Here are the 10 states with the fastest falling unemployment rates, using data from the Bureau of Labor Statistics (via WSJ). What's Michigan doing leading the nation in recovering employment?
|State||December 2010 Jobless Rate||November 2010 Jobless Rate||Month-to-Month Change||Year-to-Year Change ↓|
The whole story is more complicated than the chart. In most states, the labor force grows every year as families have children and immigrants and citizens shuffle around the country. But Michigan's population is actually declining, and it has been for a while. In fact, Detroit's metro population has slowly declined since the beginning of 2000.
That's why Michigan's unemployment rate will probably fall faster than other states for the next few quarters: It's the shrinking denominator effect. Slowly growing jobs (the numerator in the unemployment rate) divided by slowly shrinking population (the denominator) results in a faster-than-average decline in the unemployment ratio.
The upshot: Just as the national unemployment rate's recent 0.4% dip misleads us into thinking that job creation has already picked up significantly, states' unemployment rates aren't the best indication of what's happening inside their borders. Keep your eyes on the denominator.