U.S. Initial Claims for Unemployment Insurance by State, 2008 vs. 2001

For the purposes of this analysis, we have calculated ratios of the six-month average level of initial claims recorded in the first half of 2008 relative to those recorded in the first half of 2001 for each state. The table shows the states that have generated the 20 highest ratios. Each of the state series has been adjusted to account for what in many cases are strong seasonal trends in the data. Data volatility across time also demands caution when drawing specific inferences from patterns observed across states, and therefore it is best to ensure that any conclusions are defined in broad terms.

Interestingly, 20 states have recorded ratios exceeding 1.0, with another 16 recording ratios of more than 0.9. This is a good indication that economic conditions across the country may be approaching levels comparable to those seen at the onset of the 2001 recession. Indeed, the U.S. average ratio of slightly less than 1.0 reinforces this claim. Rapidly accumulating job losses at the national level are strong evidence that the U.S. economy has been heavily impacted by the damaging effects of high oil prices and the housing market collapse.

The table also reveals the presence of several of the "housing states" at the top of the list: Florida, Nevada, and Arizona. High levels of initial claims in these states are not particularly surprising, given the severe and well-publicized collapses of their respective housing markets. The emergence of real estate markets as key driving forces behind these broad-reaching downturns has presented these heavily afflicted states with a range of economic hardships that were not present during 2001. Consequently, the 2008 declines have been of larger magnitudes relative to those seen seven years ago. Initial claims levels in Florida, Arizona, and Nevada during recent months have also shown evidence of upward trends that may foreshadow further deteriorations in the coming quarters. One other key issue of note is the presence of Iowa near the top of the list. Although the Hawkeye State did experience a significant downturn during 2001, its poor showing thus far in 2008 also reflects the severe impacts of the June 2008 flood. Indeed, Iowa’s initial claims for unemployment insurance surged in June as the state responded to the disaster, pushing the six-month average sharply higher.

Overall, the conclusions and storylines derived from the 2008 initial claims data serve as good indicators of what can be expected in coming quarters, especially for those states that recently saw jobless claims trending upward. Our forecasts predict that economic health across the United States will deteriorate during the second half of 2008, with more than 30 states, as well as the national economy, averaging annualized quarterly payroll contractions during the third and fourth quarters. In contrast, the first half of the year yielded average quarterly declines in only 21 states. The case for an intensifying slowdown is further advanced by our forecasts for 33 states and the nation to record weaker employment performances in second half of the year than in the first, regardless of whether these states have seen gains or losses thus far. As events progress, many regional economies will approach the threshold of possible recession. Initial claims will likely increase over the near term, pushing the claims ratios for a host of states higher.