The paper summarized here is part of the spring 2024 edition of the Brookings Papers on Economic Activity, the leading conference series and journal in economics for timely, cutting-edge research about real-world policy issues. Research findings are presented in a clear and accessible style to maximize their impact on economic understanding and policymaking. The editors are Brookings Nonresident Senior Fellows Janice Eberly and Jón Steinsson.
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A new historical dataset of state unemployment rates shows that, except for the COVID-19 recession, states in recent decades have had increasingly similar experiences in the timing and severity of downturns, according to a paper discussed at the Brookings Papers on Economic Activity (BPEA) conference on March 29.
The Bureau of Labor Statistics has reported monthly unemployment rates for states since January 1976. The authors of the paper—Andrew J. Fieldhouse of Texas A&M University, David Munro of Middlebury College, Christoffer Koch of Empirical Research Partners LLC, and Sean Howard of JERA Americas—developed alternative state-level unemployment rates back to January 1947 by digitizing new and continuing unemployment insurance claims from historical reports previously published by the Department of Labor and the Social Security Administration.
Their paper—”The Emergence of a Uniform Business Cycle in the United States: Evidence from New Claims-Based Unemployment Data”—documents two important trends highlighted by the new datatset: First, a more uniform, and slower, pace of recovery has emerged since the 1960s. Unemployment nationally has recovered more gradually in recent decades while state unemployment rates have converged. Second, interstate migration, with unemployed workers moving to states with more plentiful jobs, has not significantly spurred recoveries since the mid-1980s.
The authors attribute the slowing and convergence of recovery rates to several factors, including a shift from manufacturing to less-volatile services in the economy, the industrial composition of states growing more similar, and the increased integration of the national economy. As a result, workers have much less incentive to move when they lose a job.
“If there aren’t greener pastures elsewhere, why migrate,” Munro said in an interview with The Brookings Institution.
According to Fieldhouse, the paper’s findings have important implications for economic stabilization policy. On the one hand, a more uniform business cycle argues for a stronger role for the federal government, through fiscal policy (tax cuts and spending programs) and the Federal Reserve’s monetary policy. On the other hand, because jobless workers are no longer moving to other states, state-level policies targeting weak local labor markets are important.
The authors note that the most recent business cycle—the deep but short recession in 2020 during the early months of the COVID pandemic and the ongoing recovery since then—is the exception to the convergence trend they document over the past 60 years.
“States had very different experiences during the COVID recession,” Fieldhouse said in an interview. “The disease affected states differentially—with different timing, different vaccination rates and differing lockdown policies. In-person services got walloped. States like Nevada, dependent on tourism, got walloped while other states were not as exposed to in-person services.”
CITATION
Fieldhouse, Andrew, Sean Howard, Christoffer Koch, and David Munro. 2024. “The emergence of a uniform business cycle in the United States: Evidence from new claims-based unemployment data” BPEA Conference Draft, Spring.
Authors
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Acknowledgements and disclosures
David Skidmore authored the summary language for this paper. Chris Miller assisted with data visualization.
Munro received support from MiddData, a data science initiative at Middlebury College. Koch was formerly an employee of the International Monetary Fund, whose Communications Department had the right to review this work prior to publication but did not inform the findings. Other than the aforementioned, the authors did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. The authors are not currently an officer, director, or board member of any organization with a financial or political interest in this article.
