Is unemployment really worse in the South?

Gigi Douban Nov 3, 2014

Is unemployment really worse in the South?

Gigi Douban Nov 3, 2014

For years now, the South has built up a reputation for itself as a place where there are lots and lots of jobs. It hasn’t appeared that way for the last several months though, as unemployment numbers in Southern states have risen.

But the jobs outlook there might not be as bleak as you think. 

At the Alabama Career Center in Birmingham, just about every computer is full.  Dozens of people are scouring the Internet for jobs. Carla Gates, hoping to land a hotel housekeeping position, is dressed in a suit. There were recruiters here this morning. 

“I mean I’ve been putting in applications online, I’ve been to a couple of job fairs. I’ve been everywhere,” Gates says. 

She’s been out of work for more than a year. 

“I think I’ve had two job interviews,” she says. 

Alabama’s unemployment rate in September was 6.6 percent, up from 6.1 percent in January. Mississippi’s was 7.7 percent.  And Georgia’s unemployment rate ranks highest in the nation, at 7.9 percent. This at the same time as the national jobless rate has dropped to 5.9 percent. 

To understand why unemployment is higher in the South, you need a little bit of back story. 

“The South was growing more rapidly than say the North and the Midwest for an extended period of time in terms of overall employment growth,” says Ken Troske, senior associate dean for administration and economics professor at the University of Kentucky’s Gatton College of Business & Economics. 

Troske says hiring in the South really hit its stride after the early-90’s recession, when those states cut the cost of doing business. Cheaper labor, tax breaks for companies. Plus, these states were right-to-work states. And businesses loved that. 

“You’ve seen the South do a lot of things that have been beneficial, and what is occurring I think are that other parts of the country are starting to catch on,” he says. 

States like Michigan and Indiana are coming up with their own business-friendly policies. And the numbers are just starting to even out, Troske says. 

“But eventually yeah, you reach a new competitive equilibrium in which the prices for producing a car are the same in South Carolina or Tennessee or Alabama as they are in Michigan or Wisconsin.”

Equilibrium aside, hiring is up in the South. So how can the unemployment rate be on the rise? Aparna Mathur is an economist with the American Enterprise Institute. She says it’s statistics. A surge in the number of people looking for work, and boom— unemployment numbers go up, “even though it could signal that it’s a good economy, people are trying to find jobs, they’re more hopeful, and suddenly they’ve entered the labor market again,” Mathur says. 

Troske says this happens more in the South because the workforce in the Midwest and the Northeast is, on the whole, older. So a lot of times, when workers there leave a job, they’re not looking for another. And that drives unemployment numbers down. 

Plus, Mathur says to really know what’s going on, you’ve got to look at other things like home sales and GDP. 

“You know, looking at those indicators is a lot more helpful,” she says. 

And for a few years now in the South, those things have all been on the upswing. 

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