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Using State-Level Data to Study Unemployment Rates

Sue K. Stockly, Associate Professor of Economics, Eastern New Mexico University
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This material was originally created for Starting Point: Teaching Economics
and is replicated here as part of the SERC Pedagogic Service.

Summary

In this activity, students obtain state-level data on monthly unemployment rates. The data can be matched to official NBER starting and ending months of recessions in order to illustrate the connection between the business cycle and unemployment rates. Students may also compare state-level unemployment rates to U.S. national-level unemployment rates.
This is one of several activities in which students use the St. Louis Federal Reserve Bank's Federal Reserve Economic Data (FRED) to collect and analyze macroeconomic data at the state level.

Learning Goals

This activity is designed to give students hands-on experience in collecting readily available macroeconomic data from FRED to track unemployment rates and the business cycle over time. Textbooks usually illustrate and give examples of unemployment rates for the U.S. economy. By collecting and analyzing unemployment rates at the state-level, students are given the opportunity to work with data they might not have seen before. In addition, since data are available for each of the 50 states, this assignment can be individualized by assigning each student, or a small group of students, a different state to study.

After completing this assignment, students will be able to
- Access monthly unemployment rates at the state level through FRED.
- Present data collected from the internet in tables and graphs.
- Write a description of the state macro economy's recent business cycle history with a focus on unemployment rates.
- Compare and contrast state-level unemployment rates with national unemployment rates over the business cycle.
- Determine whether unemployment rates are reliable lagging or leading indicators of the business cycle.
- Determine whether unemployment rates are cyclical or countercyclical indicators.

Context for Use

This activity is designed primarily for students in principles of macroeconomics courses. Since the macroeconomic data are available for all fifty states in the U.S., different states to study can be assigned individually or to small groups (2-3 students) within any class size. The activity can be used in face-to-face or online classes. Students can complete the activity as a homework assignment or during class in a computer lab. Data collection, graphical presentation of the unemployment rates, and writing a brief analysis should take approximately 45 minutes to complete. Students need to be able to use the internet, to work with data in tables and to create graphs in spreadsheets.

This activity can easily be adapted to upper-division courses in intermediate macro or regional or labor economics by expanding the complexity of the calculations required or the depth of the written analysis. Moreover, FRED offers a wealth of labor-market data that could be used in similar activities.

Description and Teaching Materials

Attached please find a Word file, "Using State-Level Data to Study Unemployment Rates" Activity Instructions. This gives step-by-step instructions for accessing state-level monthly unemployment rates from the FRED website (http://research.stlouisfed.org/fred2/) and suggestions for creating tabs for various assignments in an Excel spreadsheet.

Also attached is an Excel file, "New Mexico example spreadsheet with Unemployment Rates." This spreadsheet gives the data for New Mexico accessed from the FRED website (http://research.stlouisfed.org/fred2/) with tabs corresponding to three separate assignments including graphs and brief discussions. The spreadsheet also shows NBER dates for beginning and ending months of recessions after 1975.
Using State-Level Data to Study Unemployment Rates" Activity Instructions (Microsoft Word 2007 (.docx) 19kB Feb13 14)
New Mexico example spreadsheet with Unemployment Rates (Excel 2007 (.xlsx) 72kB Feb13 14)


Teaching Notes and Tips

Assigning States

States can be assigned to students in several ways. In smaller classes (less than 50 students), each student can be assigned a separate state to study. In larger classes, groups of two or three students can be assigned the same state and can do the assignments individually or in groups.

I often let students pick the state they want to study through an online discussion board (e.g. in Blackboard). Students must post the name of the state in the subject line and make sure that no one else has already picked the same state. I also have them pick the state and include the name of the governor, the state capital and the largest city or cities.
Accessing the Unemployment Rate Data

The state level data can be accessed through several different paths on the FRED website. Students can be given exact instructions or the data can be collected as part of a "Scavenger Hunt" in which students are told what to find and then explore the website themselves in search of the correct series.
State-level monthly unemployment rates are available in a consistent series from 1976 to the present. Monthly state-level unemployment data are updated with a two-month lag.

There is a lot of flexibility possible in assigning which years to study. The example spreadsheet illustrates the entire series. Short ranges in time can be assigned according to the specific assignment. For example, in other assignments that use state-level data, often the only years available are 1997 to the present. If students are writing a report on various aspects of the state's macro economy, they can limit the unemployment data to 1997 to present. Another assignment could highlight the past ten years or the past 20 years.

Formatting the Data

There are also many options for formatting the data in Excel. In the example file, I've presented the data in tables and graphs.

Variable Levels of Complexity

Once the data are in place, there are many ways they can be used to study unemployment rates and the business cycle. Examples of some possible assignments are given in the attached Excel file that uses data from the state of New Mexico.

In addition to unemployment rates, FRED offers access to a wide variety of state-level labor market data.

Graphical Presentation of the Data

The FRED website offers several options for modifying the graphs that are automatically generated when each series is accessed. Having students access the graphs directly from FRED to use in their own Excel spreadsheets or Word documents works quite well.

If you would also like to help students improving their graphing skills in Excel or other programs, all data can be downloaded from FRED into an Excel spreadsheet. When students create their own graphs, they can be quite creative. Some have used the state flag, or state flag colors, or images of the state as backgrounds for their graphs.

Analysis of Unemployment Rates and Business Cycle Graph

Students can look at the graph and describe how closely related changes in unemployment rates are tied to the business cycle.

When state-level unemployment rates are compared to U.S. unemployment rates, students can describe how closely the state macro economy is tied to the national economy. In this case, students can also calculate and discuss the correlation between state and national unemployment rates.

This activity lends itself quite well to analysis of state unemployment rates as indicators of recession. The state rates might be leading or lagging indicators of what's happening in the U.S. economy. State unemployment rates may be closed tied to the U.S. business cycle or counter-cyclical. Multistate comparisons are quite useful in studying the variation in levels of unemployment that occurs across counties, states and regions.

Assessment

Two types of tasks can be assessed based on the activity itself: correct collection/ presentation of the data and correct interpretation of the graphs.

Exam or quiz questions could ask students to find and analyze specific data related to an assigned state or to assigned group work. Students could be asked to explain in an essay question why unemployment rates vary from state-to-state or within different counties in the same state. Questions could also be based on individual state graphs that would explore the possible natural rate of unemployment in the state, the business cycle and cyclical unemployment and if there is any evidence of structural change in unemployment patterns across time.

When students are assigned individual state to study, online quizzes or exam questions can be individualized by asking the student to discuss the particular patterns of unemployment within the specific state.

References and Resources

Access to the internet and to Excel.

Useful links to FRED:

http://research.stlouisfed.org/fred2/
http://research.stlouisfed.org/fred2/categories
http://research.stlouisfed.org/fred2/categories/27281