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Employment Numbers Send Mixed Signals

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The labor market has been sending mixed signals over the last few months regarding its strength. For instance, initial unemployment claims—typically a signal of the overall labor market—has been trending downward and is not far from a new 35-year low. After adjusting for the size of the current population, the September figure of the seasonally adjusted 4-week moving average of 305,000 initial claims would “traditionally” be associated with a very strong labor market. In October, the number of claims edged upward, but still remains fairly low.

A few observers have noted a disconnect between the number of unemployment claims and the rest of the labor market—job creation, the unemployment rate, and wage growth. Some have taken it as a sign that the labor market is not as weak as the headline unemployment rate suggests. At its lowest in early 2000 there were 0.94 claims per 1,000 people in the country. The only other periods to approach this—1989 and in 2006—the same metric was 1.16 and 0.96 respectively. As of the end of September, the current rate was 0.96 claims per 1,000 citizens—given a U.S. population estimate of 316.4 million in 2013.

Masked in these national numbers is the marked difference in the number of claims between the states. While some states are at or near record lows in the level of unemployment claims per 1,000 residents, other states are still well above the number of monthly unemployment claims that would signal a return to a healthy labor market. Alaska, Wisconsin, and Pennsylvania are the poorest performing with claims per 1,000 people ranging from 2.87 to 1.84. At the other extreme, the labor markets in South Dakota, Oklahoma, and Louisiana are the strongest with claims of 0.43 to 0.62 per 1,000. Virginia ranks eight in the nation regarding the strength of its labor market with 0.68 claims per 1,000 residents.

In contrast to the past two recoveries where a vast majority of states saw the low point in claims data at about the same time as the national job market, several states have lagged well behind the average in this recovery.

Another way to examine this is look at the 52-week moving average of claims by state to see in each of these periods—1989, 2000, 2006, and 2013—how close each state was to its lowest ever ratio of claims per 1,000 residents. For instance in 2000 and 2006, on average when the national claims rate bottomed out, the average state was within 14% and 17% respectively above its historic low of number of claims per 1,000 residents. In contrast in 2013, as the nation approaches its historic low for initial claims per 1,000 residents, on average the states are 26% above their previous historic low.

Many states approached their historic lows in 2000 and 2006, but much fewer states are close to their historic lows currently despite the healthy national numbers in terms of initial claims. Another way to think about it is that the economic expansions in the late 1990s and mid 2000s were rising tides that spread business activity broadly across most states and metropolitan areas. Today’s expansion is more of a story of states that have and have not, where several states are beginning to forge new records for employment and many other states lag significantly behind in terms of their labor market. By this standard, Virginia is also doing reasonably well–at the end of September it was within 10 percentage points of its 30-year low of 0.63 per 1,000 residents which occurred at the end of dot-com boom in the 1999-2000 timeframe.

(This article first ran in the Richmond Times Dispatch on November 4, 2013)

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