© Copyright 2001 by the Wyoming Department of Employment, Research & Planning

Comparing Unemployment Insurance Statistics of Wyoming and Neighboring States
by:  Sherry Wen, Senior Economist

Unemployment Insurance (UI) claims data are among the most frequently consulted indicators of labor market performance. This article examines several UI statistics for Wyoming, its neighboring states and the U.S. to see if or how much Wyoming has been affected by the national economic recession.

The U.S. economy has been slowing since mid-2000. The growth in Gross Domestic Product (GDP) slowed significantly from 5.7 percent in the second quarter of 2000 to 0.3 percent in the second quarter of 2001.¹ Nonfarm employment declined by 232,000 from 132.5 million in the first quarter of 2001 to 132.3 million in the third quarter of 2001.² According to the Federal Reserve, as of September 2001 industrial production had fallen for 12 straight months, representing the longest decline since World War II.³ So, how has Wyoming fared during this national economic downturn?

UI Initial Claims

One action firms commonly take when facing economic difficulties is to lay off workers. A newly unemployed worker often responds by filing a UI initial claim⁴ in order to receive UI benefits, although not all of the claimants will be eligible for benefits. The number of UI initial claims is the only statistic, available for each state and the U.S.,⁵ that reflects how many workers have recently lost their jobs. However, this statistic does not include unemployed workers not choosing to file a claim for UI benefits or those who may have found jobs right away.

Figures 1a and 1b show UI initial claims filed by calendar quarter for the past three years (1998Q1 to 2001Q2). In general, the seasonality of UI initial claims is consistent across the states and the nation, although some quarterly changes are more significant than others. Initial claims peak in the fourth quarter reflecting the onset of winter, and drop to the lowest level in the following third quarter.

For the U.S., UI initial claims showed a slight trend-based decline between the first quarter of 1998 and the second quarter of 2000, then turned upward starting in the third quarter of 2000 and continued to increase for three more quarters. Compared with their levels in the previous year, UI initial claims increased 16.3 percent in the fourth quarter of 2000, 27 percent in the first quarter of 2001 and 40.5 percent in the second quarter of 2001 (see the Table). These figures clearly reflect the economic downturn being experienced by the U.S. economy.

In large part, Wyoming's neighboring states demonstrated a trend similar to the U.S. in their UI initial claims number. This is especially true for Colorado and Utah. Colorado experienced a 62.6 percent increase in UI initial claims in the second quarter of 2001 compared to the year before, and Utah experienced a 43.9 percent increase.

Over the same time period, Wyoming had the opposite experience of its neighbors and the U.S. UI initial claims decreased more than 10 percent in both the first and second quarters of 2001 compared to the previous year. These decreases strongly indicate that Wyoming's economy has been performing very well and, at least as of yet, has not been impacted by the national economic crisis. The relative size of industries in Wyoming, neighboring states and the U.S. economy may be the key reason for this opposite economic movement. The current economic downturn centered in the high-tech and manufacturing industries, which have lost more than one million jobs since July 2000.⁶ These industries only accounted for 0.5 percent and 4.8 percent, respectively, of the total UI covered jobs in Wyoming in the second quarter of 2000 (the quarter before the national economy started to slow down).⁷ In comparison, high-tech accounted for 3.9 percent and manufacturing accounted for 14.2 percent of the total U.S. UI covered jobs in 2000.⁸

UI Average Duration

Usually, economic growth triggers a demand for labor. Growth increases the chances for the unemployed workers to be re-employed by their former employer or find alternative employment. As a result, UI benefit recipients may receive benefits for shorter durations than they would otherwise. In contrast, a declining economy restricts the labor market and unemployed workers will more likely receive benefits longer. The UI average duration is defined as the average number of weeks that UI claimants have collected UI benefits during the year. It is calculated by dividing the total weeks compensated (with UI benefits) for the year by the annual total number of first payments.⁹ In order to allow for the normal flow of claimants through the program, the numerator lags the denominator by 26 weeks. For example, the average duration of the second quarter of 2001 is computed by dividing the total number of weeks compensated in the 12 months ending June 30, 2001 by the annual number of first payments made in the year ending December 31, 2000.

Figure 2 shows that among all of the states there was an increase in UI average duration for the 12 months ending June 2001 compared with the 12 months ending June 2000. Most of the surrounding states and the U.S. experienced about a two week increase in this statistical measure. Montana and Idaho increased by only one week. Wyoming, again, outperformed its neighbors by showing an increase of less than one half of one week. These longer UI average durations indicate, overall, the labor market ran short of labor demand. Even in Wyoming, which had no increase in layoffs and UI initial claims, it appeared to take longer for already unemployed workers to regain employment during this time period. This may be affected by an increased number of unemployed workers from surrounding states entering Wyoming’s labor market and successfully competing with the local labor force.

UI Exhaustion Rate

Similar to the average UI duration, when the economy is in decline and labor demand is contracting, more unemployed workers tend to collect Unemployment Insurance until they exhaust their entitled UI benefits. UI exhaustion rates show what proportion of UI claimants exhausted their benefits during the year. This rate is computed by dividing the average monthly exhaustions (number of claimants who exhausted benefits) by the average number of monthly first payments. Again, the denominator has a 26 week time lag. For example, the exhaustion rate for the second quarter of 2001 is computed by dividing the average monthly exhaustions for the 12 months ending June 2001 by the average monthly first payments for the 12 months ending December 2000.

Figure 3 shows that in Wyoming, 24.0 percent of UI claimants exhausted their benefits during the 12 months ending June 2001. This is the second lowest UI exhaustion rate among the surrounding states and the U.S. (31.7%). South Dakota (historically) had the lowest exhaustion rate, only 10.0 percent. Colorado had the highest with 42.0 percent of UI recipients exhausting their benefits during the same time period. Most of the states experienced a slight increase in the exhaustion rate compared to the previous year's level. The U.S. average stayed the same. This UI exhaustion rate is expected (or more likely) to change significantly in the next two quarters (Q3 and Q4) of 2001, since nationally the highest number of mass layoffs were initiated in the first two quarters of 2001. Most of the corresponding UI claimants may have not exhausted their benefits by the end of June 2001.

Conclusion

Wyoming has not shown any mass layoffs or increases in UI benefit claims through the second quarter of 2001, while the U.S. and most neighboring states have experienced large increases in UI initial claims for three consecutive quarters. This indicates that Wyoming's economy has been in very good shape and has not yet been impacted by the nation's economic downturn.

 
¹U.S. Department of Commerce, Bureau of Economic Analysis, BEA News Release, September 28, 2001,<http://www.bea.doc.gov/bea/newsrel/gdp201f.htm > (October 18, 2001).

²U.S. Department of Labor, Bureau of Labor Statistics, Archived News Releases for Employment Situations, November 5, 2001, <http://www.bls.gov/schedule/archives/empsit_nr.htm > (October 18, 2001).

³Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release, “Industrial Production and Capacity Utilization,” October 16, 2001, <http://www.federalreserve.gov/releases/G17/20011016/ > (November 26, 2001).

⁴Xiaohong (Sherry) Yu, “The Uses of Unemployment Insurance Claims Information,” Wyoming Labor Force Trends, February 1996, pp. 12-13.

⁵U.S. Department of Labor, Employment and Training Administration, ETA Unemployment Insurance, “UI Data Summary,” n.d., <http://workforcesecurity.doleta.gov/unemploy/content/data.asp> (November 16, 2001).

⁶Leigh Strope, “Unemployment Rate Soars,” Casper Star-Tribune, September 8, 2001.

⁷These numbers are calculated based on Unemployment Insurance covered employment data using the high-tech industry definition published in David Bullard's “High-Tech Industry in Wyoming: Small, but Growing Fast,” Wyoming Labor Force Trends, February 1998, pp. 1- 4.

⁸U.S. Department of Labor, Bureau of Labor Statistics, Covered Employment and Wages, n.d., <http://data.bls.gov/labjava/outside.jsp?survey=ew> (November 26, 2001).

⁹First payments represent the first week of compensation for UI initial claimants actually receiving UI benefits.

 

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