Sunday, November 23, 2008

Unemployment rates vary by state

Facts from the October BLS report on state unemployment rates, ranked from lowest to highest:

1. Five states have unemployment rates at 3.6% or less (SD, WY, ND, UT, and NE).

2. 33 states have unemployment rates below the national average of 6.5%, 15 states are above 6.5%, and two states are at 6.5%.

3. The median unemployment rate by state is 5.7%, with 25 states at or below 5.7% and 25 states at or above 5.7%, and mean by state is 5.86%.
Based on #2 and #3 above, Mark Perry suggests that the reason the national average of 6.5% is above the median of 5.7% is either because: a) the states with higher-than-average unemployment rates are also states with higher-than-average population, and/or b) there are more extreme "outliers" above the median than extreme outliers below the mean, bringing the mean of 6.5% above the median of 5.7%.

Both of these are probably correct. Some of the states with the highest jobless rates are also states that have large populations (MI at 9.3%, CA at 8.2%, OH at 7.3% and, IL at 7.3%). Moreover, the two states with the highest rates are Michigan and R.I. with 9.3% rates, 3.6% above the median, while the two states with the lowest rates are SD and WY with 3.3%, or only 2.4% below the median.

The bottom line is that economic problems and labor market weakness are not necessarily distributed equally around the country, but the biggest problems are perhaps somewhat concentrated in some of the states with the largest populations. Fourteen states have unemployment rates below 5% for example, which would normally considered to be pretty far from recessionary levels.


Martha said...

An interviewee on NPR said that WPA projects were instituted during a time of 25% unemployment.

Do you think "we" are jumping the gun by considering public works as the way out before the US tanks further?

Dr. Charlie Hall said...

Yes, I agree. Circumstances are markedly different now [in terms of the unemployment rate] from those during which FDR presided.

And not only that, a study at UCLA found the following about other FDR policies:

“President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services,” said Cole, also a UCLA professor of economics. “So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies.”

Bottom line: We need to think twice about a 'new' New Deal.

jrm said...

I heard an interview this morning on a local radio station with an economist from GMU. He was saying that another big difference between now and the 1930s is that, at that time, we were very much a manufacturing-based economy, but now we are much more service-based. He was concerned that the President-elect's economic team may not keep this in mind when designing a recovery strategy. As the interviewer put it, with the exception of hauling stuff around in a wheelbarrow, an out-of-work banker does not have the skill set to suddenly take a construction job building bridges and roads.

Today's construction jobs require hard physical labor and/or intense training to operate the high-tech specialized equipment that wasn't around 70 or 80 years ago. If things get worse, the unemployed from the service sector may have no choice but to take these types of jobs. But getting them up-and-running is not going to be as easy as handing them a shovel and a pick-axe and telling them to dig. Unless we are willing to forgo most of the cost-saving and labor-saving technological advancements of the last half century in an effort to get more people working, an approach like the 1930s probably won't work very well.