Why are some states doing better than others?

at 05:12 PM ET, 08/24/2011

Forget Texas. It’s time to start figuring out the North Dakota miracle. Or the Wyoming miracle. Or Nebraska. Here’s a map of state unemployment rates, circa July 2011:

So how come some states are doing so much better than others? Michael Leachman of the Center on Budget and Policy Priorities points to a new analysis from Zach Pandl of Goldman Sachs that tries to explain the economic disparities. Basically, it all boils down to three factors.

First, states that are linked to the oil and natural gas industry do particularly well in maintaining employment, among them Alaska, Texas, Wyoming and North Dakota (which boasts a 3.3 percent unemployment rate).

Second, states that had limited exposure to the housing bubble are doing better than the national average—Texas, as we’ve seen, is reaping the benefits from its tight lending laws and easy permitting. But Nevada, with its frenetic housing boom and bust, is suffering through a 12.9 percent unemployment rate, highest in the nation.

Third, states with large numbers of high-end service jobs—such as lawyers, accountants, architects and computer systems designers—are also stronger on the employment front, since those industries appear to have survived the recession. Examples include Colorado, Maryland and Virginia.

And that’s... about it. As Leachman notes, those three factors account for about three-quarters of the variation in state job performance since December 2007. Local tax rates and spending appear to have no relationship to a state’s unemployment rate, according to the analysis. Yet another reason why housing policy seems to be the most fruitful place to look for ideas about how to pull the country out of its slump.

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