-cutting measures led to as many as 20,000 children being exposed to lead in drinking water, is indicative of infrastructure problems that will need to be addressed before the state can completely come back.

Rising tides

Also notching a solid improvement in 2016 is Arizona, which rises nine spots to 25th place this year. The state finished 34th last year. Arizona is attracting skilled workers these days, an essential ingredient for attracting business. In all, Arizona added nearly a quarter million people last year, according to the U.S. Census Bureau. Between 2008 and 2013, the state added more than 150,000 bachelor's degree holders.

That has helped the state jump to fifth place in our Workforce category compared to 14th last year.

Those new Arizonans are finding work in a diversified economy, with targeted industries, including aerospace, renewable energy and business services. Strong job growth has helped the state surge to 15th place from 36th in our Economy category. But the state still has problems, including its 47th-ranked education system.

Other big movers in 2016 include No.33 Pennsylvania, which rises seven spots, as well as Florida (No. 10), Montana (No. 2), New York (No.29), Maryland (No.30) and Vermont (No. 36). Each moves up six spots in the rankings.

As some states go up, others go down. And in 2016, some — but not all of it — has to do with the price of oil, which has plunged 50 percent in the past two years. That has rocked budgets and the job market in several states that depend on oil.

Sitting atop the Permian Basin, New Mexico was a big beneficiary of the domestic shale oil boom. An inexpensive place to produce oil because of the geography and the geology, the growth was explosive when oil was above $100 a barrel. But what oil giveth, it taketh away. Gross Domestic product fell 1.1 percent last year.

Its oil spell broken, the Land of Enchantment tumbles 15 places in our rankings to finish 39th this year. Workers have been fleeing the state in droves since the boom died, and because we consider net migration in our Workforce category, New Mexico suffers badly. New Mexico lost some 27-thousand residents last year, according to the Census Bureau. It's one reason the state finishes 42nd for Workforce compared to 16th a year ago.

Other states hurt by the oil drop are No. 42 Oklahoma, which falls 11 spots; and No.12 North Dakota, which drops by 6.

But not every declining state can blame its woes on oil.

Connecticut, which saw some improvement last year on the strength of its workforce, slides back 10 points to finish 43rd. Connecticut workers are still among the nation's most productive based on economic output per job. But the state is losing population — 16,000 people left Connecticut last year. That includes skilled workers, and that hurts its Workforce score.

And Wisconsin, dealing with some self-inflicted budget woes, including revenue shortfalls that forced Gov. Scott Walker to delay a $100 million debt payment last month, slips eight spots to 23rd place.