124 section 3 Measurement of Economic Performance
Rocky Mountain Low
In addition to estimating the unemployment rate
for the nation as a whole, the U.S. government
also estimates unemployment rates for each
state. These state unemployment rates often
differ considerably—and the differences corre-
spond to real differences in the condition of
local labor markets. The figure shows how un-
employment rates varied across the United
States in July 2007.
As you can see from the figure, Montana
had one of the lowest unemployment rates
in the United States, only 2.7% in July
2007, mainly because the state’s boom-
ing oil business was creating new jobs
even as the state’s aging population re-
duced the size of the labor force. And this
low unemployment rate created a seller’s
market in labor. According to the Associ-
ated Press, the owner of the McDonald’s
franchise in Sidney, Montana, desperate
to find workers, “tried advertising in the
local newspaper and even offered up to
$10 an hour to compete with higher -
paying oil field jobs. Yet the only calls
were from other business owners upset
they would have to raise wages, too.”
Michigan was at the opposite ex-
treme. Layoffs by auto manufacturers,
the traditional mainstay of Michigan’s
economy, had given the state the high-
est unemployment rate in the nation:7.2% in July 2007. And this high unemployment
rate did indeed correspond to a very poor labor
market. A poll taken by the Detroit Free Pressin
early 2007 found that 3 out of every 10 young
Michigan residents were considering leaving
the state, including almost half of poor job
prospects. These state- to - state comparisons
show that the unemployment rate is indeed a
good indicator of how easy or hard it is to find
a job.One thing you should know, however, is
that differences in state unemployment rates
don’t tend to persist, in large part because,
as that Michigan poll suggested, Americans
tend to move to where the jobs are. As recently
as 2000, Michigan had an unemployment
rate of only 3.7%, well below the national
average of 4.0%, while Montana had an
unemployment rate of 4.8%, above the na-
tional average.fyi
Michigan
Montana7.0% to 9.9%
6.0% to 6.9%
5.0% to 5.9%4.0% to 4.9%
3.0% to 3.9%
2.0% to 2.9%Module 12 AP Review
Check Your Understanding
Suppose that employment websites enable job -seekers to find
suitable jobs more quickly. What effect will this have on the
unemployment rate over time? Also suppose that these
websites encourage job -seekers who had given up their searches
to begin looking again. What effect will this have on the
unemployment rate?
In which of the following cases would the worker be counted as
unemployed? Explain.
a. Rosa, an older worker, has been laid off and gave up looking
for work months ago.
b. Anthony, a schoolteacher, is not working during his
three-month summer break.
c. Grace, an investment banker, has been laid off and is
currently searching for another position.
d. Sergio, a classically trained musician, can only find work
playing for local parties.Solutions appear at the back of the book.