California 8th mostvolatile U.S. job market
California's often unpredictable job market ranks eighthmost volatile among the states. My trusty spreadsheet analyzed state-bystate employment data dating to 1990, looking at the severity of the ups and downs of job markets while focusing on a geeky volatility measure — standard deviation — applied to annual changes in unemployment rates and job counts.
California workers have had to navigate a job market filled with far above-average gyrations during the past three decades.
Just ponder the peaks and valleys.
Job growth statewide averaged 0.9% annually since 1990 — No. 23 among the states — but has run from a high 3.7% gain in the heat of the dot-com technology craze in 1998 to a pandemic-era loss of 7.1% in 2020.
And unemployment — averaging 7.3% since 1990 and second-highest in the nation — has gone from 12.5% in the Great Recession's rubble of 2010 to 4.1% in 2019, just before coronavirus iced the business climate.
But workers in seven states have seen even wilder swings, according to my math. Hawaii was No. 1 for employment volatility, followed by Nevada, then Florida, Massachusetts, Michigan, Colorado and Rhode Island.
Those states arguably have business concentrations familiar to Californians such as big tourism industries, wellknown for high economic sensitivities (Hawaii, Nevada and Florida), risky tech sectors (Massachusetts and Colorado) and aging, industrial economies (Michigan and Rhode Island).
At the other end of the volatility spectrum, Nebraska scored the most-stable ranking. Next was South Dakota, Arkansas, Kansas, Montana and West Virginia. Let's politely say these aren't major economic dynamos.
And California's economic archrival, Texas, had the 17thlowest volatility.
Details
So what's the difference between a volatile job market and a stable one? Looking at the states, sliced into three groups by volatility rankings, here's what the spreadsheet suggests using three decades of economic data …
JOBS >> The most-volatile job markets are bigger, with 67% more workers, on average since 1990 — 3.2 million versus 1.91 million. California ranked No. 1 at 14 million workers. Jobs are often a factor in migration patterns.
JOB GROWTH RATE >> Volatility may be part of the ups and downs of business expansion. The volatile job markets grew, on average since 1990, at a faster pace — adding 1.11% workers yearly versus an 0.88% rate for the most stable markets. California's 0.93% yearly growth rate ranked 23rd.
UNEMPLOYMENT >> Perhaps surprisingly, joblessness was only a tad higher in the most-volatile states — 5.6% versus 5.5%. California's 7.3% average rate since 1990 was the nation's second-highest.
INCOME >> Pay ran 11% higher in volatile states — $43,287 versus $39,043 yearly — a financial incentive that's likely boosted employment growth. California's $46,012 ranked No. 13.
RAISES >> Income growth since 1990 was slower in the most volatile job markets — 3.29% yearly increases versus 3.42%. Is that because certain markets are trying to play catch-up? California's 3.4% income growth ranked 16th.
COST OF LIVING >> Volatile states are pricier places to live — averaging 1.7% higher living expenses than the U.S. norm since 2008. The cost of living in the most stable job markets states ran 5.2% below the national average. California was 9.2% above the norm — the fifth-highest. The higher pay in the volatile states is either a necessity — or added cash helping to push costs up.
Bottom line
Volatility is not necessarily bad. It just takes a certain kind of boss and worker to successfully ride the waves.
The varied twists and turns in each state's economic roller coaster are tied to numerous factors. The mix of industries. Business costs — space, materials, labor, and yes, taxes and regulations. Quality of workers matters, too.
Even the much-desired entrepreneurism creates opportunity and unpredictability— for employers and employees. Not every “next big thing” pans out.
California's job market volatility is a combination of historically significant job creation — 4.2 million new workers since 1990, trailing only Texas — along with the nation's second-highest unemployment rates.
Grand question: Is that the right risk-reward ratio for future success?