States Recovering Unevenly and Fed Shutdown Not Helping

The latest edition of the Tax Policy Center’s State and Local Finance Initiative’s State Economic Monitor finds that revenue growth is accelerating in most states but many jurisdictions faced strong economic headwinds going into the recent partial government shutdown and potential default. In several states, a decline in public sector jobs was boosting unemployment even before the partial shutdown.

The State Economic Monitor shows state-by-state economic and finance trends and our new page on the website includes interactive maps and charts.

Between August 2012 and August 2013, the public sector shed 94,000 jobs, mostly federal positions. Forty-six states lost federal government jobs. Total government jobs (including state and local positions) increased in 18 states but every state except West Virginia remains below its peak level of government employment, seasonally adjusted.

The trends in unemployment rates vary widely. Thirty-six states have lower unemployment rates than a year ago while twelve states have higher rates.

In Louisiana, for example, the unemployment rate rose from 6.4 percent in August 2012 to 7.0 percent in August 2013, but remained below the 7.3 percent national average. The number of unemployed in the state increased by almost 13,500.

California, Florida, and Nevada had better news:  the unemployment rate in each state fell by 1.5 percentage points or more from a year ago. This is particularly welcome in California and Nevada, where unemployment rates remain substantially above the national average.

Unemployment rates can be difficult to interpret, however, since they depend on how many people enter or drop out of the labor force as well as the sheer number of jobless. For example, Massachusetts, Missouri, and Nebraska added jobs but their unemployment rates rose because more people were looking for work. In Delaware, the number of unemployed was unchanged from a year ago but its unemployment rate increased because 4,000 residents dropped out of the labor force.

Our update does not reflect the partial government shutdown that began on October 1. However, states with high concentrations of federal employees and contractors began to feel the effects almost immediately. The Washington, DC, metro area will be particularly hard hit.  In 2012, federal wages made up about 35 percent of wages in the District of Columbia, 10 percent in Maryland, and 8 percent in Virginia. Tourism in the D.C. area has also likely been more affected than most localities by the shutdown of museums, monuments, and parks.

Along with the Monitor, we’ve updated the State and Local Finance-Data Query System, a tool to download and customize annual state and local revenue and expenditure data. The system is particularly helpful now while these numbers aren’t available on an inactive Census of Governments website. Give it a try.