Break down the US unemployment rate by state and you’ll see something quite strange: low levels of joblessness correlate strongly with small state populations. Specifically:
- The national unemployment rate is currently 3.7% (as of October 2018).
- The 7 states with the lowest unemployment are Hawaii (2.3%), Iowa (2.4%), New Hampshire (2.6%), Idaho (2.7%), Minnesota (2.8%), Nebraska (2.8%), and North Dakota (2.8%).
Why this matters: collectively, these 7 random states have more influence on the current 3.7% national unemployment rate than all but the 4 most populous states in the union. At a total 16 million inhabitants between them, only California (40 million), Texas (28 million), Florida (21 million) and New York (20 million) are larger than the collective weight of seven high employment states.
So where are the standouts among the high population states? Spoiler alert – there aren’t many.
Among the 10 most populous US states, only 3 have unemployment rates below the national average. A few data points here:
- Half of all Americans live in one of these states.
- The 3 with lower-than-average unemployment: Florida (3.4%), Georgia (3.6%), and North Carolina (3.6%).
- Two are the same/close to the national average: Texas (3.7%) and Michigan (3.9%).
- Five still show unemployment rates above 4%: California (4.1%), New York (4.0%), Pennsylvania (4.1%), Illinois (4.2%), and Ohio (4.6%)
Even when you add the next 5 states in terms of total population, and high/low unemployment differential is still evident:
- 63% of all Americans live in the 15 most populous states.
- Three of this next tranche have unemployment rates above 4%: New Jersey (4.1%), Washington (4.3%) and Arizona (4.7%).
- Only two are below the national average: Virginia (2.9%) and Massachusetts (3.5%).
What we see in this data: a possible explanation for why inflation/wages have not increased dramatically even though the US labor market looks remarkably robust. Specifically:
- Yes… the US national unemployment rate sits at lows last seen in the late 1960s…
- But… there is no geographic center of gravity for that remarkably low unemployment rate. Instead, it is sprinkled through a series of smaller rural states, not concentrated in a handful of high-density/urban-centric regions.
- So… the national economy has more labor slack than the headline number might portray. Exceptionally low unemployment in the 7 seven states mentioned at the top are less likely to spark wage growth and inflation than if high-population states like New York or California saw sub 3% unemployment, for example.
BLS Source for state-level unemployment: https://www.bls.gov/web/laus/laumstrk.htm