Maryland has the lowest unemployment rate in American history, at just 1.6%

By Bryan Mena, CNN

Washington, DC (CNN) — Maryland’s job market has reached a historic milestone.

The mid-Atlantic state registered a record unemployment rate of 1.6% in September — less than half the national unemployment rate of 3.8% that month — Labor Department data shows.

That’s the lowest seasonally adjusted unemployment rate of any state on records going back to 1976, according to a CNN analysis. Metropolitan areas in the state are also seeing some of the lowest unemployment rates in the country, including the Baltimore metro and the California-Lexington Park area.

A massive loss of working-age people in the state in the wake of the Covid-19 pandemic, and its slow recovery since, is the key reason behind the state’s ultra-low unemployment rate.

However, Maryland’s job market is still robust, with government and health care employers adding jobs at a brisk pace.

Low unemployment, a smaller pool of available workers and more than 180,000 job openings in the state, according to government figures, means that workers in Maryland have the leverage to switch jobs and demand higher wages.

Here’s a dive into the labor market of the state with the lowest unemployment rate in American history:

Where the jobs are

The biggest industries in Maryland are government, health care, education and professional services. Fort Meade, a military base, is the largest employer in the state, according to Moody’s Analytics. The University System of Maryland and Johns Hopkins University, along with each university’s medical system, are also among the biggest employers.

Government employers have consistently added positions in the state over the past year, with the sector growing by more than 17,000 jobs in September from the same month a year earlier, according to the Labor Department. State and local governments employ vastly more Marylanders than the federal government, which still has a large presence in the state. Health care and hospitality businesses have also been adding jobs at a solid clip in recent months.

“This concentration of new jobs in Maryland are in the industries seeing the highest growth across the nation,” Christina DePasquale, an associate professor of practice at Johns Hopkins Carey Business School, told CNN.

The same industries propelling Maryland’s job market are doing the same nationally. The health care and social assistance industry accounted for nearly half of October’s job gains nationwide, followed by local government and education.

A slow labor force recovery

Maryland’s labor force participation rate, or the share of workers employed or actively seeking a job, stood at 65.2% in September, well below the 69.2% rate in March 2020 before it fell sharply.

When the Covid-19 pandemic hit in 2020, many workers left their jobs, either out of fear of contracting Covid-19, to care for children or relatives, or to retire early. Some economists argue that savings built up during the pandemic have kept some workers from reentering the workforce — though pandemic savings have started to dry up for many people, according to bank executives. The labor force does not include those who are not actively seeking a job.

A smaller supply of workers is a big reason behind Maryland’s tight job market, like in some other states. But the lack of new people entering the job market in Maryland is specifically due to a combination of people aging out of the workforce or moving out of the state, Colin Seitz, an economist at Moody’s Analytics, told CNN.

“We have some detailed data showing that out-migration from Maryland more than doubled from 2021 to 2022, so that’s definitely part of the labor force story in the state,” Seitz said.

Throughout the pandemic, states such as Florida and Texas were major draws for remote workers seeking to relocate into areas that are relatively more affordable and have warmer climates.

“There’s just not as much available labor in Maryland. The state’s employment recovery has been a little bit muted compared to the Northeast average and there are still many employers looking for people to fill a lot of vacant positions, so that slower job growth is due to this inability to fill some of these positions,” he said.

The number of job openings per unemployed job seeker is a good gauge of how tight a job market is and, by that measure, Maryland ranks second in the nation. Maryland had 183,000 job openings in August, according to the latest available data.

In September, there were 1.5 available jobs for every unemployed person seeking work nationally, according to data from the Bureau of Labor Statistics. In Maryland, there were 3.3 job openings for every job seeker in August.

Bad for employers, good for workers

With a smaller pool of available workers, employers in the state are having a tough time hiring qualified talent. That’s especially true in the state’s health care industry.

A study commissioned by the Maryland Hospital Association released last year said that “Maryland hospitals face the most critical staffing shortage in recent memory, with one in every four nurse positions vacant.”

Labor shortages for health care jobs are also a problem nationally.

It argued that the severe statewide shortage both of full-time registered and licensed practical nurses “could double or even triple by 2035” if current trends continue.

But the difficulties in hiring span several industries.

“The demand for workers is very high and a lot of our employers are looking for very skilled labor,” said Mary Kane, president and chief executive of the Maryland Chamber of Commerce. “They want folks that have a background in cybersecurity, health care, in defense industries, so that’s what’s caused the market to be so tight. It’s this highly skilled workforce that is needed.”

Since workers sitting on the sideline is a big contributing factor to the state’s tight labor market, some employers have begun to address the exorbitant costs of child care as a way to help bring back some people into the workforce, Kane said.

In a statement to CNN, the Maryland Department of Labor said the government is focused on “expanding diverse pathways to career opportunities through the growth of registered apprenticeships with a focus on skills-based hiring.”

Worker power to demand higher wages

While employers are in the doldrums, workers have the upper hand.

“In a hotter labor market, workers can get larger wage increases or find a job that is a better fit for them, which could eventually attract more migration from other parts of the country,” Daniel Zhao, lead economist at jobs site Glassdoor, told CNN.

“Every state is always trying to have a strong local economy and it’s a little bit of competition, especially for a state like Maryland where there’s this natural ebb and flow with DC and Virginia,” he said.

Maryland’s personal income grew at 1.3% in 2022, “which contributed to the state’s economic growth,” according to a Maryland Department of Labor spokesperson.

“Overall, Maryland’s strong labor market is a boon for workers,” Zhao said.

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