“The survey says” examines various rankings and dashboards judging geographic locations while noting that these ratings are best viewed as a mixture of astute interpretation and data.
Buzz: California’s often unpredictable job market ranks eighth among the most volatile states.
Source: My trusty spreadsheet analyzed State-by-state employment data from 1990examining the severity of labor market ups and downs while focusing on a geeky measure of volatility – the standard deviation – applied to annual changes in unemployment rates and employment numbers.
It’s not just your personal impression: California workers have had to navigate a job market filled with much above-average fluctuations over the past three decades.
Just consider the peaks and the valleys.
Statewide job growth has averaged 0.9% a year since 1990 — No. 23 among states — but has fallen from a high gain of 3.7% in the from the dot-com craze in 1998 to a 7.1% loss in the pandemic era in 2020.
And unemployment – averaging 7.3% since 1990 and the second highest in the country – fell from 12.5% in the rubble of the Great Recession of 2010 to 4.1% in 2019, just before the coronavirus does not freeze the business climate.
But workers in seven states have seen even wilder swings, by my calculations. Hawaii was No. 1 for job volatility, followed by Nevada, then Florida, Massachusetts, Michigan, Colorado and Rhode Island.
These states no doubt have concentrations of businesses familiar to Californians. Large tourism industries, well known for their high economic sensitivities (Hawaii, Nevada and Florida), risky technology sectors (Massachusetts and Colorado) and aging industrial economies (Michigan and Rhode Island).
At the other end of the volatility spectrum, Nebraska had the most stable ranking. Next come South Dakota, Arkansas, Kansas, Montana and West Virginia. Let’s politely say that these are not major economic dynamos.
And California’s big economic rival, Texas, had the 17th lowest volatility.
So what is the difference between a volatile labor market and a stable market? Looking at the states, divided into three groups by volatility ranking, here’s what the spreadsheet suggests using three decades of economic data…
Jobs: The most volatile labor markets are larger, with 67% more workers on average since 1990 — 3.2 million versus 1.91 million. California ranked No. 1 with 14 million workers. Jobs are often a factor in migration patterns.
Employment growth rate: Volatility can be part of the ups and downs of business expansion. Volatile labor markets have grown, on average since 1990, at a faster rate – adding 1.11% of workers per year compared to a rate of 0.88% for the most stable markets. California’s annual growth rate of 0.93% ranks 23rd.
Unemployment: Perhaps surprisingly, unemployment was only slightly higher in the more volatile states – 5.6% versus 5.5%. California’s average rate of 7.3% since 1990 was the second highest in the nation.
Revenue: Salaries rose 11% in the unstable states — $43,287 from $39,043 a year — a financial incentive that likely spurred job growth. California’s $46,012 ranked 13th.
Increased : Earnings growth since 1990 has been slower in the more volatile labor markets—3.29% annual increases versus 3.42%. Is it because some markets are trying to catch up? California’s 3.4% revenue growth ranks 16th.
Cost of life: Unstable states are more expensive places to live – with living expenses 1.7% higher than the US norm since 2008. The cost of living in the most stable labor market states was 5.2% lower % to the national average. California was 9.2% above the norm – the fifth highest. The higher pay in unstable states is either a necessity or extra money helping to drive up costs.
At the end of the line
Volatility is not necessarily bad. It only takes a certain type of boss and worker to successfully ride the waves.
The varied twists and turns of each state’s economic roller coaster are tied to many factors. The mix of industries. Business costs – space, materials, labor and, yes, taxes and regulations. The quality of workers also matters.
Even the much desired entrepreneurship creates opportunity and unpredictability – for employers and employees. Not all the “next big things” happen.
California’s job market volatility is a combination of historically significant job creation — 4.2 million new workers since 1990, behind only Texas — as well as the nation’s second-highest unemployment rate.
Big question: is this the right risk-reward ratio for future success?
Jonathan Lansner is the business columnist for the Southern California News Group. He can be contacted at [email protected]