At state level, unemployment’s a glass half-full or half-empty

McClatchy NewspapersJune 5, 2012 

— Two consecutive government reports showing dismal national hiring have renewed concerns that the U.S. economic recovery is stalling. A deeper dive into the state employment numbers, however, paints a more complex hiring picture, one that shows about half the nation returning to past robust employment levels and the other half not.

Energy and farm states outperformed the nation, as did states near the nation’s capital, according to a new study by a private forecaster. States that suffered a housing bust, and old industrial states, continue to suffer the most.

Those details are often lost in the broader numbers. The latest last Friday from the Labor Department showed that the unemployment rate for May ticked up slightly to 8.2 percent, the 40th month above 8 percent. Two days earlier, the agency reported that the unemployment rate in April had fallen from a year earlier in 342 of the 372 large metropolitan areas where it tracks employment.

Those two statistics seem to point in opposite directions: Things are getting worse, or maybe they’re getting better. It’s indicative of the mixed message in labor markets.

When broken down to 50 state economies, the hiring picture can be seen as a glass that’s either half-full or half-empty. About half the nation’s states will return to their peak employment levels this year or next, according to forecaster IHS Global Insight. For the other half, recovery may remain elusive until 2014 or later. Michigan, Nevada and Rhode Island might have to wait until 2017 to see a return to the peak employment levels that preceded the Great Recession, which lasted from December 2007 to June 2009.

“Yes, we are in a recovery,” insisted Jim Diffley, a regional economist for IHS Global Insight, cautioning that states continue to add jobs at a “painfully slow” pace.

Diffley and colleagues calculated where all 50 states stand in relation to peak employment, which for most states came in 2006 or 2007. They found that about half the states are within 3 percentage points of their peak rates.

The best-performing states have three tendencies: robust energy sectors, big agricultural production or proximity to the nation’s capital and thus its benefit of government and related employment.

“Those are the three big factors, and broadly natural resources,” Diffley said of state “pockets of strength.”

  • Alaska, Louisiana, North Dakota and Texas, all of which are enjoying energy booms, already have returned to peak employment levels, but three of the four have small populations.
  • Maryland, Virginia and Washington, D.C., are within 2 percentage points of peak employment, thanks to government spending and related contracting.
  • Energy-rich Oklahoma, West Virginia and South Dakota are within striking distance of peak employment too, as are Pennsylvania and New York, big states with diversified economies.
  • Several states are between 2 and 3 percentage points of peak employment, many because of farm exports and/or strong crop production. They include Iowa, Kansas, Kentucky, Massachusetts, Minnesota, Nebraska and Vermont.

For all the political debate over blame for tepid hiring, Diffley’s research found one clear culprit: the “real estate boom and bust.” States with the biggest problems in housing remain a drag on the national employment picture, and are taking longer to return to healthy hiring.

Construction-sector hiring peaked in August 2006 and then shed 2.1 million jobs. One on in four construction workers didn’t return to the trade, underscoring why bust states continue to struggle.

The housing-market collapse hit employment in two ways. One was direct, through lost construction jobs in Florida, Arizona and similar boom-to-bust states. The other was the deflating bubble in home prices, which hit parts of California and big cities in the Southeast such as Atlanta and Charlotte and Raleigh, N.C. Falling home prices hurt consumer spending, which indirectly feeds into job creation.

Fifteen states are 5 percentage points or more from their peak employment levels.

These include states hit hardest by the housing downturn – Arizona, Florida and Nevada – the latter faring worst among all states at 13 percentage points off peak employment.

Michigan wasn’t far behind, at more than 11 percentage points off of its peak hiring. Arizona and Florida, both of which were at the epicenter of the housing crisis, are still more than 9 percentage points off peak employment.

“There are some areas that are clearly ahead of the game, but the areas that were severely impacted by the recession are the big industrial states, the hot Sun Belt states; they still have a long way to go,” said Mark Vitner, senior economist for Wells Fargo Securities in Charlotte, N.C.

Specializing in the Southeast, Vitner’s research finds results similar to the IHS study and sees improvement coming to much of the nation.

“It seems to me that the economy is expanding on a broader base . . . and more states are seeing job gains. The recovery is much broader, which means it is more sustainable than it has been in the past (few years) but it isn’t particularly strong,” Vitner said.

Diffley was surprised by the resilience of the Northeast, where housing was less of an economic problem than it was in other places.

“You can argue that in the Northeast, it was worse in the 1990s” recession, he said, noting that Wall Street problems haven’t weighed down the Northeast as much as they did two decades earlier.

Despite being in the middle of the pack, North Carolina is growing again, Vitner said, and South Carolina is seeing more industrial hiring as BMW expands its auto manufacturing, Boeing operates a new plant in the state and tire makers are returning to the region.

“Most of the improvement in North Carolina is in Charlotte and Raleigh. Virtually all of the metro areas are seeing some improvement,” Vitner said.

In Florida, housing has bottomed as Latin American investment is flowing in the southern half of the state, but Vitner warned that “we fell so hard in Florida that we’ve got so much ground to make up.”

The broad recovery doesn’t always show up quickly in the employment numbers, cautioned Marisa Di Natale, the director of research for forecaster Moody’s Analytics, in West Chester, Pa.

“The breadth of the recovery has spread, both in terms of geography and in terms of industries, and that is pulling more states into the recovery that had been excluded at the outset,” Di Natale said.

Nevada’s employment numbers look bad, but Las Vegas is enjoying an uptick in tourism as the wider economic recovery allows businesses to schedule conventions and consumers spend more.

“Even in Florida, other industries outside of housing are doing well. Florida is benefiting from tourism,” Di Natale said. “When you look at more recent data, some of those states that fell the most are coming back more strongly.”

Similarly, parts of California look much better than its 6.5 percentage points off peak employment. The Central Valley and areas east of Los Angeles continue to struggle because of excessive homebuilding and the real estate bust. But tourism and port activity have helped Los Angeles, and tech companies have buoyed the Bay Area.

“You’ve got to break California into its parts,” Diffley said.

PERCENTAGE POINTS OFF PEAK EMPLOYMENT

Alabama, 7.2; Alaska, 0; Arizona, 9.1; Arkansas, 3.4; California, 6.5; Colorado, 3.1; Connecticut, 4.6; Delaware, 5.0; District of Columbia, 0.2; Florida, 9.3; Georgia, 5.9; Hawaii, 5.0; Idaho, 6.3; Illinois, 5.0; Indiana, 4.1; Iowa, 2.5; Kansas, 2.9; Kentucky 2.7; Louisiana, 0; Maine, 3.9; Maryland, 1.2; Massachusetts, 2.1; Michigan, 11.4; Minnesota, 2.7; Mississippi, 6.1; Missouri, 5.2; Montana, 4.8; Nebraska, 2.2; Nevada, 13.0; New Hampshire 3.4; New Jersey, 5.1; New Mexico, 5.5; New York, 0.4; North Carolina, 5.3; North Dakota, 0; Ohio, 6.0; Oklahoma, 1.1; Oregon, 6.7; Pennsylvania, 1.8; Rhode Island, 7.6; South Carolina, 5.4; South Dakota, 1.1; Tennessee, 4.1; Texas, 0; Utah, 3.0; Vermont, 2.3; Virginia, 1.8; Washington, 4.2; West Virginia, 0.1; Wisconsin, 5.3; Wyoming 4.

Source: IHS Global Insight

McClatchy Washington Bureau is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service