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The best and worst states for jobs, as new unemployment claims fall to pandemic-era low

The number of Americans applying for first-time jobless claims reached its lowest level since March 2020 last week, with the number of filings coming in at a better-than-expected 293,000.

But even given the nationwide improvements in the pace of those newly out of work, some states have fared better than others in bringing down their levels of unemployment.

The Labor Department's latest weekly report broke down the states with the highest and lowest insured unemployment rates. This metric captures the ratio of people claiming jobless benefits divided by the overall size of the labor force. The results underscored the lingering unevenness in the unemployment picture across various parts of the country.

As of the week ended Sept. 25, the national unemployment rate was 1.8%, not seasonally adjusted. This level has come down sharply from a pandemic-era high of 15.9% in May 2020, but is still elevated compared to 2019's average of 1.2%.

Some states had insured unemployment rates well below the national average. At the end of September, South Dakota led the nation with an insured unemployment rate of just 0.2%, followed by Alabama with a rate of 0.3%. Idaho, Nebraska, North Dakota and Utah followed thereafter, with each of these states posting insured unemployment rates of 0.4%.

Many of these states have maintained much better-than-average insured unemployment rates throughout the course of the pandemic. Of these six states with the current lowest insured unemployment rates, only Alabama had ever seen its rate climb into the double-digit percentages at the height of the pandemic last year. South Dakota's by contrast, peaked at just 6% during the week ended May 9, 2020.

But other states have struggled to bring down their insured unemployment rates. For the week ended Sept. 25, the highest insured unemployment rates were in Illinois at 4.4%, Puerto Rico at 4.3% and California at 3.3%. These three regions comprised the top three highest insured unemployment rates for two consecutive weeks.

Hawaii, with an insured jobless rate of 2.9%, and the Virgin Islands with a rate of 2.8% rounded out the top five states and territories with the most elevated insured unemployment rates in the latest data. Both represent tourist-driven economies still struggling to bounce back from virus-related travel disruptions.

These rates, however, belie the progress made across these states relative to their virus-era highs. Hawaii's insured unemployment rate peaked at 23.5% during the week ended May 9 and has since slid by a full 20.6 percentage points. And California — one of the first states to implement lockdown measures in spring 2020 — saw its insured unemployment rate skyrocket to as high as 27.8% in April 2020.

Given this context, one of the biggest takeaways for economists from the latest jobless claims report overall has been the affirmation that the labor market's biggest lingering headwind is a shortage of workers reentering the labor force, rather than a dearth of employer demand for workers. And at the national level, job openings have held near an all-time high at more than 10 million, with the quits rate jumping to a record 2.9%, to signal increased worker confidence in finding new work.

"At a time when a record number of workers are quitting their jobs, we’re reminded that some businesses are still failing as the pandemic takes its toll, resulting in unexpected job loss," Mark Hamrick, senior economic analyst at Bankrate, wrote in an email Thursday of the latest jobless claims report. "With so many jobs available and opportunities to work remote at least some of the time, the good news is that workers stand a reasonable chance of improving their employment situation, including better pay and working conditions. Clearly, that’s what many want."

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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