Changes in regional unemployment over the last decade Essay

During the mid-1970’s, the Northeast and the West experienced
the highest unemployment rates in the Nation, but after a strong
expansion in the late 1970’s and severe recessions in the early
1980’s, high unemployment was concentrated in a band of States
stretching from the Great Lakes south to the Gulf of Mexico. Business
cycle swings, as well as differences in industrial structure and
demography, account for the geographic shift in unemployment. While all
regions benefited from the robust 1983–84 recovery, the East South
Central division (Kentucky, Tennessee, Mississippi, and Alabama)
improved less rapidly than other areas, and its jobless rate in 1984 was
the highest of the nine census divisions. In contrast, New England continued its dramatic improvement into the current recovery, and its
unemployment rate in 1983 and 1984 was much lower than that in any other
census division.



This article analyzes employment and unemployment changes during
three distinct cyclical swings. It contrasts the 1976–79 period, when
employment rose strongly and unemployment declined, with the 1979–82
period, when employment growth slowed and unemployment increased
sharply. Emphasis is placed on how these two periods, as well as the
recovery in 1983–84, affected different sections of the country.
Employment developments in the four census regions and nine divisions
within these regions (and occasionally individual States) are used to
demonstrate major subnational variations. (Footnote 2 lists the States
included in census regions and divisions.)


The article is based primarily on data from the Current Population
Survey, a monthly sample of approximately 60,000 households nationwide,
which provides information on the employment and unemployment status of
the civilian population 16 years of age and over. Annual averages are
used because they are subject to les sampling variability than monthly
data and also give better estimates of major aggreagates at the State
level. The analysis begins with 1976 because it was the first year that
a consistent, reasonably reliable State data series was available.
Occasional references are made to earlier years, however, when a longer
time horizon helps to explain more recent developments. Also,
unemployment rates for 1984 indicate how the second year of the current
recovery affected different regions and divisions. However, because
final 1984 employment level data were not available at this writing, the
focus in the following section is on changes over the 1976-83 period.



Employment



The strong U.S. employment increases of the late 1970’s came
to a virtual halt at the end of the decade, as the 1980 downturn was
followed closely by the severe 1981-82 recession. Total employment,
whcih rose 11.3 percent during 1976-79, inched up only 0.7 percent
between 1979 and 1982. While the recessions in the early 1980’s
affected employment growth in all sections of the country, the impact
was most visible in the East North Central, the East south Central,
Mid-Atlantic, and West North Central divisions. Employment growth in
these four divisions trailed the national pace in the 1976-79 period and
then turned negative between 1979 and 1982. The sharpest drop occurred
in the heavily industrial East North Central States, where employment
fell by 5.5 percent from 1979 to 1982. The employment decrease, which
started a year later in the East South Central division, amounted to
approximately 3 percent between 1980 and 1982. In the Mid-Atlantic and
West North Central States, employment essentially held steady in the
1979-81 period and then declined about 1.5 percent in 1982.



Despite the negligible growth in total U.S. employment between 1979
and 1982, employment rose about 3.5 percent in both the South Atlantic
and Pacific States, while the Mountain and West South Central divisions
posted gains of 7.5 to 8.5 percent. However, these increases were
significantly below those of the late 1970’s in all four divisions.
The slowdown was particularly marked in the Pacific States, as the
strong job growth that the Pacific Northwest had recorded in the late
1970’s ended. Employment in construction and lumber and wood
products fell in both Oregon and Washington from 1979 to 1982.


Employment in New England grew at about the national rate in the
late 1970’s and slightly above it in the early 1980’s. These
employment gains contrast markedly with the sluggish growth experienced
earlier in the post-World War II period, when New England underwent a
dramatic shift in its employment mix by industry. Accounting for almost
half of New England’s employment, Massachusetts illustrates the
movement away from labor-intensive non-durable manufacturing and into
the service-producing industries and high technology manufacturing.
Between 1947 and 1975, Massachusetts’ employment in three
industries–textiles, apparel, and leather-plunged from 250,000 to
90,000, or from 14 to 4 percent of its nonfarm payroll jobs. During
this period, total manufacturing employment in the State dropped by 21
percent, in sharp contrast to a 19-percent increase nationally.
Starting in the mid-1970’s, manufacturing employment in
Massachusetts began to pick up, with a major part of the increase
occurring in three newer “high tech” industries–machinery,
electrical equipment, and instruments. This recovery in manufacturing
jobs, combined with continued expansion in the service-producing sector,
resulted in statewide job growth in the late 1970’s that was close
to the national pace.



A central challenge to any area’s economy is that employment
must expand simply to keep pace with population growth. An economy that
stands still in job creation actually deteriorates over time if the
population expands. Two distinctly different subperiods are evident
when regional employment and population growth rates are compared from
1976 to 1983. In the late 1970’s, employment growth rates exceeded
population increases in all nine census divisions. This relationship is
measured by the employment-population ratio (the percent of the
population 16 years old and over that is employed), which peaked in
1979. Between 1979 and 1982, no division recorded an employment gain
equal to its population increase, so employment-population ratios fell
until the onset of the 1983-84 recovery.



In the late 1970’s, New England and the Pacific States
recorded the largest employment-population ratio gains (4 to 4.5
percentage points), while the East South Central and the South Atlantic
divisions had the smallest (1.5 to 2 percentage points). When the
employment 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 late
1970’s in both divisions, the only divisions to do so. (See table
1.)



From 1976 to 1983, New England experienced the largest
employment-population ratio gain (3.2 percentage points), and
substantial increases (2 to 2.5 points) were also posted in the
Mountain, Pacific, and West South Central divisions. At the other
extreme, the ratios fell about 1.5 percentage points in the East North
and East South Central divisions. In the latter division, the ratio was
the lowest of the nine divisions in both 1982 and 1983.



Unemployment



The locus of unemployment has shifted markedly in a very short
time, attesting to the influence of both cyclical changes and industrial
mix on the fortunes of an area. In 1976, the highest jobless rates were
recorded in the New England, Mid-Atlantic, and Pacific divisions, while
the 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 percent
rate of 1976, but the geographic distribution differed dramatically. In
both 1983 and 1984, the highest rates in the Nation occurred in the
heavily industrialized East South and East North Central divisions and
in adjacent States, while New England had the lowest rate. (See chart
1.) Three changes in unemployment rate rankings were especially notable
between the mid-1970’s and 1983-84. New Englandshifted from the
highest jobless rate division to the lowest; the East South Central
division moved from the low unemployment rate category to the highest
rate of the nine divisions; and the East North Central States shifted
from an average unemployment ranking to next to the highest in both 1983
and 1984.



The pronounced shift in unemployment among regions between the
mid-1970’s and 1983 and 1984 reflected developments during three
distinct 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, 1975
is an important year in cyclical analysis. Regional and divisional data
for 1975 appear in table 2. However, individual State unemployment
rates for 1975 are omitted because sampling errors for many were
inordinately high.



The 1976–79 period. During 1976–79, the recovery from the deep
1973–75 recession continued, and the national jobless rate dropped from
7.7 to 5.8 percent. Jobless rates fell most in the West and Northeast,
while States in the Midwest and East South Central Division showed that
least improvement. Twelve States recorded unemployment rate declines of
3 percentage points or more. This group comprised four New England
States (Connecticut, Massachusetts, New Hampshire, and Vermont), two
Mid-Atlantic States (New York and New Jersey), four States in the West
(Arizona. California, Hawaii, and Nevada), and two South Atlantic
States (Florida and Georgia). New England, which had the highest jobless
rate of the nine divisions in 1975 (10.2 percent), recorded the largest
decrease in the late 1970’s–as its rate fell to 5.4 percent in
1979. The Pacific and Mid-Alantic divisions also recorded large
unemployment rate decreases between 1976 and 1979.



In contrast, jobless rates were virtually unchanged over this
period in 10 states, and the rate rose in Alaska. After construction
was completed on the trans-Alaskan pipeline, the State’s jobless
rate jumped from about 8 percent in 1976 to 11 percent in 1978 and then
declined to 9 percent in 1979. Most of the states where unemployment
rates did not improve significantly were in the Midwest and East South
Central division. Four States in the heavily agricultural West North
Central division (Iowa, Nebraska, and North and South Dakota) were in
this group because they had very low unemployment rates (3 to 4 percent)
in both 1976 and 1979. Idaho (in the Mountain division) also showed
little change in its unemployment rate between 1976 and 1979.



The five other States where jobless rates did not decrease between
1976 and 1979 were Alabama, Tennessee, Kentucky, Indiana, and Louisiana.
In Alabama and Indiana, unemployment rates had edged downward between
1976 and 1978 but then increased in 1979, when employment growth in each
State slowed Markedly. Both States have heavy concentrations of
goods-producing industries, which experienced little or no job growth
from 1978 to 1979. Despite the improved employment situation
nationally, jobless rates in Kentucky, Louisiana, and Tennessee showed
no discernible trend between 1976 and 1979. The fact that three of four
East South Central States (Alabama, Kentucky, and Tennessee) had
virtually the same unemployment rates in 1976 and 1979 meant that this
division was the only one where the unemployment rate did not drop
substantially in the late 1970’s. As a result, the East South
Central jobless rate shifted from well below the U.S. rate in 1976 to
slightly above it in 1979.



The 1979–82 period. Between 1979 and 1982, the national
unemployment rate jumped from 5.8 and 9.7 percent, as the economy
suffered two successive recessions. This increase affected all U.S.
regions although with different timing and severity. The brief and
relatively mild 1980 recession had the most adverse effect on industries
that are highly sensitive to interest rates, particularly automobiles
and housing. In the East North Central States, where automobile
manufacturing and supplier industries are concentrated, the unemployment
rate jumped from 6.u percent in 1979 to 9.2 percent in 1980. Very sharp
unemployment increases occurred in Michigan, Ohio, and Indiana–States
where jobless rates had begun to rise as early as 1979. Although
starting from a lower level, the jobless rate in the neighboring West
North Central States also increased markedly in 1980. In contrast, the
unemployment rate in the Northeast only rose from 6.6 to 7.0 percent
between 1979 and 1980, and rates in the South and West both increased
about 1 percentage point.



Unlike the 1980 experience, the severe 1981–82 recession resulted
in substantial unemployment increases in all sections of the country.
The most adverse impact occurred in heavily industrialized States, which
were still suffering from the 1980 downturn in basic industries.
Jobless rates jumped to 12.5 percent in the East North and 12 percent in
the East South Central divisions–double the 6 percent rates recorded in
1979. The rate in the West North Central States, while low compared
with other divisions, also nearly doubled. Seven States had 1982
unemployment rates in excess of 11.7 percent–one-fifth or more above
the national average. Five of the seven were the East Central States of
Michigan, Ohio, Indiana, Alabama, and Tennessee. West Virginia and
Washington were the two other States with very high 1982 jobless rates.



States with jobless rates lower than the national average rates
were more numerous and more geographically dispersed than those with
high rates. Sixteen States recorded 1982 rates of 7.8 percent or
less–at least one-fifth below the national average. Rates were below 7
percent 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 six
States 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 four
regions throughout the 1976-79 period, was less affected than other
parts of the country by the recessions of the arly 1980’s. Within
that region, the Mid-Atlantic States moved from being the division with
the highest unemployment rate during 1976-79 to registering slightly
below the national average in 1982. During the 1970’s, employment
growth had been sluggish in these States, as a shift occurred away from
older manufacturing industries to the more rapidly growing
service-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 unemployment
increases in the early 1980’s, and in 1982, both States had rates
that were lower than the national average. However, Pennsylvania, which
had fared better than New York and New Jersey during most of the
1970’s, was hard hit in the 1980’s by problems in industries
such as steel and coal mining, and its unemployment rate jumped from 6.9
to 10.9 percent between 1979 and 1982. The New England jobless rate
increased less in the 1979-82 period than in any division except the
Mid-Atlantic and, at 7.8 percent in 1982, was the second lowest of the
nine divisions.



Throughout 1983 and 1984. The economy demonstrated a robust
recovery in the 2 years following the deep 1981-82 recession. Although
annual averages obscure the magnitude of the cyclical swings during 1982
and 1983, significant regional employment and unemployment changes were
evident. For example, New England posted a substantial unemployment
rate drop between 1982 and 1983, while the rate rose markedly in the
West South Central States. As the economy completed a second full year
of recovery in 1984, the national unemployment rate fell to 7.5 percent,
and all sections of the country experienced lower jobless rates. (See
table 2.)



Unemployment rate changes between 1982 and 1984 illustrate how the
recovery affected different geographic areas. The largest relative
improvement 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 very
large drops in the jobless rates during this period. In contrast, the
least improvement occurred in the West South Central division, where the
jobless rate rose in 1983 and then fell in 1984. Only six States failed
to show significant unemployment rate decreases between 1982 and 1984,
and two of them–Louisiana and Oklahoma–were from the West South
Central division. Alaska, Mississippi, Wyoming, and West Virginia were
the other four States where jobless rates did not decrease between 1982
and 1984. Despite declines during the recovery, jobless rates in both
the East South and East North Central divisions were very high in 1983
and 1984.



The New England jobless rate fell from 7.8 percent in 1982 to 4.9
percent in 1984. In both 1983 and 1984, New England had the lowest rate
of the nine census divisions–a complete reversal from 1975, when New
England had the highest rate. The strong 1983-84 rebound in the New
England economy was pervasive. Three of the four States that recorded
the sharpest jobless rate drops from 1982 and 1984 were Rhode Island,
New Hampshire, and Massachusetts. By 1984, five of the six New England
States ranked in the low unemployment group (6 percent or below) and
Maine (with a 6.1-percent rate) was almost in that category.



The unemployment rate improvement in the Mountain division
reflected sharply different movement among the eight States. Arizona and
Colorado, the division’s two most populous States, both recorded
steady and substantial unemployment drops over 1982-84. At the other
extreme, Wyoming was one of only six States that showed no unemployment
rate decrease between 1982 and 1984. The Wyoming rate increased sharply
from 1982 to 1983, as did the rate in many other States with substantial
employment in oil and gas extraction; it then dropped in 1984 to about
the 1982 level.



The job situation in the West South Central division worsened
substantially in 1983 and rebounded in 1984. The 1983 deterioration contrasted with the national pattern, as well as with the strong
expansion that this division experienced in the previous several years.
Total employment in these States rose very strongly during 1976-81, and
the unemployment rate was consistently the lowest or next to lowest of
the nine census divisions. Much of the economy’s strength during
this period was linked to oil drilling and petroleum refining, which
boomed following the oil embargo by the Organization of Petroleum
Exporting Countries. However, when petroleum demand began to slacken in
1982 and production was curtailed, this division was hit first. Total
employment growth slowed to 1 to 1.5 percent in 1982 and 1983 from more
than 4 percent annually in the 1976-81 period. Wage and salary
employment in oil and gas extraction, which had more than doubled
between 1976 and 1981, was nearly unchanged from 1981 to 1982 and then
dropped sharply in 1983.



As employment growth slowed, the West South Central jobless rate
rose from 7.5 percent in 1982 to 8.9 percent in 1983; it then fell to
7.0 percent in 1984. Oklahoma, where the rate jumped from 5.7 to 9.0
percent 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 significantly
above the 1982 rate. The Texas jobless rate moved from 6.9 to 8.0 to
5.9 percent over the 1982-84 period. In 1984, Texas returned to the
group of States with rates one-fifth or more below the U.S. average.
Louisiana, however, proved much less resilient than Texas. Over the
1982-84 period, the Louisiana jobless rate moved essentially from 10 to
12 and back to 10 percent–making it one of the six States where jobless
rates did not decrease between 1982 and 1984. Also, in both 1983 and
1984, Louisiana was in the group of States with rates one-fifth or more
above the U.S. average.



The jobless rate in the East North Central States, which had
doubled in the early 1980’s, fell substantially between 1982 and
1984. Over the latter period, the Michigan rate fell more than 4
percentage points, and drops of 3 to 3.5 points occurred in Wisconsin,
Indiana, and Ohio. Despite these sharp decreases, Michigan, Ohio, and
Illinois were in the high unemployment group in 1984–those States with
rates of 9 percent or higher (or at least one-fifth above the U.S.
average). Moreover, the East North Central rate, at approximately 9.5
percent in 1984, was the second highest of the nine census divisions.



The job picture in the East South Central States worsened more than
in any other division from the mid-1970’s to 1983-84. While the
division jobless rate decreased between 1982 and 1984, the improvement
started later and was more moderate than in many other sections of the
country. 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 a
substantial unemployment rate drop in 1984 and moved into the group of
States with jobless rates close to the national average. In contrast,
Mississippi, which had a jobless rate of about 11 percent in both 1982
and 1984, was one of the six States that showed no significant decrease
in its rate during the recovery. Although the list of States in the
high unemployment rate category changed over 1982-84, four States
consistently recorded rates of 11 percent or above. Alabama and
Mississippi from the East South Central division were in this very high
unemployment group, as were West Virginia and Michigan.



The sharp deterioration in the East South Central division’s
employment situation stemmed partly from its heavy concentration in
goods-producing industries, which experienced substantial job losses
from 1979 to 1983. Another reason for high unemployment in this
division is that a large proportion of the population resides in
nonmetropolitan areas–48 percent in 1980, compared with 25 percent
nationally–which have experienced less economic growth than
metropolitan areas in recent years. (The national jobless rate in
nonmetropolitan areas was 10.1 percent in both 1982 and 1983, while the
metropolitan area rates were about 9.5 percent.) A large part of the
nonmetropolitan population in the South resides in or near small towns
whose economies often depend heavily on a single industry or even a
single plant. When these major local employers curtail or close down
operations, the effect is often devastating on the surrounding communities.



West Virginia recorded the highest State unemployment rate in both
1983 and 1984 and was one of the six States that showed no jobless rate
improvement between 1982 and 1984. In some respects, the problems in
West Virginia resemble those of the neighboring heavily industrialized
States, but West Virginia also has unique long-term structural problems.
Mining (primarily coal mining) accounted for about one-fourth of
nonagricultural wage and salary employment in West Virginia immediately
after World War II. As the demand for coal decreased and the industry
became increasingly mechanized, mining employment fell
preciptiously–dropping more than 60 percent from the early 1950’s
to 1963. The falloff in mining jobs bottomed out in the
mid-1960’s, and thereafter nonfarm employment increased for several
years. However, employment peaked in West Virginia in 1979 and dropped
in each of the succeeding 4 years. Several States with concentrations
of older basic industries also experienced job declines between 1979 and
1982, but West Virginia was the only State where total employment fell
significantly from 1982 to 1983. Between 1979 and 1983, the number of
jobs in the goods-producing sector in West Virginia plummeted 30
percent, compared with 12 percent nationally. As a result, the
State’s jobless rate, which was about 1 percentage point above the
U.S. rate in 1979, soared to approximately twice the national figure in
1983 and 1984.



Summary



The employment and unemployment picture across the United States changed substantially between the mid-1970’s and the early
1980’s, reflecting demographic and industrial composition shifts
and, most importantly, business cycle effects. Throughout this period,
employment growth was concentrated in the West and South, with
especially large increases occuring in the West South Central and
Mountain divisions. In contrast, the East North Central States
experienced very little employment growth. Employment-population ratios
clearly indicate that some parts of the country fared much better than
others between 1976 and 1983. New England recorded the largest advance
(more than 3 percentage points), followed by the Mountain, Pacific, and
West South Central divisions. In contrast, employment-population ratios
fell in both the East South Central and East North Central States.



The geographic distribution of unemployment also shifted markedly
between the mid-1970’s and 1983-84. In 1976, the highest jobless
rates (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 late
1970’s, back-to-back recessions in the early 1980’s, and then
2 years of recovery, unemployment rates were highest in the East South
and East North Central divisions and neighboring States. Most of these
States 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 technology
industries, recorded a dramatic jobless rate decrease between the
mid-1970’s and 1984. Furthermore, the New England rate became the
lowest of the nine divisions, a complete reversal of its ranking in
1975. Unemployment rates also fell in the Pacific and Mid-Atlantic
divisions between the mid-1970’s and 1984, and both improved
relatively–moving from high to average jobless rate rankings.

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