What Are the Reasons That Some States Have Record-Low Unemployment?

Between the pandemic and the Great Resignation, the United States experienced record-high unemployment rates — until now. As of April 2022, 17 states have seen a record-low unemployment rate, with the highest amount of unemployed people residing in the District of Columbia at 5.8%.

Businesses affected by COVID have seen the biggest gains in employment, including:

• Leisure and hospitality
• Professional services
• Transportation
• Warehousing

To better understand the states’ low unemployment and what that means for economic development, we need to dig a bit deeper into labor market information.

Which states have record-low unemployment?

The state unemployment rates are lowest for Nebraska, Utah, Indiana, Minnesota, and Montana.

Looking at these top 5 states where the unemployment rate is lower than 3%, we can see some patterns.

First, all 5 states have a lower population than states like New York, New Jersey, or California, all of which have a rate higher than 4%. Second, as primarily rural communities, many had a mix of pandemic-resilient industries such as agriculture, cattle ranching, food processing, and manufacturing.

What the low jobless rate means for the economy

High inflation and a volatile stock market have created anxiety among business leaders about the current economic development trajectory. The historic low unemployment rate suggests 2 things about the economy.

First, the economy may not be as bad as it seems. There is still a demand for goods across industries with low unemployment, meaning that consumer spending can keep the economy afloat for a while longer.

Second, record low unemployment also indicates that there could be a shortage of workers. While employers scramble to retain their labor force, some industries may not be able to keep up with demand if they can’t find new workers.

Top 3 questions about the unemployment rate

Does low unemployment lead to recession?

Since extremely low unemployment is a sign of an economic imbalance, some experts believe it could lead to a recession. There are, of course, caveats to this. For example, if the bulk of employed persons are actually underemployed and need more than one job to make ends meet, this could be a warning sign of an unstable economy.

Combined with inflation, higher credit rates, market volatility, and a shrinking labor force, there are simply too many variables to predict a downturn with any certainty.

What is the difference between seasonally adjusted and not seasonally adjusted data?

There are 2 methods of calculating unemployment rates. The first is seasonally adjusted data, which takes into account the difference in seasonal hiring when calculating the rate. The 2nd method, which is not adjusted for seasonality, shows clear, cyclical data outside of seasonal industries.

With unemployment so low, where are the workers coming from?

Many workers are employed — and actively looking for new jobs! In 2021, 47 million workers quit their jobs, but that isn’t the full story.

Many previous employees are also burned out, suffering from chronic COVID, caring for others, transitioning to self-employment as contractors, or simply refusing to work for low wages.

There are also industries that require a higher level of training or skill set but can’t find the right fit. For example, according to the U.S. Chamber of Commerce, hiring managers could only fill 35% of business services job openings.

At the same time, the previous administration had cut immigration by 50%. Compounded by pandemic travel restrictions, finding top talent within the United States has become a challenge across industries.

5 tips for retaining and growing your labor force

1. Consider remote workers

One of the silver linings of the pandemic lockdown was the shift to remote work. Not only do 97% of employees not want to return to the office full-time, but work from home options can attract additional talent.

Around 5.7 million unemployed persons were not counted in the survey as they were not looking for work, and another 415,000 felt that no jobs were available for them.

Work from home options can attract additional talent.

There are many reasons workers may feel that traditional office-based employment doesn’t include them. Disability, mental illness, motherhood, and caring for loved ones all affect the ability of individuals to commit to highly structured, rigid workplaces. Offering remote work options can help attract part-time and full-time workers from these untapped talent pools.

2. Revisit benefits packages

Employers need to review their compensation packages to retain workers with the high inflation rate. The labor shortage makes it easy for an employee to move on to a new employer if wages or benefits are substandard. Balancing employee benefits for inflation and tailoring your benefits to your labor force can reduce the likelihood of turnover and boost morale.

3. Offer professional development options

Another issue coupled with the low unemployment rate is that not every worker has the skills an organization is looking for. One solution is to onboard motivated, self-starting employees and offer professional development options that help them learn necessary skills faster than ever. This approach does more than train a worker — it inspires confidence, trust, and loyalty to your organization.

4. Reassess your work environment

Company culture can affect whether or not an employee is happy in their current position. A satisfied employee will not only be more productive but is less likely to be looking for a new job. As a result, ensuring that your company culture is inclusive and healthy can improve retention rates.

5. Make work meaningful

Finally, more and more employees are looking for meaningful employment. Employees want to feel like their work is making a difference. Not every industry can leverage the desire to “change the world,” but they can listen to employees.

Accessing and acting on employee feedback can help employees feel connected and appreciated and thus make work more meaningful.

How employers can retain talent in a tight labor market

With a tight labor market, it’s tough for hiring managers and HR representatives to create competitive benefits packages, retain workers, and fill vacant positions.

To attract and retain top talent, check out these free resources and guides:

• HR Director’s Guide to Hiring & Managing Freelancers and Independent Contractors
• Evaluating the ROI of a New Employee
• Employee Retention Strategies: An HR Checklist