State’s new Economic Climate Study: Washington ranks 4th best in nation.

There’s a wealth of good information in the recently-released 2021 Washington State Economic Climate Study produced by the state Economic and Revenue Forecast Council. At 122 pages, it’s full of data, rankings, and analysis, more than enough to keep analysts occupied for hours. We’ll highlight a few sections here, and encourage you to check out the report.

Three bullets from the executive summary:

  •  The Economic Climate Study is a snapshot of Washington’s performance and ranking both compared to other states and to its own history.

  • The rankings are from best to worst from the perspective of businesses with a rank of one being the best.

  • Washington’s composite rank fell from 2nd to 4th best in the nation in this year’s study.

What’s being examined:

The benchmarks considered in this study focus on the four themes: innovation drivers, business performance, economic growth and competitiveness, and quality of life. The category “Innovation Drivers” is broken into three sub-groups: talent and workforce, entrepreneurship and investment, and infrastructure. The category “business performance” is further broken down into business prosperity and cost of doing business. Overall, forty- eight indicators are presented.

As we have mentioned previously, these kinds of rankings are often most valuable for the individual indicators used; pulling them into a categorical rank inherently involves subjectivity, both in the indicators selected and the weights assigned. The ERFC acknowledges this:

The composite score equally weights each of the four chapters and effectively takes the average of the four. Each chapter’s rank is the average of the subcategories or indicators within it. This equal weighting approach was selected to minimize subjectivity regarding the importance of any given measure in constructing the composite state scores. The drawback to weighting in this manner is that indicators in different chapters have weights that may not appear reasonable. In chapters with only a few indicators, each measure is weighted more heavily than in chapters with a relatively large number of indicators.

Dig into it.