US States with better education, report lower unemployment

Edward Glaesar seldom disappoints. His writing style is just amazing.

In this new piece. he looks at state wise unemployment and analyses the reasons for differences.

Friday’s state-level employment figures remind us that this economic recovery, like the recession that preceded it, is astonishingly uneven across America.

The unemployment rate remains more than 11 percent in Nevada and less than 4 percent inNebraska. This heterogeneity poses great challenges to any nationwide stimulus policy, which will inevitably deliver its supposed medicine both to healthy Nebraska and ailing Nevada. Attempts to target aid to faltering states, or industries, slow the positive process of relocation across space and job. A far better path is to focus on helping poor people, not poor places, especially by improving education.

Two-and-a-half years ago, widespread travails made it easy to make the case for national economic interventions. In October 2009, there were only eight states with unemployment rates of less than 7 percent; collectively they made up 4.4 percent of the 50 states’ populations. In April 2012, a total of 22 states had jobless rates of less than 7 percent. Our economic troubles are not over, but there are wide swaths of the country where joblessness is back to reasonable levels, which makes it harder to build the case for more nationwide action.

States with better education have lower unemp rates:

Education is a good predictor of which areas continue to have high unemployment rates. In April, the 25 states with the lowest share of high-school dropouts among adults older than 25 averaged a jobless rate of 6.3 percent. The 25 states with the highest shares of high-school dropouts averaged 8.2 percent unemployment.

He discusses some key states and findings. One needs to be careful with interpretation.

For instance, though Michigan shows decline in unemployment rate but its labor force has also declined. Texas on the other hand shows lower decline in unemp rate (1.2%) despite adding more jobs as the work force has expanded. NY is a pzzle:

New York is a conundrum unto itself. The state’s unemployment level remained unchanged at 8.5 percent from March to April 2012, which is not much improved over its 8.8 percent rate in October 2009. The number of unemployed people in the state has fallen by only 40,000 since October 2009. Yet New York has also added more than 311,000 jobs since 2009, which is a reasonable growth rate of 3.6 percent. The combination of rising employment and stable unemployment rates would make sense if the labor force of New York state was growing, but it has also shrunk by more than 62,000 since October 2009.

One way to explain this puzzle is the mismatch between the establishment survey, which examines businesses and gives us jobs numbers, and the population survey, which counts individuals and gives us unemployment numbers. The establishment survey tells us that companies located in New York have added jobs, but the population report tells us that the employment of New York state residents has fallen. While pure measurement error is always a possibility, another explanation is that a lot of New York City companies have expanded by hiring people who live in New Jersey or Connecticut.

Then there is gloom in Jersey though California differs across two regions.

As always interesting stuff from Glaesar.

These differences don’t require one-size-fits-all national policies. It would also be a mistake to channel aid to particular places, to try to stop the exodus of people moving to areas of opportunity. But we should do more to improve education throughout the country. The best path to prosperity is to attract and train smart people, and then get out of their way.

Krugman also  looks at this (why does he always pick on econs!!) differences across states and suggests the need for fiscal stimulus as 50% of states are having unemp rates more than 8%..

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