The 5 States That Will Be Hurt Most by Slowing Gun Sales

By Rich Duprey Markets Fool.com

The firearms industry is an important component of the U.S. economy, contributing some $51 billion to total economic activity in the country. It also supplied over 300,000 jobs that paid on average more than $50,000 annually, which is why more than a few states might be very concerned about the slowdown in gun sales underway.

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The National Shooting Sports Foundation recently issued its annual firearms industry economic impact report. It once again highlights the positive role played by manufacturers of guns, ammunition, and supplies by providing employment to hundreds of thousands of workers, and taxes to government coffers at all levels (an estimated $6.5 billion worth in business taxes and more than $838 million in excise taxes). The report also shows which states are most dependent on the industry, and the results may surprise you.

Image source: Getty Images.

Jobs are the first thing to go

With any industry slowdown, there is, of course, the immediate loss of jobs that occurs, such as the recent announcement by privately held Remington Arms that it was firing over 150 employees, or 14% of the workforce at its Ilion, New York facility. It also let go an additional 16 workers from its Lexington, Kentucky plant, and previously, it had fired 39 at its Huntsville, Alabama factory. Taken together, Remington will now operate with a little more than 900 workers, down from the 1,300 employees it employed just two years ago.

Last month, Vista Outdoor (NYSE: VSTO) also reduced by 12% the workforce at its Anoka, Minnesota, Federal Premium facility that produces shotshell, centerfire, and rimfire ammunition. Slack ammo demand had started soon after the November elections, according to the company's third-quarter earnings call, and continued into the fourth quarter. Vista expects the trend to continue into its next fiscal year.

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Storied gunmaker Colt has also reportedly laid off about 10% of its workforce in the first quarter.Otherwise, the two biggest gunmakers, Sturm, Ruger (NYSE: RGR) and Smith & Wesson, have yet to announce any layoffs, but they're both experiencing declines in sales that are expected to continue for some time yet.

Everything is bigger in Texas ... and California

As two of the largest states in the country, California and Texas are no-brainers as major regions for economic activity -- the Golden and Lone Star states are surprisingly close in terms of firearms industry-related jobs and output.

State

Total Jobs

Total Wages

Total Output

California

20,610

$1.21 billion

$3.64 billion

Texas

23,070

$1.16 billion

$3.83 billion

Data source: NSSF Firearms and Ammunition Industry Economic Impact Report 2017.

While the aggregate numbers are significant, these states would not necessarily fare worse as a result.California's economy, after all is huge -- the largest in the U.S. with $2.44 trillion of economic output in 2015 (the sixth largest economy in the world). The American Enterprise Institute says Texas is second, producing $1.64 trillion in economic output, making its economy the world's 10th largest.

Image source: Smith & Wesson.

With their massive populations, the NSSF report says neither California nor Texas made the top 10 states of total economic output per capita. So, which states would be most affected by the firearms industry downturn?

Sparse populations, big impact

Although South Dakota boasts less than 1,100 jobs in the industry and produced $376.9 million in total economic output, it was the state fifth most dependent on the firearms industry on a per capita basis. It followed, in order, behind Montana, Minnesota, and Idaho as the fourth, third, and second states that produced the greatest economic output per capita.

Which state was first? If you guessed New Hampshire, congratulations! It was the firearms industry's largest state on a per capita basis, although it had just over 4,000 jobs to its credit and $972.5 million in economic output.

States With Largest
Total Economic Output
Per Capita
New Hampshire
Idaho
Minnesota
Montana
South Dakota

Data source: NSSF.

It's not surprising, really, when you consider how entwined the state and the industry are. Although it's headquartered in Southport, Connecticut, Ruger, which is the country's largest gunmaker, produces most of its firearms in New Hampshire, or more than 800,000 pistols, revolvers, rifles, and shotguns, though it also has a substantial presence in North Carolina and Arizona, too.

Conversely, American Outdoor Brands (NASDAQ: AOBC), the parent of Smith & Wesson and the second largest firearms manufacturer makes virtually all of its firearms in its home state of Massachusetts.Several other firearms manufacturers, including Sig Sauer and Heckler & Koch, also produce a significant number of guns in New Hampshire.

The firearms industry is responsible for well-paying jobs and economic wealth all over the country, but these are the five states that will see the greatest impact from a broad downturn in the space.

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Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.