During the latter years of the Obama administration, as the slow and steady recovery from the Great Recession brought the unemployment rates down to more sustainable levels, critics on both the left and right started talking about the slack in the labor market as evidenced by the ongoing decline in the Labor Force Participation Rate (LFPR), which measures the percentage of people in the country who are either working or looking for work.
That number has been in a steady decline for at least the last couple of decades. But it took a significant downward turn during the Great Recession and never really recovered. Most people assumed that meant that there were still a significant number of people who had simply given up on finding a job.
Over the last couple of years, I grew interested in some of the more deeply researched ways of understanding what was happening with the LFPR. For example, Baby Boomers account for an increase in the number of people who are retired, and therefore out of the labor market, as are the growing number of young people who are going to college. There is also the connection between LFPR and the criminal justice system. People with criminal records (especially men of color) have essentially been locked out of jobs and often give up looking.
But the Wall Street Journal just reported on something that I don’t think anyone saw coming about the LFPR.
Though the labor market has grown robustly nationwide this year, progress has been uneven across blue states and red states. An increasing number of people in red states have stopped looking for work, while a larger share of people in blue states are actively in the workforce.
The participation rate, which shows the number of people who are employed or are looking for work, fell in red states to 62% in September from 62.6% in April, while notching up in blue states to 63.9% from 63.8% over the same period, according to research from the Institute of International Finance. The report categorized a state red if it voted for President Donald Trump in 2016′s presidential election and blue if it voted for Hillary Clinton.
What’s up with that? The Institute of International Finance suggests that the difference is about the kinds of jobs available in blue vs red states.
“It’s industrial composition. [Red states] are heavy in industries that are downsizing and automating where prospects just look bad,” said Robin Brooks, chief economist at IIF. “The [overall] job market is skewing toward high-value-added jobs.”
It seems obvious that the next question should be, why would high-value-added jobs be migrating to blue states? IIF ruled out demographics and differences in economic growth as contributors. Just as slack in the labor market wasn’t an adequate answer to the question of why the LFPR has been declining, suggesting that this red/blue divide is simply about the kinds of jobs available in red vs blue states is an insufficient answer. I suspect that the reasons are much more complex and would be very interesting to track down.