Fitch: Employment Recovery Better for Some US States Than Others

According to Bureau of Labor and Statistics data released Friday, November marked the first time since the end of the recession more than six years ago that the majority of U.S. states had fully recovered their recessionary job losses. The recovery has varied widely across individual states, as has its impact on state budgets. Some of the states near the bottom of the growth curve will likely continue to see larger budget challenges for the near term. Some near the top are likely to see employment rates slow, making budget decisions during those declines critical, Fitch Ratings say.

Two of the states that have recovered the smallest number of jobs show the variety of impacts. Michigan (GO bonds, AA/Stable) never fully recovered from the 2001 recession and has only recovered 38% of the jobs since its April 2000 peak. However, in our view, the state has begun a slow economic recovery after a decade of declines in its largest sectors. We believe that the state will need to continue its commitment to reserve funding to maintain this stability. New Jersey (GO bonds, A/Negative) has recovered less than half of the jobs it lost during the last the recession. We believe this state's lagging economic recovery and narrow liquidity raise the risk that budgetary and pension challenges will take precedence over its long-term structural and liability issues.

Two of the states with highest employment growth are likely to see some employment slowdown, particularly if the price of oil continues its slide. North Dakota has gained more than 16 times the number of jobs it lost during the recession, while Alaska (GO bonds, AAA/Stable) has recovered more than four times. Alaska and other states have revised their revenue forecasts downward based on the oil price drop. We expect further reductions in oil revenue forecasts for the current fiscal year, and that volatility in oil prices will intensify the unpredictability in budgetary planning for these states.

The U.S. overall has recovered 119% of jobs lost since the recession. U.S. employment reached its previous peak in January 2008. The declines ended in February 2010, when the U.S. had lost 6.2% of jobs overall.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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