North Carolina has the sixth-best economy in the US for 2025. That’s according to a report released Monday by personal finance company WalletHub.
To determine the best state economies, they compared the 50 states and the District of Columbia across three key dimensions:
- Economic Activity
- Economic Health
- Innovation Potential
They then evaluated those dimensions using 28 relevant metrics, including GDP growth, startup activity, unemployment rate, government surplus/deficit, and jobs in high-tech industries. Each metric was graded on a 100-point scale, with a score of 100 representing the highest economic performance.
Each state and the District’s weighted average were then determined across all metrics to calculate its overall score, and they used the resulting scores to rank-order their sample.
North Carolina was also ranked eleventh for economic activity and innovation potential and fourth for economic health.
However, that rating may take a hit in the next few years as the state’s budget analysts have scaled back the state’s General Fund revenue projections for the next three years, citing signs of economic slowdown and increasing pressure on the economy from tariffs in federal trade policy.
“The downward revision is due primarily to lower-than-expected corporate income tax collections in April, particularly related to reduced estimated tax payments from businesses, likely due to anticipating higher input costs and lower profits from recently implemented tariffs,” state economists wrote.
The revision comes as legislative leaders in the General Assembly begin work to reconcile competing budget proposals from the House and Senate.
The May 2025 Revised Consensus Revenue Forecast, released by the Office of State Budget and Management and the General Assembly’s Fiscal Research Division, projects that state revenues for the current fiscal year will total $34.71 billion — still above initial expectations, but $180 million below February’s forecast.
Economists cite weaker-than-expected corporate tax collections, slower personal income growth, and persistent inflation as contributing factors. Forecasts for fiscal years 2025–26 and 2026–27 have also been adjusted downward by $218 million and $222 million, respectively.
The report notes that recession risks are rising, with anticipated slowdowns in employment and wages likely to affect revenue growth through 2027. Notably, economists point out a downward trend, specifically in transportation revenue for the state, due to emerging trade policy at the federal level.
“Personal income tax rate reductions initiated in 2014 have contributed to budget surpluses, strengthened reserve accounts, supported population growth, and helped reduce the poverty rate,” Joseph Harris, fiscal policy analyst for the John Locke Foundation, told Carolina Journal. “Reflecting this momentum, WalletHub recently ranked North Carolina as having the sixth-best economy in the nation and the top economy in the Southeast. At the same time, however, the state faces a projected budget shortfall for fiscal year 2027, with continued personal income tax cuts cited as the primary cause. This forecast contrasts with North Carolina’s robust WalletHub ranking, raising essential questions about the assumptions underlying the projected budget shortfall.”
Massachusetts ranked number one, followed by Utah, Washington, California, and New Hampshire, which rounded out the top five. The bottom five states were South Dakota, North Dakota, Hawaii, West Virginia, and Iowa in last place.
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