How fight for talent will influence America’s Top States for Business

In just one year, interest rates have risen by the most since the 1980s. A possible recession is looming even as the government is funneling billions of dollars into a handful of key industries. Workers are in painfully short supply, but some states are shunning certain workers, pushing back against “wokeness.”

What does it all mean in the battle between the states for business and jobs? America’s Top States for Business is back to find out.

The 16th edition of the annual CNBC study, coming in July, scores all 50 states in ten categories of competitiveness. Our time-tested methodology scores the states based on the criteria they use to sell themselves to business. So it’s built for whatever the economy can dish out.

This year, that’s a smorgasbord of factors that often seem to be at odds with each other.

Help wanted in tight labor market

Despite policymakers’ best efforts to slow the economy and rein in inflation by raising interest rates, companies are still hiring voraciously. But the labor market can’t come remotely close to meeting the demand for talent, with nearly twice as many job openings as there are workers to fill them.

“We’re seeing a mix of increased retirements, and fewer and fewer young people coming up through the ranks,” said Josh Wright, an executive vice president at Lightcast, an Idaho-based labor market analytics firm that provides some of the workforce data for the CNBC study. “There’s just a confluence of demographic and overlapping factors that are making it difficult to find people.”

Labor shortages in the U.S. have become so severe that the first thing many companies look for when they are deciding where to set up shop is where the workers are.

“Companies are looking at where people are going, because that’s the best indicator of where they’re going to continue to go and be long term,” said Tom Stringer, who leads the national site selection and incentives practice at New York consulting firm BDO. “The states that have been really kind of winning the net migration battle are the ones that, no surprise, have been winning the larger share of the bigger projects that have been out there.”

That is why the CNBC study starts with the workforce. Which states are attracting the most talent? How skilled and productive are each state’s workers, and what is being done to train them?

Free money, from chips to infrastructure

The scoring doesn’t end there. Billions of new federal dollars are flowing into state economic development thanks to the CHIPS and Science Act and the Bipartisan Infrastructure Law. We are looking at what the states are doing with all that cash. Which states have the best infrastructure? Which ones prize technology, innovation, and education? America’s Top States for Business has it all covered.

Despite that flood of subsidies, the national economic uncertainty, and even political tensions as the 2024 campaign season begins, have combined to put a damper on new development.

“The cost escalations have been pretty significant across the economy, not just for household goods, but on capital goods, industrial goods, steel, and even labor,” Stringer said. “So that’s had the pause button hit quite a bit.”

And that puts a premium on the health of each state’s economy. Which states are still growing? Which states have balance sheets strong enough to withstand a downturn? Which states give entrepreneurs as well as established businesses the room to flourish? Top States is finding out.

State politics and inclusiveness

The nationwide battle for talent has put quality of life, health & inclusiveness in the spotlight. The CNBC study considers crime, health care, childcare and air quality. Some states are more welcoming than others, in ways that Top States can measure.

States are also differentiating themselves on reproductive rights, one year after the Supreme Court overturned Roe vs. Wade. With data showing that a significant percentage of women are considering the issue in deciding where they are willing to live and work, and with many major employers agreeing to shoulder the cost for employees who need to travel out of state for reproductive care, abortion laws are a metric in the Top States study for the first time.

Also on the scorecard: Access to Capital and Cost of Living. Both are crucial in a time when money is tight.

And our Business Friendliness category looks at each state’s legal and regulatory climates, with an added emphasis on emerging industries.

Follow our Top States section on CNBC.com for upcoming features about state competitiveness as we put the finishing touches on this year’s rankings. As always, we want to hear from you on social media, using the hashtag #TopStates.