How we are choosing America's Top States for Business in 2025

CNBC

a day ago

Since taking office for his second term, President Trump has set out to fundamentally change the relationship between the states and the federal government. That, in turn, has changed the way the states compete for business and jobs.
In the long run, Trump's tariffs could provide incentives for foreign companies to set up shop in the U.S. Already, some companies are actively searching for locations, and states are working hard to attract them.
"This has been one of the busiest periods that we've had in our 30 year careers," said Tom Stringer, principal and leader of the site selection and incentives practice at Grassi Advisors in New York.
He said many companies are deciding they can't afford to wait until the tariff regime is ultimately decided to come up with a tariff-free location in the U.S.
"Businesses crave certainty," he said. "It's fair to say, none of us, except for one person, really has any knowledge as to where the tariffs are going to go or finish up. And so the way to deal with that has been to strategically start to place some capacity here in the U.S."
But that takes time. In the interim, the tariffs also introduce new risks. Those risks disproportionally hit states that depend more on foreign trade, especially when it comes to a major target of Trump's ire: China. In states where international trade has been an economic engine, it is now a double-edged sword at best.
Similarly, federal spending, jobs and research dollars have historically been important economic drivers in some states more than others. Now, those states are dealing with massive federal budget cuts, while states that are less dependent on Uncle Sam have new advantages.
Through it all, new industries and technologies like artificial intelligence and quantum computing continue to expand, with a voracious appetite for electrical power, computing power, and space to build.
"Who's got the project site ready to go, with infrastructure, with entitlements that we can execute on in fairly short order?" Stringer said. "And maybe the biggest component of that is adequate power."
All these changes have led to some important changes in America's Top States for Business — CNBC's exclusive study, now in its 19th year.
The fundamentals of the study are the same as they have always been since the project began in 2007. We begin with ten broad categories of competitiveness. These are the factors companies consider year after year when making site selection decisions, and that states pitch in their efforts to woo business.
Next, we analyze each state's economic development marketing pitches to determine the appropriate weight for each category. The more that states are talking about a particular aspect of competitiveness, the more weight it carries in the rankings. In 2025, amid recession fears, more states than ever are touting their economic strengths. That makes Economy this year's most important category.
Other categories rising in importance this year include Cost of Doing Business and Cost of Living, as inflation fears persist. Business Friendliness carries more weight this year as foreign and domestic companies seek the quickest path to the U.S. market. And Technology and Innovation rises to reflect the growing battle for dominance in fields like AI.
The more weight a category carries, the more metrics it includes. While most metrics remain constant from year to year, we also choose our metrics each year to reflect the current competitive landscape. So, in 2025, we have added new metrics to gauge the states' risks from a trade war and a shrinking federal budget, including sweeping cuts in federal research grants. We have also enhanced some of our Infrastructure metrics to determine how the states are delivering on companies' power and data demands. This year's Top States study employs 135 metrics, the most ever.
Each state can earn a maximum of 2,500 points across the ten categories. The states with the most points are America's Top States for Business.
Our study is not an opinion survey. We gather empirical data on the states' performance in each metric using the most recent figures available. Where it makes sense, we calculate some metrics on a per capita basis or in relation to a state's gross domestic product (GDP), to allow large and small states to compete on a level playing field.
In addition to their point totals, states receive a letter grade in each category to measure their performance relative to the competition. Grading is scaled, with the high score equal to 100 percent and the low score equal to 50 percent. However, each state's overall ranking, as well as its ranking within each category, is based solely on the number of points scored.
Here are this year's categories and weightings, and an explanation of each:
Economy
Particularly in uncertain times, companies are seeking states with stable finances and solid economies. We examine the economic strength of each state by looking at GDP growth and job growth over the past year. We measure each state's fiscal condition by looking at its credit ratings and outlook, its overall budget picture including spending, revenues and reserves, as well as pension obligations.
We rate the health of the residential real estate market based on multiple factors including inventory, price appreciation, equity, foreclosure activity and mortgage delinquencies, affordability, home seller gains, and property taxes. Because a diverse economy is important in any environment, we consider the number of major corporations headquartered in each state. We measure each state's entrepreneurial economy based on new business formations.
New in 2025, we measure the states' tariff risks by considering the importance of international trade in relation to their overall economy, their dependence on trade with China in particular, and the potential costs of increased tariffs. We also consider the role of federal spending and employment in each state's economy, and their overall dependence on federal dollars. Also new in 2025, we consider the survival rates of new businesses.
Infrastructure
Revitalizing domestic manufacturing, rebuilding supply chains and redefining the very nature of work takes a reimagined infrastructure. We measure the vitality of each state's transportation system by the value and volume of goods shipped by air, waterways, roads and rail. We look at the condition of highways and bridges, the availability of air travel, and the time it takes to commute to work.
With skyrocketing demand for abundant, reliable power, we measure each state's electrical grid. Water demand is soaring too, so we evaluate the condition of each state's water and wastewater utilities. And, in an increasingly data driven world, we look at broadband connectivity.
New in 2025, we also measure large-scale computing power in each state.
We consider access to markets by measuring the population living within 500 miles of each state. We look at the availability of vacant land and office and industrial space, and we measure state site readiness programs in terms of their overall funding and the number of certified or "shovel ready" sites. We measure each state's sustainability in the face of climate change, looking at the risk of flooding, wildfires, and extreme weather. New this year, we also look at resiliency measures that allow states to withstand disasters.
Workforce
With skilled workers in such short supply, and with the rising role of advanced manufacturing, the definition of a qualified worker is expanding. In addition to measuring each state's concentration of science, technology, engineering and math (STEM) workers and the percentage of workers with college degrees, we also consider workers with associate degrees and industry-recognized certificates. We look at which states are most successful in attracting talent at all levels, considering the net migration of educated workers to each state, and how states are faring in the competition to attract skilled workers. We look at state worker training programs, right to work laws, and worker productivity based on economic output per job.
Cost of Doing Business
With costs a growing concern amid recession fears and persistent inflation, we look at each state's ability to ease business expenses. We consider the competitiveness of each state's tax climate. We also measure wage and utility costs, as well as the cost of office and industrial space. With the nationwide insurance crisis spreading, we are looking more closely in 2025 at the cost of property-casualty insurance, along with forecasted premium increases. We consider the incentives and tax breaks that states offer to reduce business costs, and we consider available incentives targeted toward development in disadvantaged communities.
Business Friendliness
Companies follow the path of least resistance. That includes a legal and regulatory framework that does not overburden business. We measure each state's lawsuit and liability climates, regulatory regimes covering areas such as trade and labor, as well as overall bureaucracy. As companies race to build new facilities and expand existing ones, we look at state land use regulations. We also consider how hospitable states are toward emerging industries including artificial intelligence and cryptocurrency, giving them a framework for growth without stifling innovation.
Quality of Life
With workers in short supply, companies are seeking to locate in states that can attract a broad array of talent. That makes quality of life an economic imperative. We rate the states on livability factors like per capita crime rates, environmental quality, and health care. With studies showing that childcare is one of the main obstacles to employees entering the workforce, we consider the availability and affordability of qualified facilities. We look at worker protections including livable wage policies, paid leave, and rights to organize. We look at inclusiveness in state laws, including protections against discrimination of all kinds, as well as voting rights and secure election systems. And with surveys showing a sizeable percentage of younger workers would not live in a state that bans abortion, we factor reproductive rights in this category as well.
Technology & Innovation
Truly competitive states prize innovation, nurture new ideas, and have the resources to support them. We measure the states based on results, including the number of patents issued per capita. We also consider federal health, science and agriculture research grants. But with many of those programs now on the chopping block under the Trump administration, we also measure each state's risk from cuts and changes in grant formulas. We also consider which states provide their own support for research and development, independent of the federal government. With domestic semiconductor research, development and manufacturing taking center stage, we look at each state's place in this crucial technological ecosystem. And we measure each state's role in the artificial intelligence revolution in terms of where new AI models are being developed and where the AI jobs are.
Education
A state's education system is its main source for talent and an engine of innovation. It is also a key consideration for companies and families deciding where to put down roots. We look at multiple measures of K-12 education including test scores, class size and spending. We consider the number of colleges and universities in each state as well as long-term trends in state support for higher education. We also consider historically Black colleges and universities (HBCUs), which companies are increasingly seeking to partner with. With the search for talent expanding to include employees with marketable, industry-recognized skills, we measure each state's community college and career education systems.
Access to Capital
Companies large and small need ready access to financing. We look at venture capital investments in each state, as well as traditional bank lending by state in relative and absolute terms. We also look at state-backed capital assistance and loan guarantee programs. And we measure foreign direct investment in each state.
Cost of Living
With inflation persisting, companies and workers are seeking states where prices are stable and daily living is affordable. The cost of living helps drive the cost of doing business. We measure the states based on an index of costs for basic items. With a deepening national housing crisis, we are looking more closely at housing costs in 2025, considering the impact for both homeowners and renters. And as the insurance crisis spreads, we consider the cost to insure a median priced home in each state.
Our Sources
We base our rankings primarily on publicly available data. In addition, real estate cost and availability data are compiled for CNBC by CoStar Group, and they are factored in the Infrastructure and Cost of Doing Business categories. Labor market data firm Lightcast developed a State Talent Attraction Scorecard exclusively for CNBC. Those results are factored into the Workforce category. In our Infrastructure category, First Street Foundation, a non-profit, nonpartisan climate risk research firm, provided data on sustainability, and Cotality, a property risk data analytics firm, provided state level data on resilience using its Property and Mortgage Resilience tool. The Site Selectors Guild, an international association of site selection professionals, compiled data on state site readiness programs.
Most of the rest of our information comes from federal government databases. In the cases where government statistics are not available, we seek neutral and/or ideologically diverse data sources.
We use data from every state's primary economic development arm, and from the most recent Annual Comprehensive Financial Report (ACFR) issued by each state, in addition to the sources listed below.