States’ Prime-Age Employment Rates Are Still Recovering

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States’ Prime-Age Employment Rates Are Still Recovering
The Pew Charitable Trusts

Editor’s note: This article is a biannual update to the employment-to-population ratio indicator for Pew's Fiscal 50 project.

A greater share of prime-working age Americans were employed in 2021 than a year earlier as the economy continued to recover from dramatic losses early in the COVID-19 pandemic. But employment rates for 25-to-54-year-olds still lagged pre-pandemic levels in all but two states as many Americans held off seeking employment. Nevada was the furthest behind 2019 levels as its tourism industry continued to struggle.

An average of 77.6% of Americans ages 25-54 were employed throughout 2021, a year marked by a continuing recovery from historic job losses as many businesses struggled to hire workers. The rate was down from 80% before the pandemic, meaning that for every 100 people of prime working age, about two fewer were employed on average in 2021 than in 2019. For state governments, lower employment among residents can potentially suppress tax revenue and raise demand for social services.

This key economic indicator—which, unlike the often-cited unemployment rate, captures individuals who are choosing not to pursue employment along with job seekers—changed little last year in some states, while in others it approached pre-pandemic levels. Nevada’s average rate of 73.2% was down 8 percentage points from 2019, the most of any state. Its economy had not nearly recovered from the severe blow the pandemic dealt to its leisure and hospitality industry. Maryland (-4.8 percentage points) and Connecticut (-4.5 percentage points) were the next-furthest behind pre-pandemic averages as both states experienced little change overall last year from 2020. Two other states that rebounded much more quickly, Georgia and Montana, actually posted ratios slightly above pre-pandemic averages last year, although differences were not considered statistically significant, or clearly above 2019 levels.

Multiple lingering pressures held back employment levels in 2021. For example, many businesses encountered challenges in filling positions as the national job openings rate reached record highs. The share of Americans in their prime working years who were neither employed nor actively looking for work was slightly higher than before the pandemic, in part because many opted to take care of their families or not return to work for health or other considerations.

The national prime-age employment-to-population ratio has continued to climb more recently, up to 79.5% as of February 2022, according to the latest monthly seasonally adjusted estimates published by the U.S. Bureau of Labor Statistics. That’s just below where it was before the pandemic. Not long after the initial wave of business closures, the share of adults of prime working age with a job plummeted to the lowest national levels in decades—even more severe than what states experienced during the Great Recession. This drop came just after the national prime-age employment-to-population ratio had finally surpassed its pre-Great Recession level in 2019, although rates in 24 states still had not fully recovered.

Several factors influence employment-to-population ratios. For the most part, rates initially held up better in states with economies less tied to tourism and other industries devastated by the pandemic. But ratios are influenced not only by job losses, but also by population and demographic shifts. The ratio decreases when the number of 25-to 54-year-old workers in a state either declines faster or increases slower than the population for the same age group. Thirteen states posted lower 2021 employment-to-population ratios compared with 2019 even though they actually recorded slight job increases. That’s because growth in their total prime-age population outpaced gains in employment among people in that age bracket. Other issues largely beyond policymakers’ immediate control further affect employment-to-population ratios. Some of the more critical factors include national and global economic conditions, business cycles for a state’s major industries, and investments made over decades.

State highlights

A state-by-state comparison of average employment-to-population ratios for 25-to-54-year-olds between pre-pandemic 2019 levels and 2021 shows:

  • Prime-age employment rates for 2021 were still below 2019 levels in all but two states, Georgia and Montana, though differences were not considered statistically significant in a majority of states.
  • After Nevada (-7.9 percentage points), Maryland (-4.8 percentage points), and Connecticut (-4.5 percentage points), states furthest behind from their 2019 levels included New Jersey (-4.2 percentage points), California (-3.7 percentage points), and Maine (-3.6 percentage points). Changes were statistically significant.
  • On the opposite end of the spectrum, Georgia and Montana slightly exceeded their pre-pandemic levels, while seven other states registered reductions of less than 1 percentage point. None of these changes were considered statistically significant, meaning that the change could have resulted from sampling or other error.
  • In 2021, adults of prime working age were employed at the highest rates in North Dakota (85.7%) and Nebraska (85.1%)—two states that historically have reported higher ratios.
  • Adults of prime working age were employed at the lowest rates on average in 2021 in Mississippi (72.1%), New Mexico (72.4%), and Nevada (73.2%).

Download the data.

Data presented here is not intended to provide an overall assessment of states’ economies, as other economic measures should be considered.

Workers experienced disparate impacts

Mirroring the uneven economic recovery across states, some segments of the workforce have weathered the repercussions of the pandemic far better than others. Nationally, average 2021 prime-age employment rates were further below pre-pandemic levels for Black (-3.6 percentage points) and Hispanic Americans (-3.3 percentage points) than for Whites of any ethnicity (-2.2 percentage points.) Younger workers ages 20 to 24, who experienced sharp job losses early in the pandemic, also experienced somewhat larger reductions than other age groups from 2019 levels. And the employment rate for adults at least 25 years old with a high school diploma but no additional education remained much further behind 2019 levels (-3.9 percentage points) than for those holding at least a bachelor’s degree (-2.2 percentage points).

How employment affects state ledgers

Economic conditions, including employment, are major drivers of state finances. Changes in employment rates among adults in their prime working years can affect both sides of a state’s budget ledger.

  • Revenue: Paychecks help generate individual income tax dollars and fuel consumer spending, which produces tax revenue from sales and business income.
  • Expenditures: People without jobs frequently need more services such as Medicaid health care coverage and other safety-net assistance, which can increase states’ costs.

What is the employment-to-population ratio?

Although unemployment figures receive substantial media attention, many economists also track the employment-to-population ratio because it provides a broader view of labor market conditions. The unemployment rate, for example, excludes people who are not looking for jobs, but the employment rate captures this group in its measurement of population.

Focusing on 25- to 54-year-olds reduces the distortion of employment trends resulting from demographic effects such as older and younger workers’ choices regarding retirement or full-time education.

Another gauge of employment trends is the labor force participation rate. While the employment-to-population ratio tracks the percentage of the population that has jobs, the labor force participation rate measures the percentage that is working or actively looking for work.

A statistically significant decrease or increase indicates a higher level of confidence that there was a true change in the employment rate. Changes that are not statistically significant offer less certainty and could be the result of variations in sampling or other methods used to produce employment estimates. Without additional testing for statistical significance, caution should be exercised when comparing changes in employment rates among states.

Download the data to see individual state trends. Visit Pew’s interactive resource Fiscal 50: State Trends and Analysis to sort and analyze data for other indicators of state fiscal health. 

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