Kentucky's labor market conditions stand out among the Fourth District states. Indeed, its December unemployment rate of 4.5% was the lowest in the District and almost a full percentage point below the U.S. average; by that measure, Kentucky outperformed the nation throughout 2004. However, it failed to keep up with U.S. employment growth over the same period. Last year, employment in Kentucky grew by 0.8%, compared to the nation's 1.7% increase. And from the last business cycle peak in March 2001, Kentucky lost 0.8% of its employment, while the nation saw a slight gain.
U.S. employment finally surpassed the March 2001 business cycle peak this January, ending the longest recovery period for employment since the Great Depression. If Kentucky had followed its average employment gains in past business cycle expansions, it would have added 10% more jobs at this point. Typically, it has reached prerecession employment levels 22 months after the previous business cycle peak; by December, 45 months had passed since the peak. Indeed, much like the U.S. as a whole, Kentucky's economy has grown, but with less-than-typical employment gains.
One factor affecting employment is the economy's industrial makeup. Kentucky looks much like the nation for many sectors. However, it has notably larger manufacturing, transportation and warehousing, and utilities and agricultural sectors--all three being slow growth sectors.
Although the December unemployment rate was lower in Kentucky than in Ohio, Pennsylvania, or the U. …