Delaware's economic growth lags behind neighbors

What do the numbers on Delaware’s production tell us about the effectiveness of the state’s economic policies_OLD?       Delaware’s economic growth rate, as measured by growth in gross state product (GSP) in chained 2009 dollars, has lagged behind the nation, the mid-Atlantic region and comparator states such as Maryland and Virginia. The US growth rate over 5 years 2009-2013 is 8.37%. The mid-Atlantic region (DE, MD, NJ, NY, PA) lags behind at 5.64%. Maryland does slightly better at 5.85%. Virginia’s growth rate is 5.01%. Delaware lags behind even the mid-Atlantic region at 3.46% over 5 years 2009-2013 despite the recent apparent uptick in Delaware’s growth in 2013.        Delaware’s private sector growth has lagged as well. It was 4.19% over the 5 years 2009-2013. The US private sector growth rate was 9.90%, the mid-Atlantic region rate was 6.81%, Maryland’s was 6.14% and Virginia’s was 6.03%.       Based on BEA’s industry classification system, the largest private industries in Delaware (2009) were: Finance, insurance and real estate (41.3% of gross state product), Professional and Business Services (10.7% of GSP) and Manufacturing (8.4% of GSP). Professional and Business Services is a catch-all category that includes legal services, temp agencies, computer design, management services, etc. The finance sector is considerably more important for Delaware than for the entire mid-Atlantic region. Manufacturing is also more important in Delaware than in the region. However, these three categories are important in the mid-Atlantic region generally, and in nearby states like Maryland and Virginia.         How did Delaware fare in private industries that are its ‘comparative advantage’? Delaware’s most important industry, finance, expanded modestly, 5.40% over 2009-2013 compared to 6.4% for the mid-Atlantic region. Delaware’s growth in business services was its strongest category (14.5%). Though it appears to have fallen off over the last year it equals the US average growth rate and exceeds the mid-Atlantic rate (12.6%). Manufacturing has contracted a lot in Delaware (-11.6%) even relative to the mid-Atlantic region (-5.5%). In contrast, manufacturing has expanded in Virginia (9.6%). Within manufacturing there are some categories that are growing (as of 2012, when detailed data are available) such as: plastics and rubber, furniture and computer and electronic products. Others are contracting such as: petroleum and coal products, motor vehicles and transportation equipment, textiles and printing. Virginia’s data also shows turmoil within this sector with some industries growing dramatically (motor vehicles and textiles) with others contracting (petroleum and coal products, primary metals manufacturing).        Delaware retains a very high per capita GSP ranking although it has slipped from #4 in 2009 to #6 in 2013, getting beat out by North Dakota (understandably) and Massachusetts (less understandably). Gross state product in Delaware was 134% of US average and 113% of mid-Atlantic regional average in 2009. Now it is 127% of the US average and 108% of regional average. On a per capita basis, Delaware is a highly productive state but the gap between Delaware and the US and regional averages is closing as Delaware’s economy grows more slowly. Business services remains a strong and growing category, despite a drop in the past year. Finance, the dominant sector is growing slowly though nearby states are catching up. The biggest problem appears to be manufacturing, where Delaware’s regional comparative advantage is slipping away. Delaware, unlike Virginia, is not replacing contracting manufacturing categories with enough expansion in other categories to maintain growth. Delaware needs to re-examine its economic policies_OLD especially with respect to its competitors’, like Virginia (ranked #1 in business climate by Forbes and A+ by Thumbtack/Kauffman Foundation).   Director, CRI Center for Economic Policy Analysis.