Where jobs are recovering best after pandemic shocks

Moody’s Analytics director of regional economics Adam Kamins joins Yahoo Finance Live to discuss which regions of the U.S. have rebounded in terms of jobs amid the pandemic and what may impact job growth moving forward.

Video Transcript

ALEXIS CHRISTOFOROUS: Texas and Arizona have joined Utah and Idaho in recovering all the jobs they lost at the start of the COVID-19 pandemic. Will that trend continue? And which state is next? I want to bring in Adam Kamins now, Director of Regional Economics at Moody's Analytics. Adam, thanks for joining us.

So let's zero in on these four states for a minute. What are they doing right? And is this a trend you see continuing in the new year?

ADAM KAMINS: So what's really gone right for those four states is a longer story than just the aftermath of the pandemic. They are states that have been growing rapidly. They're states that have generally a large tech sector, or maybe warm weather, or some advantage that's been attracting people there for a long time. The kind of continuation of that trend and the increased prevalence of remote work-- meaning people can move anywhere they want-- is driving more and more people to those states.

So I think that's been kind of the key factor so far. And I do see this trend continuing now in the next year. It took a while to get those first four. I think the pace is going to pick up in 2022.

KARINA MITCHELL: The unemployment rate is now nationally at 3.9%. So how far behind are the other states? And which regions are closer to reaching pre-pandemic levels?

ADAM KAMINS: Sure. So the region that's been leading the way throughout the recovery is the Mountain West. A lot of states in the Mountain West are already there. And I some of the next states are going to come from there. So Montana is actually the state that's closest to being the next to get over the hump.

But in terms of a broader region, the South, and in particular the Southeast, is likely to be next. Got states like Florida, Georgia, the Carolinas that generally are ahead of the pace nationally. And I would expect by the time that we get to the middle or end of 2022, those states will be back above their pre-pandemic highs as well.

ALEXIS CHRISTOFOROUS: Well, let's talk a little bit about what's holding some states back versus others. I know that some states in the Northeast and the Midwest are still pretty far away from returning to those pre-pandemic job levels. What can you point to there? Why is that happening?

ADAM KAMINS: So it's a variety of factors. One is that the initial hit to those economies when the pandemic struck was so severe that when you're talking about a New York, you just have a much steeper and much deeper hole to climb out of than you do in a place like Arizona or Texas. Then beyond that, these are places that are losing residents, or at least not gaining them rapidly in the way that some other states are.

So consumer industries, restaurants, hotels-- those types of establishments, it's just taking a lot longer for them to ramp back up. And the last thing I would point to as well is the fact that remote work, again, has been a real game-changer. What it means in a big city like New York, or a Boston, or a DC is that there's just less activity day to day in those cities, which means less demand for consumer industries. And a lot of those low wage jobs are the ones that are taking a lot longer to catch up to the rest of the economy in that part of the country.

KARINA MITCHELL: I'm wondering how much of a headwind has Omicron been. Would the numbers have been even better if we didn't have this wave that we're going through? And then looking a little bit more forward, what about the Build Back Better plan? If that doesn't come through, do you think that's a headwind as well?

ADAM KAMINS: So, yes, I think both of those are headwinds. I think Omicron, we haven't seen it yet in the data. So all of the numbers that we've seen so far that have been officially put out by the government don't reflect Omicron yet. When we start to get the January and the February numbers, that's going to be a setback.

And in fact, January, probably we're going to see slight job losses nationally. And so that means that it's going to be a little bit of a step back, especially in parts of the country like the Northeast that are further behind. In terms of Build Back Better bill, actually, the impact of that not passing-- sort of the assumption had been that some form of it would pass-- those are going to be felt in the middle of the country probably a little bit more.

That's where health care subsidies, and universal child care, and some of the other components of the bill that might have had an economic benefit, kind of a more pronounced economic benefit, not having those is going to hurt a little bit more. But I'd say that's more of a long-term impact. I don't think it would have that much of an effect on the long-term recovery.

And same thing with Omicron. I think that's not going to have much of an effect on the kind of medium term recovery. I think we're really just talking about a month or two of a setback before things get back on track.

ALEXIS CHRISTOFOROUS: And, Adam, the latest report we got out on the job market is those weekly jobless claims, which actually rose, surprisingly, for a lot of people to 286,000. That's the highest level we've seen since October. What does that tell you about the overall job market recovery? Because it seems more and more as you delve into these reports that it's pretty uneven and it really does depend on where you live in the country.

ADAM KAMINS: Yeah. We've actually looked at that a bit. And first of all, those numbers, as you said, they're the highest in about three months. I would say Omicron's fingerprints are all over that number. We saw the same thing with Delta to a lesser extent back in the summer, where that's just dealing a little bit of a setback to what had been a pretty steady downward pace.

For the most part, what we've been seeing throughout the fall was that states that were further behind were experiencing more of a rebound. And so the decline in initial claims for unemployment insurance were actually falling a little bit more rapidly in some harder hit parts of the country. We're now seeing, again, going back to the Northeast, states like New York, New Jersey, Pennsylvania experience a more rapid increase.

And I think they are playing a disproportionate role in that increase that we're seeing now. That reflects the impacts of Omicron, and the fact that that rebound and that convergence that was starting to happen a little bit with the rest of the country has slowed meaningfully.

ALEXIS CHRISTOFOROUS: All right, Adam Kamins of Moody's Analytics, thanks for your insights today.