Wednesday, March 3, 2010

Durable goods manufacturing & the unemployment rate

People often ask why Oregon has such a high unemployment rate. It’s a question for which economists in Oregon rarely have a simple answer. Why? Well, there are a lot of factors that affect Oregon’s unemployment rate.

One of the factors that economists have sometimes mentioned to explain the high rate is Oregon’s relatively high concentration of durable goods manufacturing employment compared to other states. The logic is that durable goods employment is cyclical in nature, adding lots of jobs during times of economic growth, and shedding lots of jobs during recessions.

This seems like a plausible explanation for Oregon’s historically high unemployment rate... Broadly speaking, Oregon’s recessions have been characterized by both large job losses in durable goods manufacturing and some of the highest unemployment rates in the nation. As a result, economists have hypothesized that Oregon’s concentration of durable goods manufacturing negatively impacts the unemployment rate.

In the end, however, a basic economic regression shows only a very weak correlation between states that have a high unemployment rate and a high concentration of jobs in durable good manufacturing...Indeed, there seem to be other factors that have a stronger correlation to the unemployment rate than the concentration of durable goods employment.

For the other folks out there who love graphs, here's one that shows what we're talking about:

If you want more details about Oregon's "high" unemployment rate or our "high" levels of employment in durable goods manufacturing, please see the full article. It was written by Workforce Analyst Mike Meyers.

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