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Unemployment and Education

Posted By Russ Roberts On March 17, 2009 @ 1:58 pm In Work | Comments Disabled

From Edward Glaeser in the New York Times:

Despite the abundance of front-page stories with headlines like “Ivy
League financier is now unemployed and homeless,” unemployment is
remarkably concentrated among the least-educated Americans. Today, the
seasonally unadjusted numbers show that 15.1 percent of high school
dropouts are unemployed; the comparable number for college graduates is
4.2 percent [1].

Yet despite the city’s many less-well-educated workers, and even
though this recession was supposed to decimate Wall Street, New York
has, so far, gotten through it with relatively little unemployment. As
of January, the city’s unemployment rate was 6.9 percent while the
national rate was 7.6 percent. The epicenters of the current recession
are California and Michigan, where the state unemployment rates [2] are already in double digits. Nine California metropolitan areas have unemployment rates above 12 percent [3].

Glaeser gives a number of possible explanations for why New York's unemployment rate is so low. I am drawn to this one:

  • Hypothesis #3: It’s All About Building. The United States has gone from building more than two million new homes a year in 2006 to a current rate of about 531,000 homes a year [4].
    The decline in the number of new homes doesn’t mean just a reduction in
    building jobs, but also a big hit to the retail sector that supplies
    furniture and appliances for new homes.

    Unsurprisingly, therefore, unemployment today is particularly
    focused in those parts of the country that were growing spectacularly
    before the crash. Nevada’s unemployment rate is now 9.4 percent;
    Riverside-San Bernardino’s unemployment rate is 10.1 percent. As New
    York City has been growing at a slower rate than the nation for 50 years [5], New York City’s construction industry was only about 3.3 percent of total employment [6]. The 10 percent decline in construction just hasn’t hurt the city all that much.

This would also explain why the unemployment rate is so high for high school dropouts and so low for college grads. Not that many college grads are in construction. BTW, for high school grads without any college, the national unemployment rate is 9.6%.

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URLs in this post:

[1] 4.2 percent: http://www.bls.gov/news.release/empsit.t04.htm

[2] state unemployment rates: http://www.bls.gov/lau/

[3] above 12 percent: http://www.bls.gov/news.release/pdf/metro.pdf

[4] 531,000 homes a year: http://www.census.gov/const/bpsa.pdf

[5] been growing at a slower rate than the nation for 50 years: http://www.economics.harvard.edu/pub/hier/2005/HIER2073.pdf

[6] 3.3 percent of total employment: http://www.labor.state.ny.us/workforceindustrydata/nyc/nyclfsa.xls

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