OLMIS

by Art Ayre, Brooke Jackson-Winegardner
Published Jul-31-2008

Introduction Oregon is Not Alone Mild Climate and Unemployment Rates Big City, Low Unemployment Rate

If you're a regular reader of Oregon Labor Trends, you already know that Oregon's unemployment rate declined from a recessionary peak of 8.5 percent in the middle of 2003 to an annual average of 5.2 percent in 2007. Despite the decline, Oregon's 2007 rate was one of the 10 highest in the country and the third-highest among the 11 western states (Table 1).

The state's relatively high rate is not a new phenomenon. Indeed, Oregon's unemployment rate has exceeded the nation's for much of the past three decades. In 25 of the 32 years from 1976 to 2007, Oregon's annual average unemployment rate exceeded the comparable national rate. In 15 of the past 32 years, it was among the top 10 state unemployment rates.

Do any other states have a track record similar to Oregon's? Yes. For example, our neighbors to the north and south both spent a similar number of years on the above-U.S. and top-10 lists (Table 2). With an even worse record, Alaska has topped both lists. Some non-western states have spent substantially more years than Oregon on the high-unemployment-rate lists. Nevertheless, Oregon's presence among these states with persistently high unemployment rates invites an inquiry into the causes of the high rate.

Past articles on this topic have mentioned some of the main sources of Oregon's seasonal, cyclical, and structural unemployment. For example, our state has a somewhat more seasonal employment pattern than is typical of the nation and neighboring states. Our concentration in cyclical durable goods industries results in lots of unemployment during recessions. Finally, we've weathered substantial structural changes in both our wood products and high technology industries.

While these factors may help explain a large part of Oregon's persistently high unemployment rate, there may be other factors as well. For example, states with relatively mild winter and summer weather tend to have somewhat higher unemployment rates than states with more severe climates. Also, compared to California and Washington, Oregon has comparatively little of its total labor force living in very large urban areas; large urban areas tend to have below-average unemployment rates in our two large neighboring states.

With the notable exception of Alaska and Hawaii, states with milder climates tend to have higher unemployment rates. The severity of climates is indicated by data on heating and cooling degree days from the National Oceanic and Atmospheric Administration (NOAA). The degree-days measure is a gauge of the amount of heating in the winter and cooling in the summer that is necessary to maintain a comfortable home temperature. The data represent the climate during the 1971-2000 period.

Graph 1 shows the relationship between the 48 contiguous states' climates and their average unemployment rates for the 1990 to 2005 period. States with mild climates such as California tended to have higher unemployment rates. States with more severe climates such as North Dakota tended to have lower unemployment rates. Obviously, some states with similar levels of degree days had very different average unemployment rates. The climate helps explain only a portion of the variation in unemployment rate from state to state.

Oregon's most populous county – Multnomah – had a labor force of about 376,000 workers in 2007. This may seem large for Oregon, but our neighbors to the north and south have much more populous counties. In Washington, King County had about 1.1 million workers. In California, Los Angeles County had 4.9 million workers. Two other California counties had about 1.5 million workers, and nine other counties had between 400,000 and 1 million workers. On average, these larger urban centers had lower unemployment rates.

Washington's King County had an annual average unemployment rate of 3.7 percent in 2007. Counties with 100,000 to 400,000 workers had an aggregate rate of 4.7 percent. Counties with fewer than 100,000 workers had an aggregate rate of 5.5 percent.

A similar inverse relationship between unemployment rates and county workforce size is seen in California. The three largest counties had a combined unemployment rate of 4.7 percent in 2007, the next nine largest had a rate of 5.4 percent, and the remainder of the state had a rate of 6.6 percent.

Indeed, this inverse relationship is seen even in Oregon. The six counties with more than 100,000 workers had a combined unemployment rate of 4.9 percent in 2007, while the remainder of the state had an unemployment rate of 5.8 percent.

Over the past 10 years, the counties in California and Washington that have workforces no larger than the largest Oregon county (Multnomah) have had unemployment rates very similar to those in Oregon (Graph 2). In fact, from 2000 through 2006, these unemployment rates were almost identical.

In 2007, the average unemployment rate for smaller counties in California diverged sharply from the average rate for Oregon and Oregon-sized counties in Washington. This is likely due to the downturn in the housing market which affected California earlier than many other states. Despite this difference in 2007, the 10-year average unemployment rates for the three areas are similar. Oregon-sized counties in California and Washington had 10-year average unemployment rates of 7.0 percent and 6.1 percent, respectively, while Oregon's long-term average rate was 6.3 percent.

While the small size of most of Oregon's counties helps explain why the state's unemployment rate tends to be higher than the statewide averages for California and Washington, it doesn't help explain why Oregon's rate tends to be higher than states with even smaller workforces, such as Idaho. More research on this topic is in order, although – as seen in Graph 1 – differences in climate may be part of the explanation.