State Recoveries Depend on Economic Diversity

Since the pandemic shut down the country last year, the statewide-level recovery has been varied, largely depending on the composition of each state’s economy. The more diversified a state is in terms of goods production and services, the better off it will usually perform in a labor crisis. This same thinking applies to countries as well. Goods-producing Germany has recovered much quicker compared with tourism-dependent nations like Italy and Spain.

If you are unsure what makes your state tick, a good source of information is the U.S. Bureau of Labor Statistics’ “Economy at a Glance.” The website provides a detailed view of the composition of each state’s economy along with a variety of data for identifying underlying trends.

A Record-Setting Year

For 18 U.S. states, 2020 saw them achieve both their historical high and low unemployment rates. Most states started last year with extremely low unemployment, but that quickly changed as the U.S. economy was shut down. In December 2020, Hawaii and Nevada remained at the top of the list of states with the highest unemployment, at 9.3 and 9.2 percent, respectively, compared with the national unemployment rate of 6.7 percent. These states have felt the greatest economic turmoil because their economies hinge on tourism, shopping, commerce and other service-industry professions where face-to-face interaction has become a medical hazard. Other struggling states are located in the Midwest where the closures of countless factory floors pushed droves of residents out of work.

Public-Sector Job Pain

Contributing to the jobs devastation is the fact state and local governments are large employers themselves, accounting for about 13 percent of nonfarm jobs in February 2020. Cuts to K-12 public education spending is where the job losses are occurring across many states. Unfortunately for this area, historically, public-sector jobs have taken longer to rebound from a recession than private-sector ones, even when there isn’t a public health crisis, so the pain is not going away anytime soon. This combination of ill effects will not be short-lived for many states. Expect it to be a while before some see a positive turnaround.