Stateline Story

Rising Unemployment Vexes States

  • May 07, 2002
  • By Greg McDonald

On a recent trip to Mexico, North Carolina Sen. Ellie Kinnaird had to laugh when one of the country's textile kings complained bitterly about losing business to China.

"Of course, I didn't say a word. But it was kind of funny because we've lost a lot of textile jobs to Mexico. And here he was complaining about the competition from China." Kinnaird told Stateline.org.

Kinnaird, who chairs the state Senate's committee on children and human resources, said the Mexican's comment shows the impact of China's aggressive trade policies on the U.S. and global market.

Years ago, knick-knacks and sneakers drove the Chinese assault on the world economy. Now it's cheap clothing and much to the horror of North Carolinians furniture.

"The Chinese are making good quality furniture at cheaper prices," says Kinnaird, offering one reason why her state now shares the nation's third worst unemployment rate (6.6 percent) with Mississippi.

"The reason we've been hit so hard is loss of manufacturing...Textiles have been going overseas for years and now our 100-year-old furniture manufacturing industry is being hurt by competition from China," she says.

Last year, North Carolina lost about 92,000 jobs in all sectors of the economy. Approximately 9,000 of those were in the furniture industry. Kinnaird and other state lawmakers fear this year's losses will be worse.

Rising unemployment is hurting other states as well. The national jobless rate was six percent in April, the worst since 1994. More than 8.6 million people were out of work, an increase of 3.1 million since October, 2000.

Labor analysts predict the figure is likely to creep up in May, despite continued growth in the services industry. Most of the job losses nationwide are concentrated in the manufacturing and construction industries, according to the U.S. Labor Department.

Although the latest state-by-state figures for April won't be released until mid-May, 17 states and the District of Columbia had jobless rates in March that were above the national average. Oregon, at 7.9 percent, had the highest jobless rate in the nation, while North Dakota, at 3.1 percent, had the lowest.

Oregon lost 30,000 jobs last year across all sectors of the economy. Most were concentrated in manufacturing.

"This is certainly a more substantial downturn than we felt in the early 90s," Oregon employment economist Art Ayre told Stateline.org.

Ayre said the transportation equipment industry has been hit particularly hard, but the Portland area has also lost microchip and computer printer jobs to competition from Southeast Asia.

Making things worse, he said, is a downturn in the state's trade relationship with Japan and other Asian countries. A slowdown in the construction industry and the idling of some of the states aluminum mills due to increased electricity prices and other factors has also resulted in thousands of Oregon lay-offs.

Washington state, meanwhile, reported the nation's second-highest unemployment rate (6.8 percent) in March. Many of the job losses there have stemmed from lay-offs in the airline industry since the September 11 terrorist attacks.

North Dakota, the state with the lowest jobless rate, has been relatively unaffected by the recession so far. State labor economist Warren Boyd says a reasonably stable agriculture-based economy and a small workforce have helped the state escape problems confronting many other parts of the nation.

"Our industrial mix is quite different than most other states. We don't have a lot of dotcoms. We just have bread and butter operations," Boyd said. "And we have a total population of only about 642,000. So you need that base population just to run things."

Although unemployment remains a worrisome problem for most state governments, it has not yet reached the epidemic proportions of the 1980s when 28 states had consistently high monthly jobless rates of 10 percent or more.

West Virginia, Michigan and Alabama logged some of the highest numbers in those years, averaging 15-to-nearly 20 percent in 1982 and 1983. Unemployment in all three states is running about 6 percent now. But states are being hammered by budget deficits this year that make the unemployment situation worse than it would otherwise be.

At least 12 states have been forced in recent weeks to provide extended benefits for workers still without jobs. But revenue shortfalls have made it more difficult for states to fund retraining or business development programs aimed at creating new jobs.

"This is the second year in a row that we've had a billion dollar or more deficit in North Carolina. We're just trying to keep our heads above water without trying to do anything else in terms of long-range economic development planning," says Sen. Kinnaird, who describes her state as "floundering" in the current economic recession.

That might be an apt description for other states as well.

Though not as well known for furniture-making as North Carolina, Mississippi has also been hit hard by furniture-related job losses to Mexico and China. The state's few remaining textile operations, its food industry, and even bicycle plants, have also suffered.

"We're losing lots of plants...It's all about cheap labor," says Kathy Jones, a labor analyst for the Mississippi Employment Security Commission.

The U.S. Labor Department ranks Mississippi and North Carolina as states with the third worst jobless rate in the nation. But Jones says Mississippi's 6.6 percent figure is really 6.9 percent because the state does not adjust as the labor department does - for seasonal workforces.

"We've got some counties that are really in bad shape," says Jones. The hardest hit areas, she says, are in the heavily rural, predominantly black delta region where most counties have double-digit rates ranging from 13 to nearly 22 percent.

In South Carolina, where unemployment is six percent, the economic slowdown has also had a huge impact on rural black communities. State officials say blacks are now receiving nearly 55 percent of unemployment benefit payments, a situation directly tied to the loss of manufacturing jobs in poorer areas.

Even states with relatively low unemployment are finding it increasingly difficult to keep jobs in rural areas. In Iowa, where unemployment was 3.4 percent in March, rural jobs are dying off fast with little hope of rejuvenation as limited manufacturing plants are driven out of business or forced to relocate to cut costs.

The state lost more than 10,000 jobs last year. That may not seem like a lot at first glance, but it was the state's largest annual job decline in nearly 16 years.