- The Washington Times - Monday, January 1, 2018

Most of the country has bounced back from the Great Recession, with unemployment rates now equal to or even below where they were in 2007 — but a third of the states are still struggling.

And 10 states and the District of Columbia still have jobless rates that are at least half a percentage point higher than where they were in December 2007, as the country slipped into the recession.

The laggards are spread across the country, with no obvious patterns suggesting why they would be slower to recover.

“You really have to understand [each] state’s economy and demographic. What’s the mix of people who live there and what industries are overrepresented there?” said Salim Furth, a research fellow at the Heritage Foundation.

Some of the winners are clear: Michigan had the highest unemployment at the start of the recession at 7.3 percent and saw its jobless rate peak at nearly 15 percent in 2009. Since then, it has made huge gains, cutting its unemployment rate to just 4.6 percent as of November.

Michigan Gov. Rick Snyder attributes his state’s growth to diversification of industry. Although car manufacturing is still a major industry, it is not the leading industry in the state.

“Lawmakers eliminated the Michigan Business Tax, passed a right-to-work law, and exempted manufacturing equipment and small businesses from paying personal property taxes,” said James Hohman, director of fiscal policy at the Mackinac Center for Public Policy.

The gains are all the more impressive when compared to nearby Ohio, also a manufacturing-heavy state whose unemployment rate was 5.7 percent in late 2007, peaked at 11 percent and now is 4.8 percent.

“Ohio has a long history of having problems economically in terms of keeping up with national average,” said Greg Lawson, a research fellow at the Buckeye Institute.

“The local tax structure and local government compares unfavorably to neighboring states. The municipal income tax is a more complicated system,” Mr. Lawson said. “It makes things more difficult for new businesses, fresh businesses, problem for net job creation.”

Nationally, unemployment is at 4.1 percent — a rate not seen since the George W. Bush administration.

But some states still lag far behind — particularly states who have seen their economic fundamentals change.

That’s the case for some energy-economy states, who a decade ago were enjoying high prices that spurred an exploration boom and a job bonanza. As energy prices have fallen, exploration has slimmed and some jobs have dried up.

New Mexico went from a 4 percent rate in December 2007 to a 6.1 percent rate in October 2017. Alaska, while usually high on the unemployment spectrum, also saw a rise from 6.4 percent to 7.2 percent in that same period.

“The dependence of Alaska on oil and its boom-bust nature in the past means our unemployment rate is less correlated with the rest of the country,” said Kevin Berry, an environmental economist professor at the University of Alaska Fairbanks.

Mr. Berry also said fishing and tourism play a heavy role in the state’s economy and are two sectors that vary throughout the year.

In New Mexico, one economist said energy was part of the lag — but said race matters, too.

“The racial makeup of state really matters. It takes communities of color longer to recover,” said Janelle Jones, an economic analyst at the Economic Policy Institute.

She said one of the best ways a state can boost its unemployment numbers and create economic stimulus is by raising the minimum wage. Increasing wages, particularly at the lower-economic level, creates a boost across industries as those in the lower bracket tend to spend it quickly, she added.

“What you need to recover is aggregate demand,” Ms. Jones said.

But it’s not just racial demographics at play in a state’s recovery.

The net migration of young people matters a great deal to lowering a state’s unemployment rate, a problem many states in the Rust Belt continue to have.

More young people are leaving while older people, who are ending their working years, are staying. States that create incentives for younger workers to remain are more likely to see long term benefits.

“Things that really pay off over time are investments to the major things every company wants: infrastructure and quality education. Those take so much time planning an investment, and it pays off over a long period of time,” said Richard Auxier, a research associate at the Urban-Brookings Tax Policy Center.

One economist said that during the recession, many people dependent on jobs like manufacturing or construction — industries that were hardest-hit — moved to other, often low-cost states where they could find jobs and have stayed.

Gary Burtless, senior fellow at the Brookings Institution, also said that states tend to see a natural balance. Those hit hard recover well, while those who did not have as hard a time didn’t see as much benefit when the recession ended.

“If states saw out-sized run-ups in [the unemployment rate] in the downturn, they’re also likely to see outsize drops in [the unemployment rate] when the economy recovers,” Mr. Burtless said.

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