KEY TAKEAWAYS
  • Florida, Texas, and the Mountain West states are expected to realize the highest rates of employment growth for 2018, at or above 2.6%
  • Many states experienced annual wage growth above 3.1% during 2018; states where wages grew more slowly are mainly concentrated in the Midwest and Southeast, as well as New York and its surrounding states
  • State employment growth above the national average usually indicates employment growth across all economic sectors, not growth concentrated in specific sectors
  • Nationally and for most states, Professional and Business Services is the single most impactful sector for driving wage growth

EMPLOYMENT AND WAGE GROWTH BY STATE AND ECONOMIC SECTOR

ALL Total Private Industry
TTU Trade, Transportation, and Utilities
E&H Education and Health Services
PBS Professional and Business Services
L&H Leisure and Hospitality
MFG Manufacturing
FIN Financial Activities
CON Construction
OTH Other Services
INF Information
NRM Natural Resources and Mining

This edition of the Quarterly Economics Briefing reviews changes in wages and employment by state and economic sectorEconomic sectors are briefly described here for 2017 and 2018.

The next two sections identify key economic sectors by state – sectors accounting for a high share of state employment − and describe regional concentrations of key sectors. The following two sections compare employment and wage growth by state and sector in 2018 against 2017. Since final data for the full year 2018 are not yet available, state and national employment and wage growth for 2018 are estimates from Moody’s Analytics.

Employment Shares by State and Sector

Table 1 shows estimated shares of private employment by state and economic sector for 2018.The District of Columbia is also included States are listed from largest to smallest in terms of total employment. Nationally, more than half of private employees worked in the three largest sectors: Trade, Transportation, and Utilities; Education and Health Services; and Professional and Business Services. In addition, Leisure and Hospitality and Manufacturing each accounted for 10% or more of national employment. These national employment shares are essentially unchanged from 2017.

While all other economic sectors collectively account for only one-fifth of national employment, each is important in specific states. As examples: Natural Resources and Mining accounts for over 5% of employment in Wyoming, Alaska, and North Dakota; and Financial Activities is a large employer in Arizona and Delaware. Sector-specific shocks can have an outsize effect on employment and wages in states with particular employment concentrations in those sectors.

Key Economic Sectors by State

In Table 1, each state’s key economic sectors for 2018 are highlighted in blue. A key economic sector is either a sector for which the state’s employment share exceeds the national employment share by two percentage points, or a sector where the state’s employment share is 50% greater than the national employment share. The second criterion is especially relevant for identifying key economic sectors for which national employment is low. For example, Natural Resources and Mining has a 0.6% national employment share. This is a key sector in Texas, where the 2.4% employment share is four times the national average, but not two percentage points higher.

The maps in Figure 1 demonstrate clear regional patterns in key economic sectors. Manufacturing is important in much of the South and Midwest, Education and Health Services in the Northeast, and Natural Resources and Mining in the Southwest and Rocky Mountain states. In a few states – Illinois, Missouri, Oregon and Nebraska – no key sector stands out. These are states where employment shares by sector match countrywide averages relatively closely.

A state’s sector mix of employment does not change quickly from year to year. In 43 states, key sectors in 2018 are unchanged from 2017. The few apparent exceptions are states where key sector employment shares in 2017 and 2018 were near threshold values. In Tennessee, for example, Trade, Transportation and Utilities was a key sector in 2017; but not in 2018. In fact, Tennessee’s employment share is projected to decline slightly in 2018, coming in at 1.97 percentage points above the national share − just below our threshold of two percentage points. But the underlying year-on-year change is actually minor, and Tennessee is bordered on three sides by states that count Trade, Transportation and Utilities as a key sector.

A closer inspection of the maps in Figure 1 highlights relationships between key sectors within a state. Eight out of 10 states for which Trade, Transportation, and Utilities is a key sector also have either Natural Resources and Mining or Manufacturing as a key sector. Two of four states where Construction is a key sector also have employment concentrations in Natural Resources and Mining.

Employment by State and Sector

Figures 2 and 3 show employment growth rates by state for 2017 and 2018, respectively. Green and red shading indicate employment growth and decline, while darker shades indicate bigger year-over-year changes. For most states, employment is projected to grow slightly faster in 2018 than in 2017. A similar comparison applies countrywide. National employment is projected to grow 1.9% in 2018, slightly higher than the 1.8% growth rate in 2017. Numerical state and national employment growth forecasts for 2018 are presented in Table 2.

Moody’s projects fastest 2018 employment growth for Florida, Texas, and the Mountain West states; most of these states topped the employment growth ranking in 2017 as well. A notable exception is Wyoming, where employment fell in 2017 due to declines in Construction and Trade and Transportation and Utilities. Both sectors rebounded during 2018, benefiting from the 7.7% employment expansion in Natural Resources and Mining, a key sector in Wyoming.

Referring to first row of Table 2, 2018 national employment growth is expected to be fastest in Natural Resources and Mining, Construction, and Professional and Business Services. Employment growth in Trade, Transportation and Utilities is expected to lag the national average. Information is the only sector projected to lose employment. Other sectors are within half a percentage point of the 1.9% projected average national rate of employment growth for 2018.

ALL Total Private Industry TTU Trade, Transportation, and Utilities E&H Education and Health Services PBS Professional and Business Services L&H Leisure and Hospitality MFG Manufacturing FIN Financial Activities CON Construction OTH Other Services INF Information NRM Natural Resources and Mining

Cumulatively over the two years 2017 and 2018, employment has grown fastest in Natural Resources and Mining and Manufacturing, least in Leisure and Hospitality, while Information has lost jobs.

Interstate variations in overall employment growth are typically fairly similar across the board for all economic sectors. Consider the nine dark-green states from Figure 2 having the highest projected employment growth rates for 2018. (These are the states Utah – Wyoming appearing above the first dashed line in Table 2.) In those states, almost every sector experienced employment growth greater than the countrywide median growth rate for that sector. In the three progressively lighter-shaded groups, the proportions of sectors with above-median growth are 60%, 43%, and 19%, respectively. Alaska, the only state where employment declined, is counted among the lightest-green states.

States rarely have large deviations, either up or down, from national employment growth rates in the economic sectors that are big employers nationally. In Table 2, most of the dark shading applies to sectors where national employment shares are small, such as Construction, Information, and Natural Resources and Mining. A notable exception is Manufacturing in Nevada, where employment growth is projected at 13% for 2018. But Manufacturing has a small footprint in Nevada, being only 4% of state employment compared with 9% nationally; and an influx of workers from a single source – the Tesla Gigafactory – has a big impact when measured in percent.

Wages by State and Sector

Figures 4 and 5 show growth in average weekly wages by state for 2018 and 2017, respectively. Numerical state and national wage growth forecasts for 2018 are in Table 3. Nationally, wages are projected to grow 3.5% in 2018, up from 3.1% in 2017. Wages are projected to increase in all states, and 31 out of the 50 states are expected to experience faster wage growth in 2018 than in 2017.

As with employment, wage growth shows some geographic variation. Regions where 2018 projected wage growth is above 3.1% (the two darkest green shadings) include the West and Southwest, several Great Lakes states, as well as states from the central Atlantic region and New England. For Midwestern and Southern states, with the exceptions of Alabama and Florida, wage growth for 2018 is projected to be below the national average.

In addition to state average wage growth, Table 3 also shows projected 2018 wage growth for individual sectors. Nationally, the fastest wage growth is forecasted for Information, Construction and Professional and Business Services. Natural Resources and Mining, Financial Activities, and Education and Health Services are forecasted to grow wages least.

Nationally, as well as for most states, Professional and Business Services is the most impactful sector in driving wage growth. This observation is not too surprising since Professional and Business Services has the largest share of employment nationally, and likewise in many states.

What is more surprising is the magnitude of interstate variation in projected wage growth for Professional and Business Services relative to the national average for the sector. In almost half of states – 23 out of 50 – projected wage growth for Professional and Business Services during 2018 deviates by two percentage points or more from the national sector average of 4.1% − either 2.1% and lower, or 6.1% and above.

For both reasons – the large employment share of Professional and Business Services in most states and substantial interstate variation in wage growth for this sector – state wage growth in Professional and Business Services correlates well with state wage growth overall. This is evident from inspection of Table 3, where state rankings with respect to overall wage growth (read down the column for states, ranked highest to lowest) tend to correspond to state rankings with respect to wage growth in Professional and Business Services (read down the column for this sector, noting that darker green shadings progress quite smoothly to lighter green and red shadings). ALL Total Private Industry TTU Trade, Transportation, and Utilities E&H Education and Health Services PBS Professional and Business Services L&H Leisure and Hospitality MFG Manufacturing FIN Financial Activities CON Construction OTH Other Services INF Information NRM Natural Resources and Mining