BUSINESS

Unemployment rates fell in 21 US states in June, held down by shrinking workforce

07/21/2015 11:14 EDT | Updated 07/21/2016 05:59 EDT
WASHINGTON - Unemployment rates fell last month in 21 U.S. states and were unchanged in 17, as widespread job growth and a shrinking workforce reduce the ranks of those out of work.

The figures point to widespread improvement in the nation's job market. There is also evidence that the falling unemployment rates in many states could be boosting wage growth, according to an analyst note, a trend that could emerge at the national level.

The Labor Department said Tuesday that unemployment rates rose in 12 states. Employers added jobs in 31 states and cut them in 17, with little change in the remaining two states.

The figures reflect steady hiring nationwide. Employers added 223,000 jobs in June, and the U.S. unemployment rate fell to 5.3 per cent from 5.5 per cent. Yet last month's rate decline occurred because some of the unemployed gave up looking for work. The jobless aren't counted as unemployed unless they are actively searching for work.

The proportion of U.S. adults in the workforce — defined as those with jobs or looking for work — declined last month to the lowest level in 38 years, according to the government's jobs report, released earlier this month. Just 62.6 per cent of people 16 and over are in the workforce, the government said. That's down from 66 per cent before the recession.

Nebraska has the lowest unemployment rate, at 2.6 per cent, while West Virginia has the highest, at 7.4 per cent. New York gained 25,500 jobs last month, the most of any state, followed by 23,000 in California and 16,000 in Texas.

The unemployment rate fell to 5 per cent in the Midwest, from 5.1 per cent in May, and 5.3 per cent in the South, from 5.4 per cent. Unemployment in the Northeast declined to 5.4 per cent from 5.6 per cent. Only the West reported an unchanged rate, at 5.8 per cent.

Smaller workforces helped lower unemployment rates in many states last month, including Connecticut, Florida and New Jersey.

Unemployment rates in 31 states are now at 5.5 per cent or below, a range that the Federal Reserve considers full health. That suggests employers will have to pay higher wages to attract workers, given the dwindling supply of unemployed.

The lower unemployment rates in many states are already starting to push up wage growth, according to research released Tuesday by David Mericle, an economist at the investment firm Goldman Sachs.

States with unemployment rates that are at or near full health have seen their average hourly pay levels grow more quickly than other states, according to Mericle. And states with steeper drops in their unemployment rates in the past year have also experienced better wage growth.

Some measures suggest paychecks nationwide are growing a bit faster, though the evidence is mixed. Average hourly pay rose just 2 per cent in June compared with a year ago. That's much lower than the 3.5 per cent to 4 per cent that is typical for a healthy economy.

Goldman Sachs forecasts that wage growth will reach 2.75 per cent by the end of this year and reach 3.5 per cent next year.