Deep Recession Sharply Altered U.S. Jobless Map

http://www.cnbc.com/id/44685033

Published: Tuesday, 27 Sep 2011 | 10:08 AM ET Text Size
By: Michael Cooper
The New York Times

When the unemployment rate rose in most states last month, it underscored the extent to which the deep recession, the anemic recovery and the lingering crisis of joblessness are beginning to reshape the nation’s economic map.


The once-booming South, which entered the recession with the lowest unemployment rate in the nation, is now struggling with some of the highest rates, recent data from the Bureau of Labor Statistics show.

Several Southern states — including South Carolina, whose 11.1 percent unemployment rate is the fourth highest in the nation — have higher unemployment rates than they did a year ago. Unemployment in the South is now higher than it is in the Northeast and the Midwest, which include Rust Belt states that were struggling even before the recession.

For decades, the nation’s economic landscape consisted of a prospering Sun Belt and a struggling Rust Belt. Since the recession hit, though, that is no longer the case. Unemployment remains high across much of the country — the national rate is 9.1 percent — but the regions have recovered at different speeds.

Now, with the concentration of the highest unemployment rates in the South and the West, some economists wonder if it is an anomaly of the uneven recovery or a harbinger of things to come.

“Because the recovery is so painfully slow, people may begin to think of the trends established during the recovery as normal,” said Howard Wial, a fellow at the Brookings Institution’s Metropolitan Policy Program who recently co-wrote an economic analysis of the nation’s 100 largest metropolitan areas. “Will people think of Florida, California, Nevada and Arizona as more or less permanently depressed? Think of the Great Lakes as being a renaissance region? I don’t know. It’s possible.”

The West has the highest unemployment in the nation. The collapse of the housing bubble left Nevada with the highest jobless rate, 13.4 percent, followed by California with 12.1 percent. Michigan has the third-highest rate, 11.2 percent, as a result of the longstanding woes of the American auto industry.

Now, though, of the states with the 10 highest unemployment rates, six are in the South. The region, which relied heavily on manufacturing and construction, was hit hard by the downturn.

Economists offer a variety of explanations for the South’s performance. “For a long time we tended to outpace the national average with regard to economic performance, and a lot of that was driven by, for lack of a better word, development and in-migration,” said Michael Chriszt, an assistant vice president of the Federal Reserve Bank of Atlanta’s research department. “That came to an abrupt halt, and it has not picked up.”

The long cycle of “lose jobs, gain jobs, lose jobs” that kept Georgia’s unemployment rate at 10.2 percent in August — the same as it was a year earlier — is illustrated by Union City, a small city on the outskirts of Atlanta.

It suffered a blow when the last store in its darkened mall, Sears, announced that it would soon close. But the city had other irons in the fire: a few big companies were hiring, and earlier this year Dendreon [DNDN 10.36 0.19 (+1.87%) ], a biotech company that makes a cancer drug, opened a plant there, lured in part by state and local subsidies.

Then, this month, Dendreon said it would lay off more than 100 workers at the new plant as part of a national “restructuring.”

Union City, with a population of 20,000, now calls itself the place “Where Business Meets the World” and has been trying to lure companies by pointing out its low business taxes, various incentive programs and proximity to Hartsfield-Jackson Atlanta International Airport.

Steve Rapson, the city manager, said that the challenge there, as in much of America, has been to get employers to hire again. “It’s hard to get your mind around what can you do as a city to encourage future jobs and jobs growth,” he said.

The reordering of the nation’s economic fortunes can be seen in the Brookings analysis, which found that many auto-producing metropolitan areas in the Great Lakes states are seeing modest gains in manufacturing that are helping them recover from their deep slump, while Sun Belt and Western states with sharp drops in home values are still suffering. The areas that have been hurt the least since the recession, the study said, rely on government, education or energy production. Places that were less buoyed by the housing bubble were less harmed when it burst.

In Pennsylvania, the analysis found, the Pittsburgh area — which is heavily reliant on education and health care — is weathering the downturn better than the Philadelphia area. In New York, areas around long-struggling upstate cities like Buffalo and Rochester are recovering faster by some measures than the New York City metropolitan area. And the rate of recovery in Rust Belt areas around Youngstown and Akron, two Ohio cities that were hit hard, has outpaced that of former boomtowns like Colorado Springs and Tucson.


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Minimum wage jobs leave millions in poverty

Chris Isidore, On Tuesday September 27, 2011, 9:39 am EDT
Most experts agree that to get out of the economic slump, we need more jobs.

But another problem is that millions of Americans already have jobs that don't pay very much.

Getting the economy going will require more than just creating a large number of low-wage positions, said Paul Osterman, economics professor at MIT. Raising the minimum wage to get more cash to the working poor is just as crucial, he said.

About 20% of American adults who have jobs are earning only $10.65 an hour or less, according to Osterman's analysis. Even at 40 hours a week, that amounts to less than $22,314, the poverty level for a family of four.

The federal minimum wage currently stands at $7.25 an hour (18 states set their own rates above the federal level, maxing out at $8.67 an hour in Washington State). But increases have not kept up with inflation. When adjusted for inflation, the highest federal minimum wage was in 1968, when it was the equivalent of $10.38 in today's dollars.

Osterman, who has written a new book called "Good Jobs America," said gradually raising the federal minimum wage to something close to that level over the next few years would be an important first step to helping the working poor climb out of poverty, while injecting more money into the economy.

Poverty's home: The suburbs

"If you give someone making $15,000 a year a $3,000 increase, that's going to make a tremendous difference in their life," he said.

With a greater percentage of the nation's income going to corporate profits than ever before, Osterman argues that businesses can afford a higher minimum wage.

"There needs to be standards in the job market," he said. "If the object is simply to minimize costs, we can use slaves again."

A 'job-killing' policy?

Many economists and small business owners fear that increasing the minimum wage would end up hurting the working poor rather than helping them, because employers who couldn't afford to pay more would be forced to cut staff.

But there's little empirical evidence to suggest that raising the minimum wage causes companies to cut back on hiring, according to Heidi Shierholz, labor economist for the Economic Policy Institute, a liberal think tank. In fact, one study conducted by Alan Krueger, President Obama's pick for his next chief economic adviser, found little difference in employment levels of fast food industries in Pennsylvania and New Jersey, which have different minimum wages.

"When you look at surveys of businesses, they consistently list weak demand as the key problem holding hiring back. Wages are nowhere near the major concern for employers," Paul Sonn, legal co-director of the National Employment Law Project Action Fund. "They may not realize it but raising the minimum wage would help sales and help them increase their hiring."

Still, in the current political climate, there is strong opposition to anything that might cost companies money and deter them from adding to their payrolls.

"If you raise the price of anything, people take less of it. That includes labor," said William Dunkelberg, chief economist for the National Federation of Independent Businesses. "That's why you can't raise wages during bad times. If you raise the price of labor, and the economy is growing, maybe I'll still hire people. But not now."