Where The Midwest Makes Its Money

The US's manufacturing jobs might not be nearly as plentiful as they used to be, but manufacturing is still bringing home the bacon for the Midwest.

For 10 of the 12 states in the region, no sector accounts for a larger portion of the economy than manufacturing. This, among some fun other pieces of data, can be found in the Bureau of Economic Analysis's new quarter-by-quarter state GDP statistics.  

The outliers are the Dakotas: the shale oil boom dominates North Dakota and finance & insurance rules South Dakota. Of course, the massive build-up of oil facilities in the Bakken Formation have also made North Dakota the state with the fastest growth overall and the lowest unemployment. South Dakota has made itself a destination for relocating operations of major companies through aggressive marketing and eliminating corporate taxes. 

While it may seem surprising that the biggest contributor to the Midwest's economy is manufacturing when jobs in the sector have been disappearing for 30 years, it really isn't a stretch. Manufactured goods carry large price tags - whether they are cars in Michigan, agricultural equipment in Minnesota, or Harley-Davidsons in Wisconsin - and therefore make up a bigger portion of the economy. 

Even though manufacturing is still the biggest part of the Midwest's economy, it is not a huge growth area. The fastest growing areas look much different - although still surprising. Considering that farming is the bread and butter of the Midwest, it might not be an obvious choice for economic growth driver, but it is. Between higher productivity and (as of last year) higher commodity prices, agriculture's contribution to the economy grew faster than any other sector in 8 of 12 Midwest states. North Dakota and Minnesota, led by rejuvenation in the Iron Range, experienced growth in mining, while Nebraska grew its management sector the most (so many more TPS reports!). South Dakota's biggest industry, finance and insurance, was also the fastest growing. In large part, this is due to the small population of the state.

As the broader economic picture gets better and commodity prices remain below the highs seen over the last couple years, expect the fastest growing industries in the Midwest to change. North Dakota and Minnesota may provide a clue as to the next big thing in some other Midwest states: improving technologies for mineral and resource extraction will make previously marginal projects profitable - which may spell growth in places like eastern Ohio and southern Illinois. While change is coming in the second map, it is unlikely that manufacturing will be overtaken from the top spot in the first map; the money brought in from durable manufacturing is just too great to be dethroned - despite the secular decline in manufacturing jobs.