Following is a table of unemployment for the month of February taken from the Bureau of Labor Statistics. Out of the 25 states with the highest unemployment, seven states have figures higher than 10 percent, with California suffering its 2nd month of double digit unemployment. Only 5 states have a much better rate falling under 5%: Iowa, South and North Dakota, Nebraska, and Wyoming. Four of these states rely heavily on agriculture and service economy, which might help explain the lower unemployment. Wyoming, on the other hand, is more reliant on mineral production. Michigan’s 12% unemployment rate comes as no surprise given the troubles faced by the automotive sector, which up until now has seen minimal improvements.
See the table after the jump.
Three things will cause changes in these figures: further inventory reduction and cost cuts by companies, recovery of the (global) economy, and Obama’s stimulus and infrastructure projects . With companies still facing a slump in earnings, which would probably extend until the 3rd or 4th quarter, we can still expect them to perform additional cost cutting measures including reducing redundancies and inventories, which in itself typically entails job cuts in lieu of reduced operations. With this said, perhaps some 6 more months of bloody rise in unemployment might persist.
I believe, however, that as things begin to stabilize- sometime in 4th quarter of the year with more people already more willing to spend for the holidays, not only will sales begin to pick up but so will employment. If predictions of late 2009 recovery are indeed correct, then give it several more months (a quarter up to a full year) before hiring picks up again as companies begin to adjust their operations, improve their financial standing, and begin expanding again as a response to a pick up in demand.
Finally, with Obama’s promise of 2.5 million jobs to be created with his stimulus plan, there seems to be a gleam of hope for those who have been living off of welfare payments. I don’t think this requires elaboration other than the result of a potential increase in government spending in infrastructure projects. Although arguments are raised as to its effectiveness in boosting economic activity or the economy in general, it is perhaps without a doubt that job creation indeed awaits.