Local unemployment rates reveal a surprising amount about what's going on in the economy - and they're hinting at a boom in manufacturing
- UBS used estimates of how county-level unemployment has changed in the last years to illustrate broader trends in the economy.
- Unemployment trends in counties dependent on the oil industry provide an interesting view on the state of the energy market over the last several years.
- Improving unemployment rates in industrial areas suggest a possible boom in manufacturing investment in the near future.
Even in a global economy, what happens at the local level can be important.
A UBS team led by economist Seth Carpenter analyzed year-over-year changes in US county-level unemployment rates and saw that they illustrated some bigger patterns in the national and global economies. "The data cannot be used in isolation, but when combined with knowledge of the geographic distribution of economic activity in the US, the data can identify shifts in industrial activity and identify new trends," Carpenter wrote in a recent note to clients.
The report focused on how local unemployment rates changed between subsequent Februarys, based on data from the Bureau of Labor Statistics. Business Insider took a similar look at the Bureau's Local Area Unemployment Statistics estimates to illustrate how the unemployment rate has changed between February 2017 and February 2018 in each of the 3,142 US counties and county equivalents:
Most counties saw an improvement in their unemployment rates over the year, as can be seen in the large swaths of blue, indicating lower rates in February 2018 than in February 2017.
The UBS team showed how this kind of analysis can illustrate patterns in different sectors of the economy. Much of the last four years of the rise, fall, and recovery in the US oil industry appear in the unemployment estimates in the parts of the country where the oil industry is dominant, as circled in the following graphic from UBS:
The February 2016 map shows a big increase in unemployment in shale-heavy regions, reflecting the prior year of falling oil prices. By February 2018, prices had significantly recovered, and UBS observed that unemployment rates dropped across many of those regions.
Carpenter noted that this county-level data provides a strong signal about a bigger macroeconomic phenomenon: "Using the four maps in succession identifies both the timing of the economic ups and downs in the energy sector and the regions where that stress was occurring. Had we not already known about the changes in energy production, the specificity of the regions would have allowed us, in most cases, to drill down at the micro level and identify the sources of the change."
The researchers conclude by observing that falling unemployment rates in industrial areas stretching from the "rust belt" counties of the Midwest through the more recently industrialized parts of the inland Southeast suggest a possible uptick in manufacturing investment, although more information is likely to be needed to confirm that optimism.