Job Woes Linger in 29 States as U.S. Recovers UnevenlySteve Matthews and Alex Tanzi
Kevin Yearout has added about 80 jobs to his Albuquerque, New Mexico, contracting company since July of last year. That still leaves him with less than half the number he employed in 2009, at the end of the deepest downturn since the Great Depression.
“It has been a very slow climb back,” said Yearout, 51, co-owner and chief executive officer of Yearout Mechanical Inc. “The economy went very south, very quickly.” With his commercial construction business hobbled by government funding cutbacks, “I never see the local economy getting back” to justify the prior level of jobs.
Even as the U.S. economy reached a milestone in May with employment exceeding the prerecession peak, 29 of 50 states have yet to match that accomplishment, according to Labor Department data compiled by Bloomberg. New Mexico, for instance, still had 4 percent fewer employed workers, ranking among the bottom 10 percent of states.
“This is not like any other recovery,” said John Herrmann, director of U.S. rate strategy at Mitsubishi UFJ Securities USA Inc., who tracks the gross domestic products of states. “There is a tremendous disparity, not a uniform recovery at all, with the performance of the economy much more skewed on a regional basis.”
The weakest jobs rebound has been in the states central to the 2002-2006 housing bubble and the subsequent price collapse.
Nevada, Arizona and Florida are among those furthest from their peak employment during the December 2007-June 2009 downturn. Those states, along with five others -- Alabama, Illinois, Michigan, New Jersey and Ohio -- remain more than 50,000 positions short of that level.
Yet the regional woes are far broader: New Jersey has been hurt by the loss of casino and pharmaceutical industry positions, New Mexico by U.S. government defense cutbacks, Alabama by weakness in manufacturing, and Michigan by a loss in auto jobs.
The energy industry is driving the economic expansion in 12 of the 13 states leading growth since the recession ended, Herrmann said. Leaders include Texas, North Dakota, Oklahoma and Louisiana, with Oregon the only non-energy state among the standouts. Oregon has been boosted by technology manufacturing and fast growth in exports.
Excluding the 1.1 million jobs created in Texas, which has led the expansion, the nation would be 350,000 below the prerecession peak, according to Federal Reserve Bank of Dallas research cited by its president, Richard Fisher.
The spotty regional recovery meshes with the Federal Open Market Committee’s view there is “significant underutilization of labor resources,” according to the statement after its September meeting, and continued room to keep interest rates near zero long after the central bank ends its bond buying as planned in October.
“There is no pressure to raise interest rates this year and into next given that many parts of the country have a surfeit of unemployed and underemployed workers,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania.
IHS Global Insight economists in Lexington, Massachusetts, project that every state won’t have returned to its peak employment until Michigan achieves that level in 2019.
While the auto industry has recovered and sales in August reached the highest level since January 2006, employment levels in Michigan haven’t.
“The auto industry has been moving out of Michigan,” said James Diffley, IHS Global Insight chief U.S. regional economist, who is based in Philadelphia. “Job totals have been declining.”
Michigan regained 34,185 automotive manufacturing jobs between 2010 and 2013. Yet that doesn’t come close to replacing the 174,429 industry positions lost from 2001 to 2010, a 59 percent decline, according to data calculated for Bloomberg by the Ann Arbor-based Center for Automotive Research.
While the auto industry remains dominant in Michigan, “education, tourism, green technologies” and information technology “will become increasingly important,” according to a Moody’s Analytics’ forecast in June.
Weak wage growth outside a few areas, such as energy jobs in North Dakota and Texas, supports the view that most of the country remains far from fully recovered, said Gary Burtless, a senior fellow at the Brookings Institution in Washington and a former Labor Department official.
Hourly earnings nationwide were up 2.1 percent over the past 12 months, compared to 3.9 percent in June 2007, six months prior to the past recession, Labor Department data show.
Young adults 25 to 34 years old, who are most likely to relocate for jobs, have been moving at decreasing rates even after the recession ended with migration at historically low levels in 2013, according to a Brookings analysis.
That mobility remains low suggests “that local job markets have been basically lousy almost everywhere” except a few areas benefiting from the energy boom, Burtless said. “Wages are behaving as though there’s still a lot of labor-market slack.” Wages gains have been basically flat for the past several years, he said.
While housing prices have regained part of their losses, Nevada was 5.9 percent below its peak employment, Arizona 4.1 percent, Florida 1.5 percent and Georgia 1.1 percent. The data compiled by Bloomberg compares the top employment level for any month during 2014 with the maximum during the downturn.
“The economy is still sluggish in Nevada,” said Jim Mason, president and co-owner of Taylor International Corp. in Las Vegas. ‘We still have a lot of excess capacity in the employment market.’’
In 2007, Taylor employed 500 people managing $1 billion in construction primarily of hotels and casinos. Today, the company employs 30 in the state and gets 20 applications for each job opening.
In New Jersey, Trump Entertainment Resorts Inc., which owns two properties in Atlantic City, filed for bankruptcy protection in September. New Jersey has lost more than 5,000 casino hotel jobs in the past two years, according to state figures.
Casinos there have faced new competition from Pennsylvania, Connecticut and New York, and there has been “very little private sector investment” in new manufacturing and commercial construction, said Joseph Seneca, a Rutgers University economist in New Brunswick.
“We have a lot of white elephants -- large empty casinos,” he said. “This is a significant problem for the state going forward.”
Alabama’s job level remains 4.6 percent below the peak during the downturn, according to data compiled by Bloomberg. Job creation has been hurt by weakness in construction, manufacturing and government spending, said Ahmad Ijaz, an economist at the University of Alabama in Tuscaloosa.
“Commercial construction is still relatively weak due to sluggish consumer and business spending,” he said. “Nondurables, particularly the textile and apparel industry, will not be adding any jobs anyway because of off-shoring and automation. Government spending is weak because of cutbacks in federal spending which in turn also impacts state and local government spending.”
Eddie Foreman, 40, of Opelika, Alabama, who has a part-time job at a fast-food restaurant, said better-paying and permanent industrial positions aren’t coming back.
“The economy is tough and there are no jobs for us here,” said Foreman, who has put out 20 applications in the past year and had no interviews. He worked in a variety of manufacturing and construction jobs before the recession. “Eventually I think it has to get better. It can’t get any worse.”
New Mexico’s economy was slowed as reverberations from last year’s federal government shutdown rippled through the state, according to a Moody’s Analytics report in April. The state, home of the Los Alamos National Laboratory, has government as its largest employer, with 24 percent of all workers compared to 16 percent in the U.S., according to Moody’s Analytics. There were 30,000 federal workers among the 193,000 public sector employees in the state last year, according to the Moody’s report.
“Government has been a drag,” said Michael O’Donnell, research scientist with the Bureau of Business and Economic Research at the University of New Mexico. “Many of the private sector jobs rely on government funds and grants.”
While governments and companies have started to seek bids for new construction projects, Yearout said, there’s no backlog of work that ensures rising employment a year from now. At about 280 now, he doesn’t see returning to the 750 workers the company employed in 2009 anytime soon.
“There is a cautious optimism that things are turning around,” he said, yet private businesses sometimes back out even after seeking bids. “The owner is afraid to pull the trigger. There is no long-term visibility or momentum. Everyone is a little bit afraid.”