Population Density a Factor in State-by-State Unemployment

http://finance.yahoo.com/blogs/daniel-gross/north-dakota-spurred-energy-ag-boom-3-2-122815061.html

The above-linked article reports that the lowest unemployment in the nation is found in the state of North Dakota.  The article cites a number of factors but, of course, makes no linkage to population density.  With a population density of only nine people per square mile, North Dakota is the fourth most sparsely populated state in the nation, beaten only by Montana (6 people/square mile), Wyoming (5 people per square mile) and Alaska (1 person per square mile).  A coincidence?  I think not.

However, if I were to simply make a linkage between North Dakota’s low population density and their low unemployment rate, one could easily refute my argument by pointing to other states with low population density and high rates of unemployment.  Nevada, for example, with a population density of only 22 people per square mile has an unemployment rate of more than 12%, the highest in the nation.

The only way to settle the argument is to do a scatter chart of the unemployment rate for all 50 states and see whether a pattern emerges.  This is something I’ve not done before, since a cursory examination of the data shows a lot of scatter, and since free trade between the 50 states tends to level out unemployment across the nation, exporting jobs from low density states to high density states and exporting unemployment in the other direction, exactly in the same way that it works between nations on a global scale.

But this single data point for North Dakota compelled me to finally compile the data and see whether any relationship is evident at all, or if the data produces a shotgun scatter with zero correlation.  The following is the result:

Unemployment vs Pop Density

In spite of the unemployment-leveling effects of free trade between the states, a relationship does indeed emerge.  Yes, there’s a lot of scatter, but the relationship becomes evident when the trend line (that line that begins near zero and slowly rises along the bottom of the graph) is inserted and the “coefficient of determination” is calculated.  If no relationship existed, the trend line would be flat and the coefficient of determination would be zero.  A perfect relationship would have all of the data points fall in line (either a straight line or a curved line) and the coefficient of determination would be “1”.

In this case, there is a definite upward trend which follows a “power” equation, and the coefficient of determination is .14 – weak, but a definite correlation.  Getting back to Nevada, the state one would use to refute my argument, it must be remembered that within my theory that relates population density to per capita consumption (and thus to unemployment), what’s important is not actual population density but “effective” population density; that is, the population divided not by the total area but by the inhabitable area.  And a major fraction of Nevada is indeed uninhabitable, thanks to vast deserts and moutainous regions.  The “effective” population density of Nevada is actually quite high.  If just that one data point out of 50 is removed from the data set, the coefficient of determination rises to .18.

Looking at the data another way, let’s divide the states evenly around the median population density of 95 people per square mile.  Among the more densely populated 25 states, only 8 have unemployment rates of less than 8%.  Among the less densley populated 25 states, there are 15 such states.  Only one state in the more densley populated half of states has an unemployment rate of less than 6% – New Hampshire.  There are five such states in the less densely populated half of states – North Dakota, South Dakota, Nebraska, Oklahoma and Vermont.

The moral of this story?  If you’re unemployed, think about moving to one of these less densely populated states.  (Of course, if everyone did that, those states would soon no longer be sparsely populated, nor would they have low rates of unemployment.)  Secondly, contrary to what most people would say, a growing population in your state is not good for its economy.  Get involved in promoting legislation that discourages illegal immigration and encourage your federal legislators to oppose high rates of immigration in general – both legal and illegal.  Finally, consider what happens when less densely populated nations like the U.S. trade freely with those far more populated.  If you do, you’ll also want to encourage your legislators to demand changes to U.S. trade policy.

If you like unemployment, then just keep quiet about trade and immigration policy.  It’ll get worse.  If you don’t like it, then find out what really lies at the core of the problem and start demanding changes.

6 Responses to Population Density a Factor in State-by-State Unemployment

1. james says:

If a high population density is so terrible why does all our culture, ideas and power have it routes in cities and more so the worlds great mega cities. Could it not be that North Dakotas unemployment levels are low because young North Dakotan s leave in search of work in the big cities.

You also fail to mention the huge amount of government money areas like Alaska require just to function, kept afloat by the taxes of the people of New York, Boston, LA etc (no bad thing the urbanista can always come and visit).

This book should give you a better understanding of how society works. But be warned the more you know about society the more you will come to realize you cannot possibly fully understand it.

http://urban-age.net/publications/theEndlessCity/

• Pete Murphy says:

Indeed, as the world grows more densely populated, it becomes more urban. It’s impossible for it not to become more urban. Urban and rural areas are both required for a viable economy. Each is dependent on the other. That’s why, if you read my book, you’ll learn that my theory isn’t applicable to tiny city states like Singapore, Luxembourg and others. But the fact remains that, as the world has grown more densely populated, unemployment is on the rise everywhere. If you look beyond the central business and financial districts, most of the world’s “great mega cities” are plagued with slums, high unemployment and poverty.

“… areas like Alaska … kept afloat by the taxes of the people of New York, Boston, LA, etc.” You can’t be serious! Seems to me it’s the other way around. Your mega-cities are kept afloat by the natural resources harvested from places like Alaska and North Dakota. Imagine if the tax money stopped flowing from urban to rural areas and, in return, natural resources stopped flowing from those areas to the city. I wonder which people would cry uncle first?

I’m reminded of the claim by those who extrapolate from typical urban population densities that the entire world’s population could be fit into an area the size of Texas. Sounds great until dinner time arrives and all 7 billion simultaneously say “I’m hungry.” Oops. I guess we forgot to leave someone out in the hinterland to work the farms. Then the farmer says, “My tractor is out of gas.” Oops. I guess maybe we need to spread some people across the globe to drill for oil and to run refineries. Before you know it, Texas has been evacuated and people are spread all over the world again just trying to put food on the table.

I strongly encourage you to spend some time pondering the relationship between per capita consumption and per capita employment and how per capita consumption can be sustained when people are forced into ever-more-cramped living conditions.

I’ll skip the “Endless City.” Sounds depressing.

2. jreighley says:

North Dakota also has massive population growth, Which certainly would lend itself to a thriving growth rate — Lots of people where there used to be no people is going to demand a lot of things be built and stuff be bought– It also makes sense that money would retreat from the densly populated areas to the less densly populated areas — I think an Analysis of the change in population might give you a stronger correlation than density alone.

• Pete Murphy says:

Shifts in population from those regions that have breached an optimum population density to those that are still sparsely populated (like North Dakota) are, I think, a natural consequence of my theory. It could indeed open up a whole new area of exploration for the field of economics, as you’ve suggested. Sadly, the field of economics remains intentionally oblivious to the subject of population growth.

3. Jacob says:

Hey, I made an equally stupid Excel that shows an even stronger link between state-by-state population density and per-capita income! Grabbed data for each from Wikipedia, and guess what, there’s a positive relationship between the two variables.

Go read some Jane Jacobs. You would enjoy her, particularly The Economy of Cities.

• Pete Murphy says:

Jacob, I suspect that the “per capita income” you used is a simple calculation of total income divided by the population. A better measure would be median income, which factors out the skewing effect of any given area (or state) being home to a larger-than-average proportion of extremely high wage-earners. As an example, if Donald Trump is included in a population of poor people, the “per capita income” will still be quite high, in spite of the fact that the vast majority are quite poor.

In addition, the cost of living has to be taken into consideration. Income is only relevant compared to the cost of living. Someone in New York City who makes twice as much money as someone in North Dakota is probably poorer when the cost of living is factored in.

The subject of this post was the state-by-state relationship between population density and unemployment, not income.