The Myth of the Geographical Recession

Probably the central misperception about the Great Recession is the idea that it basically consists of wide-spread job losses among construction workers spurred by massive overbuilding. This misperception, combined with the fact that the unemployment rate is very low in a handful of states with barely any residents, has led a lot of people to vastly overrate the geographical basis of the recession. Since really out-of-control homebuilding was confined to a few places—Las Vegas, Phoenix, Florida, and the Inland Empire in California—you get people worrying that broad-based stimulus doesn’t really do what we need to do. But look at this data I poached from Paul Krugman and reworked into a bar chart and you’ll see that a majority of the population is living in places where the unemployment rate is over 8 percent and much less than 10 percent of the population lives in places where the unemployment rate is less than 6 percent.

That’s all just to say that there’s a lot of good broadly demand-stimulating measures could do. It’s also true that the United States is a great big country with over 300 million residents and even optimal demand-side policy would still leave plenty of people facing plenty of problems. But there’s a very big and very broad problem of mass unemployment out there that isn’t limited to a handful of hard-hit locations.