States See Growth in Jobs

Upturn Slowly Spreads to Service-Heavy Coasts From Industrial South, Midwest

By Conor Dougherty

The sluggish U.S. jobs recovery is inching beyond the industrial South and Midwest, and is spreading toward the service-heavy economies of the two coasts, in a sign of hope for a labor force hit by the worst recession in generations.

New Labor Department data, released Friday, showed that the decline in unemployment was widespread: The jobless rate fell last month from April in 37 states, plus the District of Columbia.

"The recovery has spread out," said Steven Cochrane, an economist at Moody's Analytics.

The U.S. has added nearly a million jobs since the trough of the recession in December 2009, including some temporary Census Bureau jobs that will soon disappear. The gains have been uneven. States with big manufacturing and natural-resource sectors like Texas and Indiana have enjoyed steady growth, while states like Nevada, where the housing bust was especially dire, have lagged badly.

Indeed, Nevada had the nation's highest jobless rate last month at 14%, the first time since April 2006 that a state other than Michigan has held that distinction.

To be sure, much of May's increase in jobs resulted from the surge in hiring for the 2010 census. And recovery continues to be elusive in some parts of the country. Unemployment in the West was 10.9%, compared with 9.7% nationally, and total employment fell in May in three Western states.

California, the nation's largest state, has resumed adding jobs but continues to see slow growth: The giant economy has added only 95,900 jobs since December, a 0.7% gain.

The nation still faces a long slog back to pre-recession employment levels. Only 12 states and the District of Columbia had more jobs in May than they did a year ago.

But there were also signs that the job recovery was spreading beyond its roots in manufacturing to sectors including shipping and trade, which benefit more parts of the country. One bit of evidence that the job market, though still weak, has bottomed out: No state showed a statistically significant decrease in employment over the month.

Indiana has seen the largest percentage increase in jobs through the year, rising 1.9% on a surge in manufacturing jobs. Illinois, Pennsylvania and Minnesota—all big in manufacturing—were among the top 20 states in terms of job gains, each with job increases of 1.2% or greater.

Yeager Machine, a precision manufacturing firm that makes parts that go into everything from industrial pumps to machines that warm blood during surgery, has doubled its head count to 16 in the past year. The company, based in Norwood Young America, Minn., this week added a night shift and has plans to hire at least four more people in the months ahead, said owner Michael Yeager.

"It's been an across-the-board increase, which makes me feel better than if it was one customer ordering everything," said Mr. Yeager.

The pickup in manufacturing, which was quickly followed by growth in shipping industries and trade, has also led to stronger job growth in the South. Texas added 43,600 jobs last month, more than any state. South Carolina and Tennessee both saw a 0.6% gain in employment last month, among the highest in the nation.

As the recovery gains steam, it is starting to spread to the service sector, which accounts for 70% of the nation's jobs and is broadly distributed through the states. Kentucky continued to shed jobs through the early part of this year, but companies have recently resumed hiring, with the state adding jobs each of the past three months.

Tom Butler, partner at a Louisville, Ky., consulting firm, is now looking to make his small firm bigger. Later this summer, his three-person company will move into a bigger office, with plans to hire a new consultant shortly after.

Mr. Butler said his confidence has been bolstered now that many of his clients have resumed signing monthly retainer fees that bring steady income, versus the project-by-project work they sought during the recession. "People were OK with signing up and saying, 'We're going to continue to work with you,' " he said.

At the same time, the free-fall in construction jobs has slowed, paving the way for job growth even in states hit hard by the housing bust, such as Arizona and Florida, both of which have returned to slow private-sector employment growth.

A surge in federal stimulus spending and employment has been a boon to mid-Atlantic states, with the District of Columbia, Maryland and Virginia all seeing big job gains. Each was among the top dozen states for job growth.

Improvements in the nation's huge service sector helped add jobs in coastal states with large cities, where the sector tends to be bigger. Massachusetts and Washington state saw jobs grow 1.4% and 1.3%, respectively.