Where the job market is growing and shrinking in the U.S.
In a country as large as the United States, there isn't just one labor market. There are many. And some are flashing more serious warning signs than others about the economy.
Why it matters: State-level jobs data released yesterday shows that while the U.S. job market remains on solid footing, a couple of states are displaying dynamics more commonly seen in recessions.
- The good news is that those weaker job markets are relatively limited for now, with only four states and the District of Columbia seeing their jobless rate increase by more than half a percentage point over the last year.
- The bad news is that some of the steepest rises were in highly populated California (up 0.8 percentage points) and New Jersey (up 1.2 points).
- There were 18 states in which the jobless rate has fallen by half a percentage point or more in the last year, led by Maryland (down 1.7 percentage points) and Massachusetts (down 1.3 points).
The intrigue: As ZipRecruiter chief economist Julia Pollak notes, the recent unemployment swings in New Jersey, D.C. and California match those typically seen in recessions, according to a rule of thumb known as the Sahm Rule.
- Invented by former Fed staffer Claudia Sahm, the rule is a handy real-time indicator of recession.
- Her observation was that when the three-month national average of the jobless rate is more than 0.5 percentage points higher than the lowest unemployment rate over the last year, it's an almost foolproof sign that a recession is underway.
State unemployment rates tend to be more volatile than the national rate, reflecting smaller survey samples (and thus higher statistical error) and the natural volatility that can happen in states where employment is concentrated in a few industries.
- So it's unsurprising that some states would trip the Sahm Rule even in a basically solid national economy. Still, localized economic problems can be an early warning sign of national ones.
What they're saying: "While some localized downturns remain contained, local trends can often expand to other regions or have downstream effects," Pollak tells Axios.
- "Metros or states with the highest concentrations of a disrupted industry may be bellwethers that signal similar effects to follow in similar states, or lesser effects in other regions."
- "Or they may highlight important trends that are hard to see in aggregate data due to offsetting effects in other regions, but that are nevertheless important for local populations," she said.