During its early years of statehood, Vermont was overwhelmingly agricultural, with beef cattle, sheep, and dairying contributing greatly to the state's income. After World War II, agriculture was replaced by manufacturing and tourism as the backbone of the economy. Durable goods manufacturing (primarily electronics and machine parts), construction, wholesale and retail trade, and other service industries have shown the largest growth in employment during the 1990s. Vermont's economy was little impacted by the national recession in 2001, as the growth rate of its gross state product, which had accelerated from 5.1% in 1998 to 5.3% in 1999, to 5.6% in 2000, actually improved to 5.7% in 2001. The main negative effect was an unexpected shortfall in tax revenues that followed the abrupt collapse in capital gains income, presenting Vermont, as with most states, with a state budget crisis. Payroll employment did decline, but the trough was reached by April 2002, and despite layoffs by IBM in late 2002, the state economy registered net job gains in fall 2002. Per capita income grew in the first half of 2002, and Vermont's bankruptcy rate was the lowest in New England.
In 2001, Vermont's gross state product gross state product was $19.1 billion, the 2nd smallest (after North Dakota) among the states, to which general services contributed $4.4 billion; financial services, $3.5 billion; trade, $3.02 billion; manufacturing, $2.99 billion; government, $2.5 billion; transportation and public utilities, $1.4 billion, and construction, $868 million. The public sector in 2001 constituted 13.3% of gross state product, compared to the 12% average for the states.