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6 April, 2022

An investor’s guide to the north-east states of the US

This investor’s guide to the north-east US is essential for anyone establishing operations in Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island or Vermont.

By Naomi Davies

Up until the late 2000s, the economy of the north-east US (consisting of Connecticut, Delaware, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont) experienced consistent growth. Regional GDP increased steadily between 1997 and 2008 before dropping by 1.5% in 2009 in the fallout from the global financial crisis. The economy recovered promptly, exceeding pre-recession levels in 2010.

In the years that followed, regional GDP continued to grow at a compound annual growth rate (CAGR) of 3.4% between 2010 and 2019. In 2020, the economy contracted by 2.3% due to the economic impact of Covid-19 – its first decrease in 11 years.

New York represents almost half of the north-east US’s overall GDP

New York is by far the richest state in the north-east US. At $1.7trn, it accounted for almost half of the region’s GDP in 2020. New York was also the state with the highest GDP per capita at $85,575.

Across the US, New York had the third-largest GDP in 2020 behind California and Texas. If it was an independent country, it would be the ninth-largest economy in the world ahead of Canada, South Korea and Russia. The state’s GDP grew consistently between 2010 and 2019 at a CAGR of 4.2% – the highest of all the states analysed. It then contracted by 3% in 2020 in the fallout from the Covid-19 pandemic.

New York City, the largest regional urban economy in the US, is a global hub for the banking, finance and communications sectors. The city has a labour force of more than four million – the largest in the US – as well as more than 100 higher education institutions. It is also home to the second-largest start-up ecosystem in the world, estimated at $71bn, with more than 9,000 start-ups and 120 incubators. The wider state is also a thriving centre for manufacturing, shipping and technology.

New York was among the states hardest hit by Covid-19 and was considered an epicentre for the virus in early 2020. This led to more stringent lockdown measures than in other parts of the US, which heavily impacted its service-driven industries as well as business and travel tourism. In a bid to boost economic growth, former New York City mayor Bill de Balsio unveiled a record-breaking $98.6bn recovery budget in April 2021.

At state level, measures are also being implemented to expand key growth industries. In February 2022, New York Governor Kathy Hochul unveiled the new $200m Focused Attraction of Shovel-Ready Tracts New York (FAST NY) grant programme. The initiative will see the development of new sites to attract high-tech manufacturing, particularly semiconductor manufacturing, warehousing, distribution and logistics businesses, to the state.

New Jersey had the second-largest GDP in the region in 2020. At $618.6bn, it represents 17.5% of the north-east US’s overall economy. There are 16 Fortune 500 companies headquartered in the state including pharmaceutical giant Johnson & Johnson, insurance company Prudential Financial and multinational IT company Cognizant Technology Solutions.

Life sciences is one of New Jersey’s major economic sectors. The state is home to 14 of the world’s top 20 pharmaceutical companies including Merck & Co and Becton, Dickinson and Company. It also has the largest concentration of scientists and engineers per square mile in the US.

Other key industries include technology, manufacturing, financial services, logistics and cleantech.

Massachusetts was the third-largest economy in the north-east US, accounting for 16.5% of the region’s GDP in 2020. It also has the second-highest GDP per capita.

The state is a world-famous hub for biotechnology, engineering and higher education. Cambridge’s Kendall Square neighbourhood is known as the most innovative square mile on Earth due to its high concentration of life sciences companies and research institutions including Amgen, Novartis and Pfizer.

Vermont was the smallest economy not only in the north-east but across the US at $33.4bn in 2020. Home to almost 7,000 farms and more than 400,000 hectares of farmland, agriculture is one of the state’s leading industries. It is the country’s top maple syrup producer and the leading producer of dairy in New England. The state generates approximately $11.3bn in local food output annually.

Delaware had the highest population growth in the north-east US. The state population grew at a CAGR of 1% between 2010 and 2021.

The state’s largest and most populous city, Wilmington, is known as the chemical capital of the world. It is home to one of the world’s top chemical manufacturing companies in DuPont.

Delaware is also a hub for business and financial services. Companies such as Bank of America, Barclays, Capital One and JPMorgan Chase have a presence there. The financial services sector represents 9% of all jobs in Delaware – the highest share of any US state.

As a result of the state’s business-friendly corporation law, more than 50% of all US publicly traded companies and 63% of the Fortune 500 are incorporated in Delaware.

New Hampshire was the only north-eastern state to experience an increase in GDP in 2020, growing by 0.1% from 2009. The state has achieved year-on-year GDP growth since 2009. New Hampshire’s largest employment sectors include healthcare, retail and manufacturing.

New York is the third-most popular FDI destination in the US

Across the north-east US, foreign direct investment (FDI) project numbers fell by 13.5% between 2019 and 2020, from 326 projects to 282.

New York was the leading destination for FDI in the region. The state received 155 FDI projects in 2020, the third-highest number across all the US states behind California and Texas. International companies employ more than 530,000 New York-based staff, the third-highest figure among the US states.

According to statistics from the Global Business Alliance, more than 1,700 foreign companies have operations in New York, with UK, Canada and France-based companies supporting the largest number of jobs.

Covid-19 has not deterred major companies from investing in New York. In May 2020, TikTok, the video-focused social networking service owned by China-based ByteDance, signed a lease for an office in the heart of Times Square. In September of the same year, Li-Cycle, a Canada-based lithium-ion (Li-ion) battery resource recovery company, announced plans to open a $175m Li-ion battery recycling hub in Monroe County.

Massachusetts was the second-most popular FDI destination in 2020 of north-eastern US states. It experienced the biggest nominal drop in project numbers out of all states analysed with a decline of 16 projects from 83 in 2019 to 67 in 2020.

The state’s most popular industries for investment were software and IT services, with 13 projects, followed by electronics and business and professional services, with nine each. In addition, Massachusetts is a life sciences hub and attracted several high-value investments in the sector, including China-based WuXi Biologics' $60m manufacturing facility in Worcester announced in May 2020.

New Jersey attracted the third-highest number of FDI projects in the north-east US in 2020 with 35. New Jersey operates five foreign trade zones, which help investors keep costs down by deferring payment of duties. The state’s comprehensive logistics and distribution infrastructure also make it an attractive investment destination. New Jersey benefits from having nearly 5,000km of interstates and highways, the country’s highest railroad density and the largest port on the US east coast.

Delaware was the top location in terms of FDI per capita with one project per 100,000 people. It was also the only north-east state to see an increase in FDI project numbers between 2019 and 2020, going from three to ten projects.

There are 408 international companies based in Delaware that employ 24,600 staff. Approximately 7,400 of these workers are in manufacturing roles. The state’s main source countries for investment are the UK, Germany and the Netherlands.

Which north-east US state is the most business friendly?

Maine had the lowest mean salary of all the north-east US states at $51,220 in 2020. According to statistics from the Eastern Maine Development Corporation, it is the top US state for the share of start-ups that remain active after one year. Maine also offers the lowest labour costs in the New England region at less than 6% of the national per capita rate.

Massachusetts recorded the highest mean salary of the states analysed in 2020 at $70,010. This is the second highest of all the US states, second only to District of Columbia.

More than 460,000 companies were registered in New York in 2019, the highest number of all north-east states and the third highest across the US behind California and Florida. The state is an attractive option for business owners due to its highly qualified workforce, sound infrastructure and competitive incentives. It ranks first in the north-east for the total number of science, technology, engineering and mathematics graduates.

Vermont is the leading destination among north-east US states for companies per capita at 27.6 per 1,000 people in 2019.

New Jersey has the best internet in the north-east US, with a median mobile internet download speed of 73.7 megabits per second in the fourth quarter of 2021.

Rhode Island has the lowest corporate tax rate in the region with a maximum of 7% in 2022. The state also offers various incentives, credits and grants for new, expanding or relocating businesses. For instance, the Qualified Jobs Incentive programme gives annual, redeemable tax credits for up to ten years for a business that expands its workforce in Rhode Island or relocates jobs from out of state.

Massachusetts is the most educated state in the north-east US

Connecticut had the highest life expectancy of all states analysed at 80.3 years on average in 2019. A contributing factor to this may be the state’s falling cancer mortality rate, which has decreased by more than 21% since 2008, according to the Centres for Disease Control and Prevention. Connecticut also has one of the country’s highest rates of both doctors and dentists per capita.

The state is considered one of the best locations in the country to raise a family due to the quality of its public schools and healthcare system, low crime rates, reasonable childcare costs and housing affordability. Connecticut house prices can be 50% lower than those in New York City.

Massachusetts has the highest education attainment rates across the north-east US. In 2020, 44.5% of the population aged over 25 years had a bachelor's degree. Harvard University and the Massachusetts Institute of Technology are both located in Cambridge and are among the best universities in the world. Several other Massachusetts universities are also held in high regard, including Tufts University, Boston College, Brandeis University and Northeastern University, as well as the US’s top liberal arts colleges; Williams, Amherst and Wellesley.

New York recorded the highest unemployment rate of all states analysed at 6.9% in 2021. This can be attributed to the state’s slower economic recovery in the wake of Covid-19 given its dependence on the office and entertainment sectors. In addition, New York had the highest poverty rate with 11.8% on a three-year average between 2018 and 2020.

Vermont had the lowest unemployment rate at 3.4% in 2021, down 2.2 percentage points from 2020.

New Hampshire had the lowest poverty rate in the country at an average of 5.3% between 2018 and 2020. Taylor Caswell, the state commissioner for the Department of Business and Economic Affairs, attributed this to New Hampshire’s strong economy and low unemployment rate. However, advocates have warned that the figures don’t paint a full picture, particularly given the state’s high cost of living and low minimum wage.

Massachusetts experienced the largest increase in gasoline prices between March 2021 and March 2022, with the price of a gallon of gasoline increasing by $1.48, from $2.76 to $4.24. New Jersey saw the smallest increase at $1.27.

Vermont is the greenest state in the US

All north-east US states have reduced their carbon emissions since the early 2000s. Maine recorded the highest percentage drop in emissions between 2000 and 2018 at 34.4%.

In December 2020, the Maine Maritime Council unveiled its climate action plan Maine Won’t Wait, which aims to reduce carbon emissions by 45% by 2030 and at least 80% by 2050.

Rhode Island recorded the smallest drop in carbon emissions between 2000 and 2018 at 6%. As part of its Energy 2035 plan, the state aims to reduce carbon emissions by 10% below 1990 levels by 2020, 45% by 2035 and 80% by 2050. However, concerns have been raised that Rhode Island is under-reporting its carbon emissions, which may hinder its ability to meet these targets.

Vermont is the greenest state, not only in the north-east, but across the whole of the US. Renewable energy sources accounted for 99.8% of the state’s electricity mix in 2020.

Hydropower represented 57.8%, followed by biomass (17.8%), wind (16.2%) and solar (8%). In January 2022, Vermont released an update to its Comprehensive Energy Plan. It aims to reduce demand and convert remaining thermal and transportation loads into electric technologies such as heat pumps and electric vehicles. Maine is also an environmentally friendly state, with renewable energy sources representing 82.1% of its electricity mix in 2020.

The rest of the north-east US states rely predominately on non-renewable energy sources (nuclear, coal, natural gas or petroleum) for their electricity generation. The worst-offending states are Rhode Island, Connecticut, New Jersey and Delaware, where non-renewable energy sources accounted for more than 90% of the electricity mix in 2020.

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