What Do State Unemployment Rates Show About the U.S. Economy?

by: Mark J. Perry

Facts from the October BLS report on state unemployment rates, ranked from lowest to highest:

  1. Five states have unemployment rates at 3.6% or less (SD, WY, ND, UT, and NE).
  2. 33 states have unemployment rates below the national average of 6.5%, 15 states are above 6.5%, and two states are at 6.5%.
  3. The median unemployment rate by state is 5.7%, with 25 states at or below 5.7% and 25 states at or above 5.7%, and mean by state is 5.86%.
  4. Based on #2 and #3 above, it suggests that the reason the national average of 6.5% is above the median of 5.7% is either because: a) the states with higher-than-average unemployment rates are also states with higher-than-average population, and/or b) there are more extreme "outliers" above the median than extreme outliers below the mean, bringing the mean of 6.5% above the median of 5.7%.

I believe both of these are correct: Some of the states with the highest jobless rates are also states that have large populations (MI at 9.3%, CA at 8.2%, OH at 7.3% and, IL at 7.3%). Moreover, the two states with the highest rates are Michigan and RI with 9.3% rates, 3.6% above the median, while the two states with the lowest rates are SD and WY with 3.3%, or only 2.4% below the median.

Bottom Line: The economic problems and labor market weakness are not necessarily distributed equally around the country, but the biggest problems are perhaps somewhat concentrated in some of the states with the largest populations. Fourteen states have unemployment rates below 5% for example, which would normally considered to be pretty far from recessionary levels.