Changes in regional unemployment over the last decade Essay

During the mid-1970’s, the Northeast and the West experiencedthe highest unemployment rates in the Nation, but after a strongexpansion in the late 1970’s and severe recessions in the early1980’s, high unemployment was concentrated in a band of Statesstretching from the Great Lakes south to the Gulf of Mexico.

Businesscycle swings, as well as differences in industrial structure anddemography, account for the geographic shift in unemployment. While allregions benefited from the robust 1983–84 recovery, the East SouthCentral division (Kentucky, Tennessee, Mississippi, and Alabama)improved less rapidly than other areas, and its jobless rate in 1984 wasthe highest of the nine census divisions. In contrast, New England continued its dramatic improvement into the current recovery, and itsunemployment rate in 1983 and 1984 was much lower than that in any othercensus division.

This article analyzes employment and unemployment changes duringthree distinct cyclical swings. It contrasts the 1976–79 period, whenemployment rose strongly and unemployment declined, with the 1979–82period, when employment growth slowed and unemployment increasedsharply. Emphasis is placed on how these two periods, as well as therecovery in 1983–84, affected different sections of the country.Employment developments in the four census regions and nine divisionswithin these regions (and occasionally individual States) are used todemonstrate major subnational variations. (Footnote 2 lists the Statesincluded in census regions and divisions.) The article is based primarily on data from the Current PopulationSurvey, a monthly sample of approximately 60,000 households nationwide,which provides information on the employment and unemployment status ofthe civilian population 16 years of age and over. Annual averages areused because they are subject to les sampling variability than monthlydata and also give better estimates of major aggreagates at the Statelevel.

The analysis begins with 1976 because it was the first year thata consistent, reasonably reliable State data series was available.Occasional references are made to earlier years, however, when a longertime horizon helps to explain more recent developments. Also,unemployment rates for 1984 indicate how the second year of the currentrecovery affected different regions and divisions.

However, becausefinal 1984 employment level data were not available at this writing, thefocus in the following section is on changes over the 1976-83 period. Employment The strong U.S.

employment increases of the late 1970’s cameto a virtual halt at the end of the decade, as the 1980 downturn wasfollowed closely by the severe 1981-82 recession. Total employment,whcih rose 11.3 percent during 1976-79, inched up only 0.7 percentbetween 1979 and 1982. While the recessions in the early 1980’saffected employment growth in all sections of the country, the impactwas most visible in the East North Central, the East south Central,Mid-Atlantic, and West North Central divisions. Employment growth inthese four divisions trailed the national pace in the 1976-79 period andthen turned negative between 1979 and 1982. The sharpest drop occurredin the heavily industrial East North Central States, where employmentfell by 5.

5 percent from 1979 to 1982. The employment decrease, whichstarted a year later in the East South Central division, amounted toapproximately 3 percent between 1980 and 1982. In the Mid-Atlantic andWest North Central States, employment essentially held steady in the1979-81 period and then declined about 1.5 percent in 1982. Despite the negligible growth in total U.

S. employment between 1979and 1982, employment rose about 3.5 percent in both the South Atlanticand Pacific States, while the Mountain and West South Central divisionsposted gains of 7.5 to 8.5 percent. However, these increases weresignificantly below those of the late 1970’s in all four divisions.The slowdown was particularly marked in the Pacific States, as thestrong job growth that the Pacific Northwest had recorded in the late1970’s ended. Employment in construction and lumber and woodproducts fell in both Oregon and Washington from 1979 to 1982.

Employment in New England grew at about the national rate in thelate 1970’s and slightly above it in the early 1980’s. Theseemployment gains contrast markedly with the sluggish growth experiencedearlier in the post-World War II period, when New England underwent adramatic shift in its employment mix by industry. Accounting for almosthalf of New England’s employment, Massachusetts illustrates themovement away from labor-intensive non-durable manufacturing and intothe service-producing industries and high technology manufacturing.

Between 1947 and 1975, Massachusetts’ employment in threeindustries–textiles, apparel, and leather-plunged from 250,000 to90,000, or from 14 to 4 percent of its nonfarm payroll jobs. Duringthis period, total manufacturing employment in the State dropped by 21percent, in sharp contrast to a 19-percent increase nationally.Starting in the mid-1970’s, manufacturing employment inMassachusetts began to pick up, with a major part of the increaseoccurring in three newer “high tech” industries–machinery,electrical equipment, and instruments.

This recovery in manufacturingjobs, combined with continued expansion in the service-producing sector,resulted in statewide job growth in the late 1970’s that was closeto the national pace. A central challenge to any area’s economy is that employmentmust expand simply to keep pace with population growth. An economy thatstands still in job creation actually deteriorates over time if thepopulation expands. Two distinctly different subperiods are evidentwhen regional employment and population growth rates are compared from1976 to 1983.

In the late 1970’s, employment growth rates exceededpopulation increases in all nine census divisions. This relationship ismeasured by the employment-population ratio (the percent of thepopulation 16 years old and over that is employed), which peaked in1979. Between 1979 and 1982, no division recorded an employment gainequal to its population increase, so employment-population ratios felluntil the onset of the 1983-84 recovery. In the late 1970’s, New England and the Pacific Statesrecorded the largest employment-population ratio gains (4 to 4.5percentage points), while the East South Central and the South Atlanticdivisions had the smallest (1.5 to 2 percentage points). When theemployment picture weakened in the early 1980’s,employment-population ratios fell most in the East North Central States(down 4.

3 percentage points) and the adjacent East South Central States (down 3.4 points). These decreases outweighed the gains of the late1970’s in both divisions, the only divisions to do so. (See table1.

) From 1976 to 1983, New England experienced the largestemployment-population ratio gain (3.2 percentage points), andsubstantial increases (2 to 2.5 points) were also posted in theMountain, Pacific, and West South Central divisions. At the otherextreme, the ratios fell about 1.5 percentage points in the East Northand East South Central divisions.

In the latter division, the ratio wasthe lowest of the nine divisions in both 1982 and 1983. Unemployment The locus of unemployment has shifted markedly in a very shorttime, attesting to the influence of both cyclical changes and industrialmix on the fortunes of an area. In 1976, the highest jobless rates wererecorded in the New England, Mid-Atlantic, and Pacific divisions, whilethe lowest rate occurred in the West North Central division.

In 1984,the U.S. unemployment rate, at 7.5 percent, was close to the 7.7 percentrate of 1976, but the geographic distribution differed dramatically. Inboth 1983 and 1984, the highest rates in the Nation occurred in theheavily industrialized East South and East North Central divisions andin adjacent States, while New England had the lowest rate.

(See chart1.) Three changes in unemployment rate rankings were especially notablebetween the mid-1970’s and 1983-84. New Englandshifted from thehighest jobless rate division to the lowest; the East South Centraldivision moved from the low unemployment rate category to the highestrate of the nine divisions; and the East North Central States shiftedfrom an average unemployment ranking to next to the highest in both 1983and 1984. The pronounced shift in unemployment among regions between themid-1970’s and 1983 and 1984 reflected developments during threedistinct cyclical subperiods: 1975–79, when national unempolyment fell,1979–82, when it rose sharply, and 1983–84, when joblessness declined.March 1975 was the trough of the 1973-75 recession and, therefore, 1975is an important year in cyclical analysis.

Regional and divisional datafor 1975 appear in table 2. However, individual State unemploymentrates for 1975 are omitted because sampling errors for many wereinordinately high. The 1976–79 period.

During 1976–79, the recovery from the deep1973–75 recession continued, and the national jobless rate dropped from7.7 to 5.8 percent. Jobless rates fell most in the West and Northeast,while States in the Midwest and East South Central Division showed thatleast improvement. Twelve States recorded unemployment rate declines of3 percentage points or more. This group comprised four New EnglandStates (Connecticut, Massachusetts, New Hampshire, and Vermont), twoMid-Atlantic States (New York and New Jersey), four States in the West(Arizona. California, Hawaii, and Nevada), and two South AtlanticStates (Florida and Georgia).

New England, which had the highest joblessrate of the nine divisions in 1975 (10.2 percent), recorded the largestdecrease in the late 1970’s–as its rate fell to 5.4 percent in1979. The Pacific and Mid-Alantic divisions also recorded largeunemployment rate decreases between 1976 and 1979. In contrast, jobless rates were virtually unchanged over thisperiod in 10 states, and the rate rose in Alaska. After constructionwas completed on the trans-Alaskan pipeline, the State’s joblessrate jumped from about 8 percent in 1976 to 11 percent in 1978 and thendeclined to 9 percent in 1979. Most of the states where unemploymentrates did not improve significantly were in the Midwest and East SouthCentral division.

Four States in the heavily agricultural West NorthCentral division (Iowa, Nebraska, and North and South Dakota) were inthis group because they had very low unemployment rates (3 to 4 percent)in both 1976 and 1979. Idaho (in the Mountain division) also showedlittle change in its unemployment rate between 1976 and 1979. The five other States where jobless rates did not decrease between1976 and 1979 were Alabama, Tennessee, Kentucky, Indiana, and Louisiana.In Alabama and Indiana, unemployment rates had edged downward between1976 and 1978 but then increased in 1979, when employment growth in eachState slowed Markedly.

Both States have heavy concentrations ofgoods-producing industries, which experienced little or no job growthfrom 1978 to 1979. Despite the improved employment situationnationally, jobless rates in Kentucky, Louisiana, and Tennessee showedno discernible trend between 1976 and 1979. The fact that three of fourEast South Central States (Alabama, Kentucky, and Tennessee) hadvirtually the same unemployment rates in 1976 and 1979 meant that thisdivision was the only one where the unemployment rate did not dropsubstantially in the late 1970’s. As a result, the East SouthCentral jobless rate shifted from well below the U.S. rate in 1976 toslightly above it in 1979. The 1979–82 period.

Between 1979 and 1982, the nationalunemployment rate jumped from 5.8 and 9.7 percent, as the economysuffered two successive recessions. This increase affected all U.S.

regions although with different timing and severity. The brief andrelatively mild 1980 recession had the most adverse effect on industriesthat are highly sensitive to interest rates, particularly automobilesand housing. In the East North Central States, where automobilemanufacturing and supplier industries are concentrated, the unemploymentrate jumped from 6.u percent in 1979 to 9.2 percent in 1980.

Very sharpunemployment increases occurred in Michigan, Ohio, and Indiana–Stateswhere jobless rates had begun to rise as early as 1979. Althoughstarting from a lower level, the jobless rate in the neighboring WestNorth Central States also increased markedly in 1980. In contrast, theunemployment rate in the Northeast only rose from 6.6 to 7.0 percentbetween 1979 and 1980, and rates in the South and West both increasedabout 1 percentage point.

Unlike the 1980 experience, the severe 1981–82 recession resultedin substantial unemployment increases in all sections of the country.The most adverse impact occurred in heavily industrialized States, whichwere still suffering from the 1980 downturn in basic industries.Jobless rates jumped to 12.5 percent in the East North and 12 percent inthe East South Central divisions–double the 6 percent rates recorded in1979.

The rate in the West North Central States, while low comparedwith other divisions, also nearly doubled. Seven States had 1982unemployment rates in excess of 11.7 percent–one-fifth or more abovethe national average. Five of the seven were the East Central States ofMichigan, Ohio, Indiana, Alabama, and Tennessee. West Virginia andWashington were the two other States with very high 1982 jobless rates. States with jobless rates lower than the national average rateswere more numerous and more geographically dispersed than those withhigh rates.

Sixteen States recorded 1982 rates of 7.8 percent orless–at least one-fifth below the national average. Rates were below 7percent in the following farm belt and oil and gas drilling states:Kansas, Nebraska, North and South Dakota, Wyoming, Oklahoma, and Texas,as well as in Connecticut, Vermont, and Hawaii. An additional sixStates had 1982 jobless rates between 7 and 7.8 percent–Colorado,Minnesota, Utah, New Hampshire, Georgia, and Virginia.

The Northeast, which had the highest unemployment rate of the fourregions throughout the 1976-79 period, was less affected than otherparts of the country by the recessions of the arly 1980’s. Withinthat region, the Mid-Atlantic States moved from being the division withthe highest unemployment rate during 1976-79 to registering slightlybelow the national average in 1982. During the 1970’s, employmentgrowth had been sluggish in these States, as a shift occurred away fromolder manufacturing industries to the more rapidly growingservice-producing sector. Jobless rates in New York and New Jersey,which had been substantially above the national average during the mid-and late 1970’s were relatively resistant to the unemploymentincreases in the early 1980’s, and in 1982, both States had ratesthat were lower than the national average.

However, Pennsylvania, whichhad fared better than New York and New Jersey during most of the1970’s, was hard hit in the 1980’s by problems in industriessuch as steel and coal mining, and its unemployment rate jumped from 6.9to 10.9 percent between 1979 and 1982. The New England jobless rateincreased less in the 1979-82 period than in any division except theMid-Atlantic and, at 7.8 percent in 1982, was the second lowest of thenine divisions. Throughout 1983 and 1984.

The economy demonstrated a robustrecovery in the 2 years following the deep 1981-82 recession. Althoughannual averages obscure the magnitude of the cyclical swings during 1982and 1983, significant regional employment and unemployment changes wereevident. For example, New England posted a substantial unemploymentrate drop between 1982 and 1983, while the rate rose markedly in theWest South Central States.

As the economy completed a second full yearof recovery in 1984, the national unemployment rate fell to 7.5 percent,and all sections of the country experienced lower jobless rates. (Seetable 2.) Unemployment rate changes between 1982 and 1984 illustrate how therecovery affected different geographic areas. The largest relativeimprovement occurred in New England, followed by the Mountain division.Four States–Arizona (from the Mountain division), and Rhode Island,Massachusetts, and New Hampshire (from New England) expecrienced verylarge drops in the jobless rates during this period. In contrast, theleast improvement occurred in the West South Central division, where thejobless rate rose in 1983 and then fell in 1984.

Only six States failedto show significant unemployment rate decreases between 1982 and 1984,and two of them–Louisiana and Oklahoma–were from the West SouthCentral division. Alaska, Mississippi, Wyoming, and West Virginia werethe other four States where jobless rates did not decrease between 1982and 1984. Despite declines during the recovery, jobless rates in boththe East South and East North Central divisions were very high in 1983and 1984. The New England jobless rate fell from 7.8 percent in 1982 to 4.

9percent in 1984. In both 1983 and 1984, New England had the lowest rateof the nine census divisions–a complete reversal from 1975, when NewEngland had the highest rate. The strong 1983-84 rebound in the NewEngland economy was pervasive. Three of the four States that recordedthe sharpest jobless rate drops from 1982 and 1984 were Rhode Island,New Hampshire, and Massachusetts. By 1984, five of the six New EnglandStates ranked in the low unemployment group (6 percent or below) andMaine (with a 6.1-percent rate) was almost in that category.

The unemployment rate improvement in the Mountain divisionreflected sharply different movement among the eight States. Arizona andColorado, the division’s two most populous States, both recordedsteady and substantial unemployment drops over 1982-84. At the otherextreme, Wyoming was one of only six States that showed no unemploymentrate decrease between 1982 and 1984. The Wyoming rate increased sharplyfrom 1982 to 1983, as did the rate in many other States with substantialemployment in oil and gas extraction; it then dropped in 1984 to aboutthe 1982 level. The job situation in the West South Central division worsenedsubstantially in 1983 and rebounded in 1984.

The 1983 deterioration contrasted with the national pattern, as well as with the strongexpansion that this division experienced in the previous several years.Total employment in these States rose very strongly during 1976-81, andthe unemployment rate was consistently the lowest or next to lowest ofthe nine census divisions. Much of the economy’s strength duringthis period was linked to oil drilling and petroleum refining, whichboomed following the oil embargo by the Organization of PetroleumExporting Countries. However, when petroleum demand began to slacken in1982 and production was curtailed, this division was hit first. Totalemployment growth slowed to 1 to 1.5 percent in 1982 and 1983 from morethan 4 percent annually in the 1976-81 period.

Wage and salaryemployment in oil and gas extraction, which had more than doubledbetween 1976 and 1981, was nearly unchanged from 1981 to 1982 and thendropped sharply in 1983. As employment growth slowed, the West South Central jobless raterose from 7.5 percent in 1982 to 8.9 percent in 1983; it then fell to7.0 percent in 1984. Oklahoma, where the rate jumped from 5.

7 to 9.0percent between 1982 and 1983 and then decreased to 7.0 percent in 1984,was the only State in the Nation where the 1984 rate was significantlyabove the 1982 rate. The Texas jobless rate moved from 6.9 to 8.0 to5.9 percent over the 1982-84 period. In 1984, Texas returned to thegroup of States with rates one-fifth or more below the U.

S. average.Louisiana, however, proved much less resilient than Texas. Over the1982-84 period, the Louisiana jobless rate moved essentially from 10 to12 and back to 10 percent–making it one of the six States where joblessrates did not decrease between 1982 and 1984.

Also, in both 1983 and1984, Louisiana was in the group of States with rates one-fifth or moreabove the U.S. average. The jobless rate in the East North Central States, which haddoubled in the early 1980’s, fell substantially between 1982 and1984. Over the latter period, the Michigan rate fell more than 4percentage points, and drops of 3 to 3.5 points occurred in Wisconsin,Indiana, and Ohio. Despite these sharp decreases, Michigan, Ohio, andIllinois were in the high unemployment group in 1984–those States withrates of 9 percent or higher (or at least one-fifth above the U.

S.average). Moreover, the East North Central rate, at approximately 9.5percent in 1984, was the second highest of the nine census divisions.

The job picture in the East South Central States worsened more thanin any other division from the mid-1970’s to 1983-84. While thedivision jobless rate decreased between 1982 and 1984, the improvementstarted later and was more moderate than in many other sections of thecountry. In 1984, three of the four East South Central States (Alabama,Mississippi, and Kentucky) were in the high unemployment group.Tennessee, which had been in the high group in 1983, experienced asubstantial unemployment rate drop in 1984 and moved into the group ofStates with jobless rates close to the national average. In contrast,Mississippi, which had a jobless rate of about 11 percent in both 1982and 1984, was one of the six States that showed no significant decreasein its rate during the recovery. Although the list of States in thehigh unemployment rate category changed over 1982-84, four Statesconsistently recorded rates of 11 percent or above. Alabama andMississippi from the East South Central division were in this very highunemployment group, as were West Virginia and Michigan.

The sharp deterioration in the East South Central division’semployment situation stemmed partly from its heavy concentration ingoods-producing industries, which experienced substantial job lossesfrom 1979 to 1983. Another reason for high unemployment in thisdivision is that a large proportion of the population resides innonmetropolitan areas–48 percent in 1980, compared with 25 percentnationally–which have experienced less economic growth thanmetropolitan areas in recent years. (The national jobless rate innonmetropolitan areas was 10.1 percent in both 1982 and 1983, while themetropolitan area rates were about 9.

5 percent.) A large part of thenonmetropolitan population in the South resides in or near small townswhose economies often depend heavily on a single industry or even asingle plant. When these major local employers curtail or close downoperations, the effect is often devastating on the surrounding communities. West Virginia recorded the highest State unemployment rate in both1983 and 1984 and was one of the six States that showed no jobless rateimprovement between 1982 and 1984. In some respects, the problems inWest Virginia resemble those of the neighboring heavily industrializedStates, but West Virginia also has unique long-term structural problems.

Mining (primarily coal mining) accounted for about one-fourth ofnonagricultural wage and salary employment in West Virginia immediatelyafter World War II. As the demand for coal decreased and the industrybecame increasingly mechanized, mining employment fellpreciptiously–dropping more than 60 percent from the early 1950’sto 1963. The falloff in mining jobs bottomed out in themid-1960’s, and thereafter nonfarm employment increased for severalyears.

However, employment peaked in West Virginia in 1979 and droppedin each of the succeeding 4 years. Several States with concentrationsof older basic industries also experienced job declines between 1979 and1982, but West Virginia was the only State where total employment fellsignificantly from 1982 to 1983. Between 1979 and 1983, the number ofjobs in the goods-producing sector in West Virginia plummeted 30percent, compared with 12 percent nationally. As a result, theState’s jobless rate, which was about 1 percentage point above theU.S. rate in 1979, soared to approximately twice the national figure in1983 and 1984. Summary The employment and unemployment picture across the United States changed substantially between the mid-1970’s and the early1980’s, reflecting demographic and industrial composition shiftsand, most importantly, business cycle effects.

Throughout this period,employment growth was concentrated in the West and South, withespecially large increases occuring in the West South Central andMountain divisions. In contrast, the East North Central Statesexperienced very little employment growth. Employment-population ratiosclearly indicate that some parts of the country fared much better thanothers between 1976 and 1983.

New England recorded the largest advance(more than 3 percentage points), followed by the Mountain, Pacific, andWest South Central divisions. In contrast, employment-population ratiosfell in both the East South Central and East North Central States. The geographic distribution of unemployment also shifted markedlybetween the mid-1970’s and 1983-84. In 1976, the highest joblessrates (more than 9 percent) were recorded in the New England,Mid-Atlantic, and Pacific divisions, while low rates (5 to 6 percent)occurred in the West North Central and the West South Central divisions.Eight years later, following a strong expansion during the late1970’s, back-to-back recessions in the early 1980’s, and then2 years of recovery, unemployment rates were highest in the East Southand East North Central divisions and neighboring States. Most of theseStates have heavy concentrations of older goods-producing industries,which were battered by the 1980 and 1981-82 recessions.

In contrast,New England, which has become heavily infused with high technologyindustries, recorded a dramatic jobless rate decrease between themid-1970’s and 1984. Furthermore, the New England rate became thelowest of the nine divisions, a complete reversal of its ranking in1975. Unemployment rates also fell in the Pacific and Mid-Atlanticdivisions between the mid-1970’s and 1984, and both improvedrelatively–moving from high to average jobless rate rankings.

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