The Long and Large Decline in State Employment Growth Volatility

Supersedes Working Paper 07-11/R - The Long and Large Decline in State Employment Growth Volatility

Estimates from a state-level pooled cross-section/time-series model indicate that aggregate and state-level factors each account for an important share of the total explained variation in state-level volatility. Specifically, state-level factors have contributed as much as 16 percent, while aggregate factors are found to account for up to 46 percent of the variation. With regard to state-level factors, the share of state total employment in manufacturing and state banking deregulation each contributed significantly to fluctuations in volatility. Aggregate factors that are quantitatively important in accounting for volatility include monetary policy, the state of the national business cycle, and oil-price shocks.