The Jobless Rate Is at a Half-Century Low. Here Are the States With Even Lower Rates

The labor market improved across the U.S. last year, with every state adding jobs. However, the pace of gains varied widely.

The national unemployment rate fell to a seasonally adjusted 3.5% in December, matching the lowest reading in a half century. Some states had significantly lower rates than others. Utah had the nation’s lowest rate at 2.2% last month, according to the Labor Department. Other states’ rates were much higher, led by Nevada’s at 5.2%.

There are recent signs that the national labor market is cooling as the Federal Reserve’s rapid interest-rate increases slow overall economic growth. December saw the smallest national monthly gain in jobs in two years, and several large employers have announced layoffs. This slowdown in the labor market is a direct result of the Fed’s interest rate hikes, which are intended to slow the overall economy.

Adam Kamins, director of regional economics at Moody's Analytics, said that the slowdown has been somewhat uneven. In some places, jobs are being lost while in other places the labor market is holding up pretty strong.

The Labor Department has released data on how state job markets have fared over the past year. Here are the highlights:

At the end of 2022, over a dozen states had an unemployment rate below 3%, but none as low as Utah.

According to Mr. Kamins, Utah and many other states in the Mountain West have made a quick recovery. Utah, in particular, has been growing rapidly for some time now, adding new residents and creating new jobs in high-wage industries such as tech and finance.

North Dakota and South Dakota had similar unemployment rates in December, both coming in at 2.3%.

New Mexico's unemployment rate dropped by 2 percentage points over the course of 2022, the biggest decline of any state. In December, the state's unemployment rate reached 3.9%.

There were significant declines in unemployment in many states that had unemployment rates above 5% at the beginning of 2022, including New Jersey and Pennsylvania.

There was a wide range of job growth across the states last year, with some posting strong gains while others only saw a modest improvement.

Texas and Florida saw the largest employment increases in December, with payrolls rising 5% and 4.8% respectively from a year earlier. Nationwide employment rose 3%.

According to Mr. Kamins, cities in states like Austin and Orlando are still attractive for people who can work remotely. This is mostly because these places are more affordable than expensive coastal cities like New York City and San Francisco. Additionally, milder climates are a draw for workers who are looking to relocate.

After Russia invaded Ukraine in early 2022, oil prices surged and oil companies began drilling projects in Texas, which likely benefited the state's job market, Mr. Kamins said.

Mississippi had the smallest job growth in 2022, with an increase of just 500 jobs. This was the lowest percentage growth of any state, followed by Montana and North Dakota.

Some states ended last year with an unemployment rate well above the national average. Nevada, Illinois, and Oregon had the highest unemployment rates in the nation at the end of last year. Mr. Kamins said the uptick in Oklahoma was likely due to its population growing and some of those people not being able to find suitable jobs yet.

The unemployment rate in western states such as California, Oregon and Washington has been trending upward in recent months, after reaching lows earlier in the year. This slowdown in labor-market momentum is noticeable compared to the earlier part of the year.

According to Mr. Kamins, there are many signs that the western United States is weak economically, particularly in the housing market and in year-over-year job growth.