April update: what can state data tell us about national employment trends?

By Randall. W. Eberts

Whenever the national economy adds fewer than 100,000 jobs in a month, like what happened in March 2017, the economy seems to take notice and ask whether the tide is turning.  The Wall Street Journal characterized the March BLS report of 98,000 additional jobs as a sharp decline in growth and called it "an unusually low number in what has been a strong run of job figures in recent years." Indeed, since October 2010, when employment started to rebound in earnest, the economy has pieced together an unprecedented string of 78 consecutive months of employment gains, the longest since BLS started recording monthly jobs figures in 1939. During the uninterrupted employment expansion, monthly job gains of less than 100,000 have been rare—occurring only 10 times. So far, with only one exception, these few months of slow job growth were followed by gains of more than 100,000 jobs the next month. For example, the last two times monthly increases were below 100,000 jobs—April 2015 and May 2016, they were followed immediately by two consecutive months of gains reaching 300,000 jobs or more (Figure 1).  Is there anything to worry about this time?

Figure 1  Monthly employment change and year-over-year growth rate

 

 

 

During the past several months, we at the Upjohn Institute have turned to state economies to see whether they might offer an informed glimpse into the crystal ball. From looking at the state employment numbers for March, which were just released Friday, April 21, all signs seem to point to continued employment growth for the nation overall. More specifically, our analysis of the March state report revealed that: 1) year-over-year employment changes are still positive and near the trend growth rate during the expansion, 2) only a few energy-intensive states have registered job losses, and 3) no additional states have slipped into the negative range in March. 

Moreover, job growth across states has been balanced, with no signs of any state or group of states outside the energy patches leading us into a broader downturn in employment growth. In fact, the energy slump has done little to slow down year-over-year employment growth in the rest of the country, reducing overall growth by at most a few hundredths of a percentage point in recent months. 

Employment growth in these six energy-intensive states has fluctuated greatly during the expansion, as seen in Figure 2 displaying differences in job growth rates over that period. High oil prices during the first part of the recent expansion benefited many energy-intensive states, including an oil boom in North Dakota. Figure 2 shows a large increase in the difference between maximum and minimum year-over-year employment growth rates during the period of high oil prices (2010–2013). The spread was caused by a large increase in employment in these states while other states maintained steady employment growth. When oil prices fell precipitously in the latter half of 2014, six states—Oklahoma, Alaska, North Dakota, Louisiana, West Virginia, and Wyoming—slipped into a steady decline in employment, which was still evident in the March employment report. During that time, the spread increased because of large job losses in those same states, while the rest of the states stayed on course.  

Recently, employment declines in those states have leveled off as oil prices have stabilized around $50/barrel, resulting in a narrowing of the job-growth spread. Attributing these large fluctuations in the spread to the six energy-intensive states is substantiated by examining the difference between the 75th percentile and the 25th percentile growth rates. This difference, which does not include the six energy-intensive states, does not exhibit the same wide gyrations as found in the max-min spread. The overall standard deviation shows a similar balanced growth among the states. These two measures indicate that most states have experienced steady and balanced employment growth throughout most of the expansion. 

Figure 2  Spread of job growth rates across states