This paper studies determinants of the geographic distribution of unemployment in the United States since 1950. We argue that “equilibrium” differences in unemployment among markets are partially supported by corresponding differences in the covariance structure of sectoral demands for labor. When workers are mobile, greater diversification of sectoral demands reduces unemployment. We confirm this point using pooled time-series-cross-section data on state unemployment and employment by industry. We also find evidence for nonneutrality of aggregate disturbances based on geographic differences in industrial composition, and that permanent changes in the sectoral composition of employment lead to transitory fluctuations in unemployment.

Using longitudinal data, we study the processes of job mobility and wage growth among young men. During the first ten years in the labor market, a typical worker will hold seven jobs, about two thirds of his career total. The evolution of wages plays a key role in this transition to stable employment: wage gains at job changes account for at least a third of early-career wage growth, and the wage is the key determinant of job changing decisions among young workers. Job changing is a critical component of workers' movement toward the stable employment relations of mature careers.