The Heritage Foundation

WebMemo #412 on Taxes

February 3, 2004

February 3, 2004 | WebMemo on Taxes

Jobs Picture Brightening: Unemployment Drops in 38 States

From January 2003 to January 2004, the unemployment rate dropped in four out of five states and almost every region saw an increase in the civilian labor force, according to a March 10 report from the Bureau of Labor Statistics. While the job market may not as robust as policymakers would like, it is improving, contrary to the conventional wisdom of a bleak employment picture in much of the country.

 

Unemployment Rate

Every region reported a decline in the unemployment rate over the last year (see table). The South remains the strongest region in terms of employment. The South has the lowest unemployment rate at 5.2 percent and experienced the highest growth in the civilian labor force. Unemployment in the West declined the most of all the regions, from 6.6 percent in January of 2003 to 5.9 percent a year later. Unemployment in the South declined from 5.7 to 5.2 percent over the same period, and in the Northeast and Midwest by .2 percent. From December to January, only the Northeast's unemployment rate did not decline. It held steady at 5.7 percent, compared to a monthly decline of .4 percent for the other three regions.

 

The unemployment report presented ever better news at the state level. Only five states - Alabama, Maine, New York, Indiana and Ohio - experienced higher unemployment in the last year. Thirty-eight states and the District of Columbia had a lower unemployment over the course of the year. North Dakota had the largest decline in its unemployment rate, from 4.2 percent in 2003 to 3 percent in 2004.

 

Civilian Labor Force

The civilian labor force continued to grow over the last year, with gains in every region but for the Northeast. Every region saw an increase in the seasonally adjusted civilian labor force over the last month from December to January. Many workers re-entered the labor force over the last year as the economy recovered.

 

An expanding labor force and a declining unemployment rate indicate a solid employment picture. These data stand in sharp contrast to the slow growth in the payroll survey.[1] A strong, growing labor force is necessary for a growing economy because it increases the value and quantity of labor.

 

Signposts for an Expansion in Employment

The employment picture has improved since the nadir of June 2003. Many surveys and indicators point to a rebounding job market.[2] The President's tax cuts - especially tax reductions on the cost of capital that increased business investment - have helped the economy grow. Continued strong GDP growth is vital to a stronger job market. Congress should make the President's tax cuts permanent to ensure that the citizens of every state - and not just of the forty-five states that are better off this year - enjoy a lower unemployment rate by next year.



[1] Kane, Timothy, " Diverging Employment Data: A Critical View of the Payroll Survey", The Heritage Foundation, CDA Report No. 04-03, March 4, 2004, available at http://www.heritage.org/Research/Labor/CDA04-03.cfm.

[2] On March 18, 2004, the Labor Department reported that jobless claims had fallen to the lowest level since before the recession, that of January 2001.

About the Author

Rea S. Hederman, Jr. Director, Center for Data Analysis and Lazof Family Fellow
Center for Data Analysis