How States Compare on a Critical Jobs Measure

Economists say the employment-to-population ratio for prime-working-age adults can be more reliable than the unemployment rate.
by | March 7, 2017
Utility workers tend to be older than those in other major sectors. (Shutterstock)

One of the most telling measures of a state’s economy is the employment-to-population ratio for those in their prime-working years.

The U.S. Department of Labor reports that an average of 77.9 percent of Americans between the ages of 25 and 54 were employed in 2016. That’s an improvement from a few years ago. But federal data released last week suggests several states, particularly in the South, are lagging behind.

Economists consider the prime-working age employment-to-population ratio a fairly reliable economic indicator that doesn’t suffer from the same obvious shortcomings of more commonly cited measures. The unemployment rate, for instance, doesn’t factor in those who’ve given up their search for work. Meanwhile, retiring baby boomers and increasing college enrollment somewhat skew the total employment-to-population ratio for all individuals.

Nationally, the share of prime working-age adults who were employed fell 4.9 percentage points from the start of the recession to late 2010, when it bottomed out. It has since inched back up, but slowly. The Labor Department’s latest estimate of 78.2 percent for January suggests the economy has recovered about two-thirds from pre-recession levels.

The highest ratios of any state last year were in Wisconsin (85.7 percent) and Nebraska (85.5 percent). Not too far behind were Iowa, Minnesota and a few other mostly Midwestern states. 

West Virginia, on the other hand, posted the lowest ratio of any state: Just under 70 percent of its prime-age workers were employed. Similarly, only about 72 percent of Alabama, Mississippi and New Mexico workers held jobs last year.

While the strength of these states’ economies greatly influences the numbers, other factors are at play too.

In some states, for cultural or other reasons, people tend to work a little later into their careers than in other places. Wisconsin workers aren’t apt to retire early, for instance, as its older residents remain employed at notably high rates.

Employment-to-population ratios also depend to a degree on a state’s major industries. Workers in the agriculture, transportation and utility industries are, on average, older than those in other major sectors.

Differences in demographics, education and income levels could further explain some of the variation across states.

While the numbers of employed prime working-age adults provide a good picture of a state’s job market and generally mirror unemployment rates, a few states serve as exceptions. Hawaii and Utah have some of the lowest unemployment rates, but their employment-to-population ratios hover around national averages.

Considering data for only men, who are employed at greater rates, tells a somewhat different story in a few states as well. This is particularly apparent in Utah, where an estimated 90.2 percent of prime-working age men were employed last year, the second highest rate nationally. The state’s total prime-working age ratio, by comparison, nearly matches the national average.

The reversal is true in Vermont, where women hold jobs more frequently than in other places. The state’s overall prime-working age ratio ranked among the best of any state, while its estimate for men only mirrored national averages.

NOTE: Figures represent estimates for the civilian population ages 25-54.

SOURCE: U.S. Bureau of Labor Statistics 2016 annual averages

Compared to 2015, most states experienced improvements last year. Arizona, Arkansas, Kentucky and Nebraska all saw their average prime-working age employment-to-population ratios climb more than two percentage points.

Generally speaking, though, states aren’t going to experience large fluctuations in just one year -- the majority of states registered smaller gains in 2016. Iowa and South Dakota experienced the largest declines in their ratios last year, but that’s largely because they were already relatively high to begin with.

A few states stand out, though, as poor performers. Shares of prime-age workers employed in Alabama and Oklahoma dipped last year to among the lowest rates of any state. Both states similarly maintain relatively high unemployment rates for the demographic.

NOTE: Figures represent estimates for the civilian population ages 25-54.

SOURCE: U.S. Bureau of Labor Statistics 2015 and 2016 annual averages