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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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10.30.09

Economic Trends

Fourth District Employment Conditions

Kyle Fee

The District’s unemployment rate fell 0.1 percentage point to 10.0 percent for the month of September. The decrease in the unemployment rate is attributed to monthly decreases in the number of people unemployed (2.0 percent), the number of people employed (−0.3 percent), and the labor force (−0.7 percent). Compared to the nation’s unemployment rate in September, the District’s was higher (by 0.2 percentage point), as it has been since early 2004. Since the start of the recession, the nation’s monthly unemployment rate has averaged 0.6 percentage point lower than the Fourth District’s unemployment rate. Since this time last year, the Fourth District and the national unemployment rates have increased by 3.1 percentage points and 3.6 percentage points, respectively.

There are significant differences in unemployment rates across counties in the Fourth District. Of the 169 counties that make up the District, 37 had an unemployment rate below the national rate in September, and 132 counties had a higher rate than the national rate. There were 125 District counties reporting double-digit unemployment rates in September, indicating that large portions of the Fourth District have high levels of unemployment. Geographically isolated counties in Kentucky and southern Ohio have seen rates increase, as economic activity is limited in these remote areas. Distress from the auto industry restructuring can be seen in the unemployment rates of counties along the Ohio-Michigan border. Outside of Pennsylvania, lower levels of unemployment are limited to the interior of Ohio or the Cleveland-Columbus-Cincinnati corridor.

The distribution of unemployment rates among Fourth District counties ranges from 6.5 percent (Holmes County, Ohio) to 22.7 percent (Magoffin County, Kentucky), with the median county unemployment rate at 12.0 percent. Counties in Fourth District Pennsylvania generally populate the lower half of the distribution, while the few Fourth District counties in West Virginia fall mostly in the upper half. Fourth District Kentucky continues to dominate the upper half of the distribution, with Ohio counties becoming more dispersed throughout the distribution. These county-level patterns are reflected in statewide unemployment rates, as Kentucky and Ohio have unemployment rates of 10.9 percent and 10.1 percent, respectively, compared to Pennsylvania’s 8.8 percent and West Virginia’s 8.9 percent.

The drop in the District unemployment rate most likely does not indicate an improving labor market, as the drop stems mostly from a shrinking labor force (−1.5 percent since this time last year). During recessions, workers leave the labor force because they become discouraged and stop looking for work, effectively shrinking the base from which the unemployment rate is calculated. When employment prospects increase, discouraged workers eventually return to the labor force. However, if labor force increases are not accompanied by strong growth in employment, the unemployment rate has the potential for further increases. Consequently, this drop in the unemployment rate is far from a positive sign about the condition of the Fourth District labor market.