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Why Hasn’t the Unemployment Rate Fallen in Half the States?

Rob Garver

The unemployment rate has fallen below 6 percent for the first time since July 2008. The economy has been producing well over 200,000 jobs per month, on average, for the whole of 2014, so a continued decline in the rate of joblessness is to be expected. However, a closer look at the data suggests that the improvement is being driven by big gains in some states, while nearly half the country has either seen no change or has experienced worsening joblessness.

In the first eight months of the year, 23 of the 50 states saw unemployment rates either remain static or actually rise, despite the addition of 1.8 million jobs nationally. (The state-level unemployment data for September will not be released until later this month.)

Related: Jobs Jump, Wages Don’t – a Mystery for the Fed

The range of changes in state unemployment rates was striking. Illinois was far and away the biggest success story, with a 2 percentage point improvement in just eight months. Rhode Island and Ohio also came in near the top, with declines of 1.5 percentage points and 1.2 percentage points, respectively.

Year-to-Date Change in State Unemployment Rates

The biggest increase in unemployment rates, as pointed out by The Wall Street Journal Monday, was among states in the Southeast and Mid-Atlantic regions. In Virginia and Maryland, the jobless rate jumped by 0.6 percentage points; West Virginia’s rate rose 0.7 percentage points; Georgia and Alabama both saw an increase of 0.8 percentage points. Louisiana’s performance was the worst, clocking in at an increase of 0.9 percentage points. (Louisiana’s 5.8 percent unemployment rate as of August is still far lower than Georgia’s 8.1 percent, the highest in the country.)

The poor performance was not limited to the South. States as spread out at Iowa, Oregon, and Vermont all experienced an increase in joblessness.

Success in driving down unemployment had similarly little obvious connection to geography. Illinois, with its 2 percentage point decline, borders Iowa and Missouri, which both saw their jobless rate worsen. Louisiana shares a border with Arkansas, which experienced a full percentage point improvement in joblessness

Related: Today’s Jobs Numbers Tell Only a Fraction of the Story

What’s driving the disparate impact of the recovery on different states is unclear — just as the real-world significance of the official unemployment rates remains something of a puzzle for economists to debate. (The concern there is that the stated unemployment rate undercounts the number of Americans who are truly unemployed — a phenomenon creating what is known as “slack” in the labor market.)

It is possible that some of the states where the unemployment rate is on the rise had a larger share of discouraged workers who are now looking for jobs again. In that reading, a rising unemployment rate could be a sign of a state-level economy that’s heating up enough to draw people back into the labor force. 

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