Meet the Author

Timothy Dunne |

Vice President

Timothy Dunne

Timothy Dunne is a former vice president and economist of the Federal Reserve Bank of Cleveland.

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Meet the Author

Kyle Fee |

Economic Analyst

Kyle Fee

Kyle Fee is an economic analyst in the Research Department of the Federal Reserve Bank of Cleveland. His research interests include economic development, regional economics and economic geography.

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Meet the Author

Mary Zenker |

Research Analyst

Mary Zenker

Mary Zenker is a former research analyst in the Research Department at the Federal Reserve Bank of Cleveland.

1.11.11

Economic Trends

Fourth District Employment Conditions

Tim Dunne, Kyle Fee and Mary Zenker

Unemployment remains quite high in the nation and higher still in the Fourth District, though it has been nearly 18 months since the recovery began. The unemployment rate in the Fourth District inched down to 10.0 percent in November, while in the nation as a whole it is slightly lower but still high (9.8 percent in November and 9.4 percent in December).

The persistently high levels of unemployment at the national and Fourth District levels reflect both the depth of the recession and the slow pace of employment growth during the recovery cycle. In the past, it has taken Ohio roughly three years from the start of the recession to bring its employment back to the pre-recession level. It has now been 35 months since the last recession began, yet Ohio’s employment level remains 7.5 percent below its pre-recession level.

Pennsylvania has experienced considerably smaller employment losses. Employment fell by only 4.4 percent from December 2007 to December 2009. In addition, there has been a somewhat more noticeable, though still anemic, bounce back in Pennsylvania.

Comparing the employment patterns of all the Fourth District states during the latest recession and recovery, we see that in each state, employment declined for roughly two years from the start of the recession before bottoming out. The pace of the recovery has been relatively uneven, with little net employment growth seen over the past six months. In terms of employment losses, the recession has been relatively severe in Ohio, milder in Pennsylvania and West Virginia, and on par with the nation in Kentucky, where losses have closely tracked the national path throughout the recession and recovery cycle.

One possible explanation for differences in employment losses across states is that industry structure differs in each state and the recession’s impact has varied markedly across industries. For example, construction and manufacturing have been very hard hit, with construction employment declining by 25.0 percent and manufacturing employment declining by 15.1 percent over the course of the recession, nationally. Alternatively, health and education service employment actually expanded over the recession, increasing by 6.3 percent. If states specialize in industries with different growth paths, this specialization could help explain the relative differences in state employment growth. On the other hand, differences in state-level employment growth could simply reflect differences in the severity of the recession or the strength of the recovery experienced in individual states.

Ohio and Pennsylvania provide examples of some of these possibilities. Ohio’s employment growth differed from the nation’s for several reasons. On the negative side, in 10 of 11 major industry groups, Ohio’s employment growth was lower than the national growth rate. In addition, Ohio had a much larger manufacturing share than the nation as a whole prior to the recession. Together, the higher rate of job loss in manufacturing and the higher employment share in manufacturing can account for roughly half of the difference between the national growth in employment and Ohio’s growth in employment. On the positive side, Ohio’s construction sector was relatively small and suffered proportionately less employment loss than the nation.

In the case of Pennsylvania, the main driver of its divergence from the U.S. employment level was differences in industry employment growth. In 10 of 11 major industry groups, Pennsylvania’s employment growth outpaced the nation’s, the only exception being in education and health services. In terms of industry specialization, a slightly higher manufacturing share in Pennsylvania compared to the U.S. was a drag on employment growth. And again, construction was a relative bright spot. Pennsylvania experienced less relative employment loss in construction, though the loss was still substantial in absolute terms. Overall, differences in industry employment growth, as opposed to variation in industry specialization, account for the majority of the employment growth differentials in Pennsylvania and Ohio.