Eighth District Has Fared Better Than Nation in Some Labor Statistics
Canon, Maria E., Chen, Mingyu, Regional Economist
Recent economic data indicate that the U.S. labor markets may have finally begun a steady recovery. The unemployment rate for the country decreased from 9.1 percent in August 2011 to 8.1 percent in April 2012.
Household employment increased 1.5 percent and job vacancies increased 9.7 percent during the same period.1 Labor markets in the Eighth Federal Reserve District, served by the Federal Reserve Bank of St. Louis, experienced a similar recovery.2 The District's unemployment rate fell from 9.5 percent to 8.1 percent, while employment and job vacancies increased 1.5 percent and 8.7 percent, respectively.
Before the recent improvement in labor markets, the unemployment rate remained high after the Great Recession. Popular explanations include the extension of unemployment benefits, the effect of discouraged workers re-entering the work force and the increase in mismatch between job vacancies and unemployed workers. The extension of unemployment benefits might have kept unemployed workers from taking unattractive jobs, keeping the unemployment rate high. Discouraged workers are those who stop searching for jobs; such workers might choose to re-enter the labor force after the recession is over, dramatically increasing the number of job seekers and preventing the unemployment rate from decreasing. The unemployment rate could remain high in this case even if employment increases. Mismatch refers to a poor match between the characteristics (such as skills and location) of vacant jobs and the characteristics of unemployed workers. The worse the mismatch, the longer it might take for a job seeker to find an ideal job, again keeping the unemployment rate high. Many people have suspected that job mismatch is on the rise because the unemployment rate remained high even though the number of job openings increased significantly.3
Below, we delve into three important economic indicators for labor markets: the unemployment rate, household employment and job vacancies. The recovery in labor markets in the Eighth District is compared with that of the nation.
Unemployment and Employment
The accompanying figure compares changes in unemployment and household employment in multiple geographical areas, represented by different shapes. The change in unemployment is given in percentage points because it is the difference between two unemployment rates (which already are percentages). The change in employment is given in percent because it is the rate of change between two numbers of employed people.
Changes in the Eighth District states can be compared easily with changes in the other states in the nation. The leftpanel shows the change from November 2007, the month before the recession started, to April 2012, while the right panel shows the change from the end of the recession (June 2009) to April 2012. A drop in the unemployment rate between two periods would show up as a point below the horizontal axis; an increase in the rate would show up as a point above the same axis. Similarly, a drop in employment would place a dot to the leftof the vertical axis; an increase in employment would show up as a point to the right of the same axis. Hence, a recovery in labor markets would show up as a point in the bottomright (or fourth) quadrant.
As seen in the leftpanel of the figure, the unemployment rate and household employment had not returned, as of April 2012, to their prerecession levels. All the District states and most of the remaining states in the nation are located in the top-left(second) quadrant of the graph, indicating an increase in the unemployment rate and a decrease in employment from November 2007 to April 2012. Similar to that of the nation, the unemployment rate in the District was still 2. …