Are Unemployment Benefits Taxable?


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Are Unemployment Benefits Taxable?

Unemployment benefits can help you get by in the event of job loss, but this money is subject to taxes just like any other source of income. How much your unemployment benefits are taxed depends on your filing status, tax bracket, and state of residence.

In this guide to unemployment benefit taxes, you’ll learn the ins and outs so you can pay Uncle Sam what you owe. Read on to find out:

  •   Are unemployment benefits taxable?
  •   How are unemployment benefits taxed?
  •    What are tips for paying taxes on unemployment benefits?

Do You Have to Pay Taxes on Unemployment Benefits?

Yes, you do have to pay taxes on unemployment benefits. They are taxable like any other income. That means you won’t actually get to keep all the money the government gives you while you’re unemployed. You’ll have to give some of it back, just as you do on many other forms of money you receive. It’s simply part of being a taxpayer.

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How Is Unemployment Taxed?

Now that you’ve learned that unemployment benefits are taxable, consider the details. How much are the taxes, is it just federal or state taxes too, and how do you pay them?

How Much Are Unemployment Benefits Taxed?

No matter which state you live in, your unemployment benefits are taxed at the federal level. That means everyone — including residents of states without income taxes — must pay taxes on unemployment compensation.

How much you owe depends on your filing status and tax bracket. The United States is on a progressive tax system: In general, the higher your adjusted gross income (AGI), the more you’ll pay in taxes.

For the 2023 tax season (filed in 2024), there are seven federal tax brackets, ranging from 10% to 37%.

Before filing your taxes, you’ll receive a Form 1099-G, Certain Government Payments, reflecting your unemployment benefits. This form will indicate how much unemployment compensation you received as well as how much was withheld, if applicable. You’ll need this form, plus any records of quarterly payments (more on those below) when filing your taxes.

Unemployment Benefit Taxes at the State Level.

When determining how much unemployment benefits are taxed, don’t forget that federal taxes may not be the only funds due. Depending on where you live, you may have to pay state income taxes on your unemployment compensation, too. Nine states do not have personal income taxes on what are considered wages:

  •   Alaska
  •   Florida
  •   Nevada
  •   New Hampshire
  •   South Dakota
  •   Tennessee
  •   Texas
  •   Washington
  •   Wyoming

If you live in one of those nine states, you don’t have to pay state income taxes on unemployment benefits.

That said, four states that do have a state income tax also don’t tax your unemployment compensation:

  •    California
  •    New Jersey
  •    Pennsylvania
  •    Virginia

If you live in one of the remaining 37 states (or Washington, D.C.), you’ll have to pay state taxes on any unemployment earnings.

How to Pay Taxes on Unemployment Benefit

Like it or not, you’ll owe taxes (federal and maybe state) on any unemployment compensation. Now that you know how unemployment is taxed, consider how you can pay those taxes. You have two main options:

  •    Have the taxes withheld like you would from a paycheck
  •    Estimate and pay the taxes each quarter

Here’s a closer look at each option.

Withholding Taxes

When you initially apply for unemployment, you can ask to have taxes withheld from your payments. However, federal law has established a flat rate of 10% for tax withholding for unemployment benefits.

When you receive income as wages, you can usually specify how much you want to have withheld via filling out Form W-4.

If you expect to be in a higher tax bracket and need to pay more in taxes than what’s being withheld, you can make quarterly estimated payments for the difference.

If you’re currently receiving unemployment compensation and taxes aren’t being withheld, you can submit Form W-4V.PDF File . PDF File, Voluntary Withholding Request, to initiate the 10% withholding on future benefit distributions.

Paying Quarterly

To avoid owing an underpayment penalty when you file your taxes, you may need to make quarterly estimated payments on your unemployment earnings. You can use Form 1040-ES  and send in your payment by mail, or you can pay online or over the phone.

If you’re new to estimating taxes, you can use the IRS resource for quarterly taxes , work with an accountant, or use tax software.

Tips for Paying Taxes on Unemployment Benefits

Being unemployed can be stressful, and on top of that, it may be hard to figure out how to properly pay taxes on unemployment benefits you receive. Follow this advice which can help simplify and clarify the process.

  • Opting into tax withholding: When you apply for unemployment, you can opt into automatic tax withholding at a flat 10% rate. While it may not be enough to cover your entire tax liability, it’s a good start — and can keep you from overspending your unemployment compensation.
  • Setting aside money in a high-yield savings account: If you don’t opt in to withholding (or if 10% is not enough to cover your tax liability), you’ll need to pay quarterly estimated taxes on your unemployment income. To avoid accidentally spending that money before it’s due, it’s a good idea to calculate what you’ll owe and put it in a savings account that pays a competition rate that you won’t touch until it’s time to pay Uncle Sam. Bonus: You’ll be earning interest on the money.
  • Keeping track of all your earnings and paperwork: Tax filing can be complicated — there are lots of forms to collect and statements to reference. Keeping clean records of benefit distributions and quarterly payments throughout is crucial to preparing for tax season.
  • Using IRS Free File: Because you have to pay taxes on all income, including unemployment, you’ll likely want some help. If your adjusted gross income is $79,000 or less, you can get free guided tax preparation through IRS Free File . If your AGI is too high but you’re feeling overwhelmed by how complicated your taxes are, it might be a good idea to pay for tax software or hire an accountant.
  • Being aware of unemployment fraud: It’s possible for criminals to use your personal information to falsely make unemployment claims in your name. If you receive Form 1099-G for unemployment compensation but did not receive any unemployment benefits, follow the Department of Labor’s steps for reporting unemployment identity fraud .

The Takeaway

Like other forms of income, unemployment benefits are subject to taxes. If you aren’t having taxes withheld from your unemployment compensation — or if the flat 10% rate is not high enough — the IRS requires that you pay quarterly taxes. Paying what you owe on unemployment benefits is an important and necessary step in correctly filing your tax return.

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The States With the Highest Unemployment Rates

The States With the Highest Unemployment Rates

The national unemployment rate in September 2023 was 3.8%, virtually unchanged over the previous five months, demonstrating that the tightest labor market in decades is showing no signs of loosening. In fact, the national unemployment rate has been under 4% since December 2022. 

In total, 25 states had unemployment rates lower than the U.S. figure of 3.8%, 2 states and the District of Columbia had higher rates, and 23 states had rates that were not appreciably different from that of the nation.

Nevada had the highest unemployment rate of all the states at 5.4%. On the other end of the spectrum, Maryland had the lowest jobless rate in September at 1.6%. The next lowest rates among states were in North Dakota, South Dakota, and Vermont, at 1.9% each. 

Moreover, record low unemployment has been achieved for African AmericansHispanic Americans, and people with disabilities — and a 70-year jobless low for women. Employment continued to “trend up” in professional and business services, health care, leisure and hospitality, and social assistance.

A very low level of unemployment sounds like great news for American workers but it presents challenges too. Economists say that inflation cannot ease significantly while unemployment is this low. For small businesses, the problem can be really acute. Not only is it hard to fill job openings, but salary pressure is intense and if there aren’t enough skilled workers, the business stagnates or slumps.

Dean Mitchell/istockphoto

In this story, we are taking a look at unemployment rate by city to get a feel for the job landscape across America. Using Bureau of Labor Statistics data, we have created a list that ranks the jobless statistics for the 50 cities that show the largest populations within their respective states. 

While Las Vegas had led the list of highest unemployment for six months, in September it was displaced by Los Angeles, which now ranks as having the highest jobless rate of all the cities on our list. Within this list, many fascinating — and even contradictory — trends are revealed that have bearing on small business owners.


The labor force participation rate was 62.8%, which is the same as August. Why doesn’t that align with a 3.8% unemployment average?

The Bureau of Labor Statistics, which falls under the Department of Labor, measures labor market activity, working conditions, price changes, and productivity in the U.S. economy.  The unemployment rate for any area is the number of area residents without a job and looking for work divided by the total number of area residents in the labor force.

In other words, the unemployment rate represents the number of unemployed people as a percentage of the labor force (the labor force is the sum of the employed and unemployed). 

The key factor is the BLS unemployment rate will not tell you how many people have taken themselves out of the workforce, perhaps becoming so discouraged in their job search that they have given up hope of finding a job. In September, the number of persons not in the labor force who currently want a job was 5.5 million. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job. Some economists say that the low unemployment could be due, in part, to a low labor participation rate. What is the labor force participation rate? It’s the percentage of the population that is either working or actively looking for work.

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As previously noted, we have taken the city with the largest population in each of the 50 states as the city to track within its state, beginning with the city that had the lowest rate of unemployment and moving to the highest. The data from September 2023 was the most recently obtainable from the Bureau of Labor Statistics.

Washington, D.C.

The nation’s capital of Washington, D.C., population 712,000, showed an unemployment rate of 5.3% in September 2023, which is one of the highest for any large city in America.


For the second month, Fargo, population 126,000, was the city on the list with the lowest unemployment rate of 1.4% in September 2023, while the state’s unemployment was 1.9%, which continues a record low. One reason North Dakota has had such a low unemployment rate for years is because it is the fifth least-populated state in the United States. Fargo’s economy is based on education, the medical industry, agricultural equipment, and services.


South Dakota showed an unemployment rate of 1.9%. “South Dakota traditionally has a lower unemployment rate than the rest of the country,” explained an economics professor in a recent paper.  But the state’s low rates in 2023 — and the extremely low 1.6% jobless rate of its largest city, Sioux Falls — creates a “double-edged sword.” The super-tight labor market means economic growth can be difficult, warned the same economist.


In September, the city of Burlington showed an unemployment rate of 1.8%. The statewide unemployment rate was also 1.9%. “There are nearly three job openings for every unemployed Vermonter,” according to the Vermont Department of Labor. Burlington is the industrial, tourist, and financial center of the state, with a population of 44,700. Burlington also has the distinction of being the least populous city in the 50 states to be listed as the most populous city within its state.

Erika J Mitchell/shutterstock

At 1.9%, Baltimore is hanging on in the bottom five for unemployment.  Maryland had the lowest unemployment of any state in America at 1.6% in September and the lowest rate ever recorded for that state. What makes the achievement of the Baltimore metropolitan area particularly newsworthy is that it posted the lowest jobless rate among large U.S. metro areas with 1 million or more in population.


The September 2023 jobless rate for Alabama of 2.2% continues the streak of low joblessness for the state. The unemployment rate of of 2% for Huntsville makes it one of the country’s lowest for cities of its size. A city of rapid growth, Huntsville’s leading sectors are aerospace, defense, information technology, bioscience, and advanced manufacturing. “Alabamians have been finding jobs in record numbers for many months now,” said the state’s governor in a recent interview.

Sean Pavone/istockphoto

The September jobless rate of 2.2% for Charleston, population 151,000, helps it return to pre-pandemic status and more. In April 2020, unemployment raged at 13%. The city’s economic strength is diverse, ranging from aerospace and life sciences to hospitality. The statewide unemployment rate was 2.9% in September, inching down from 3% in August.


The state of New Hampshire continued to show record low unemployment rate with 2% in August. The jobless rate of Manchester, population 115,000, edged up a very small amount, going from 2.2.% in August to 2.3% in September. The continued low jobless rate does create special challenges, such as dealing with the size of the workforce, which is smaller in New Hampshire than it was before the start of the Covid-19 pandemic. 


Maine’s unemployment rate was 2.7%. Unemployment has been below 4% for 22 consecutive months, the third longest period of such low rates for the state of Maine. The city of Portland’s was even lower at 2.3%. The state’s economic boom was driven mostly by the leisure and hospitality sector, which added the most jobs since the beginning of Covid-19.

Sean Pavone/istockphoto

In September, Nebraska continued its record-low unemployment rate of 2%. Nebraska’s low jobless rate is believed to be due to the dominance of industries like manufacturing and agriculture, which are less volatile than the energy or hospitality sectors during downturns. Omaha, population 487,000, had a jobless rate of 2.3%.

Jacob Boomsma/istockphoto

The largest city in Montana showed an unemployment rate of 2.3% in September. Billings has a history of strength in agriculture and energy; more recently, it has focused on retail. Montana reached its 23rd consecutive month of unemployment below 3% in September, with 2.7%. The only other time Montana’s unemployment rate was below 3% was for three months in 2007.


At 2.6%, Massachusetts showed low unemployment in September, with Boston’s unemployment moving from 2.7% in August to 2.3% in September. The city is the economic engine and cultural hub of New England, with higher education, health care, and financial services as the major drivers. In a recent survey of cities most attractive to recent college graduates when considering job openings and affordability, Boston came in at number 12, making it the top city in the Northeast.

Sean Pavone/istockphoto

With a population of 189,000, Providence had a jobless rate of 2.4% in September and the state had an unemployment rate of 2.6%. About one-third of the city’s economy is based in trade, transportation, utilities, and educational and health services. The four Fortune 500 companies based in Rhode Island are CVS Heath, United Natural Foods, Textron, and Citizens Financial Group.

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With a jobless rate of 2.6%, Cheyenne’s economy is based on light manufacturing, agriculture, the military and government, tourism, and transportation. Cattle- and sheep-raising continue to thrive throughout the region too. The unemployment rate in Wyoming was 2.9% in September, the same as in August.


With a population of 345,000, Honolulu had an unemployment rate of 2.6% in September, down a little from 2.9% in August. Job gains were seen in professional and business services, trade, transportation and utilities, and private education and health services. Overall, Hawaii had an unemployment rate of 2.8%.

Art Wager/istockphoto

Salt Lake City had a jobless rate in September 2023 of 2.6%, decreasing from 3% in August. Known as the “Crossroads of the West,”  the city’s major industries are government, trade, transportation, utilities, and professional and business services.  The state’s unemployment rate is also 2.6%.


With an unemployment rate of 2.7% in September, Minneapolis is surging. The Twin Cities are expected to continue to thrive through early 2024, with industries such as healthcare, finance, manufacturing, and technology playing an expanded role. Minnesota’s unemployment rate was 3.1%.


Missouri had a jobless rate of 2.9% in September 2023, and Kansas City, its largest city, had a rate of 2.7%, down from 3.4% in August. The unemployment rate in Missouri reached a record high of 11.4% in April of 2020 and a record low of 2.1 in May of 2022. Kansas City is the third largest beef-processing city in America and has strong sectors in health care, tech, retail, and finance.


With a population of 149,000, Jackson had a jobless rate of 2.7% in September, down from 3.5% the month before. Jackson has a lower cost of living average than the U.S. average and shows major sectors in advanced manufacturing, health care, information technology, and food processing. The state of Mississippi’s unemployment rate was 3.2%.


The state of Tennessee held onto its low unemployment record of 3.2% in September 2023, but Nashville’s was even lower, coming in at 2.8%. The city is famous for music and entertainment, but healthcare and manufacturing are leading sectors as well. The city, population 1.3 million, is one of the fastest growing in America.


The largest city in Iowa had an September 2023 jobless rate of 2.8% in September, compared to 3% in August. Iowa’s seasonally adjusted unemployment rate ticked up to 3% in September, up from 2.9% last month but down from 3.1 a year ago. The state is recognized for its leading position in the agricultural sector, particularly corn, soybean, pork, and egg production.

Jacob Boomsma/istockphoto

With a population of 237,000, Boise had a jobless rate of 2.9% in September, down from 3.2% in August. The major economic drivers in the region include semiconductor and other computer product manufacturing, food product manufacturing, administrative and business support services, and construction. Statewide unemployment stood at 3.1%.

Sean Pavone/istockphoto

The largest city in Florida with a population of 954,000, Jacksonville had a jobless rate of 3% in September. The state of Florida showed an unemployment rate of 2.8% in September, a tiny bit more than 2.7% in August. Florida’s unemployment rate has remained lower than the national rate for 35 consecutive months. 


With a population of 879,000, Charlotte is home to corporations such as MetLife, NASCAR, Wells Fargo, Bank of America, and Lowe’s. Its unemployment rate was 3% in September, while the state’s jobless rate was 3.4%. The number of people employed increased 14,985 over the month to 5,087,812 and increased 124,714 over the year.

Sean Pavone/istockphoto

The unemployment rate in Wichita, population 395,000, was 3% in September. Agriculture, manufacturing, healthcare, and energy drive the Wichita regional economy. The state of Kansas had a jobless rate of 2.8%, which means it is holding to its 2023 low-jobless trend.


Arkansas’s unemployment rate increased by 0.2 percentage points, from 2.7% in August to 2.9% in September. Little Rock, its largest city at 202,000, showed a jobless rate of 3.1%. Healthcare is a leading sector in Little Rock, followed by manufacturing and construction.


Ohio’s unemployment rate was 3.5% in September 2023. Columbus, its largest city, clocked in at 3.1%. However, job growth could slow as employers struggle to fill openings in such a tight market, Columbus leaders say. The city does a great job of drawing young professionals with diverse sectors, ranging from education and food to defense and steel.

Sean Pavone/istockphoto

The city of Indianapolis showed an unemployment rate of 3.1% in September. An economist said earlier in 2023 that there were 5 job seekers for every 10 open positions in the state. Central Indiana’s life sciences and healthcare sector generates nearly $84 billion in total economic output. The state of Indiana showed a jobless rate of 3.6%.

Sean Pavone/istockphoto

The largest city in Oklahoma hung in there with a low jobless rate of 3.2%. Oklahoma City has one of the world’s largest livestock markets, with oil, natural gas, and petroleum products as its largest sectors. As for the state, Oklahoma’s rate of 3% edged up a small amount from 2.8% in August.

Sean Pavone/istockphoto

The unemployment rate in Bridgeport, population 148,000, dropped to 3.2% in September from 3.7% in August 2023. While some fled New York or New Jersey during the pandemic, Connecticut added 66,000 people in 2021. Connecticut had 103,000 job openings in September 2023, compared to 96,000 openings in August. However, Bridgeport struggles, with some 19% of its residents living in poverty. 


Colorado’s jobless rate was 3.2% and Denver, its largest city, had a rate of 3.3%. Considered a magnet for work-from-home professionals, Denver is a fast-growing city, but one with housing costs that are 36% higher than the national average. Software and financial services are among its hottest industries. Aerospace, digital communications, and food and beverage sectors are also expanding.


Virginia Beach has a jobless rate of 3.4%, virtually the same as August rate of 3.3%. Real estate, defense, and tourism are major sectors of the city’s economy. Meanwhile, the state of Virginia’s September employment rate maintained a low level of 2.5%. Among the metro areas, Northern Virginia had the lowest unemployment rate at 2.6%, while Lynchburg had the highest at 3.5%.


Oregon’s unemployment stands at 3.5%, while Portland, its largest city, has a jobless rate of 3.4%. This progress could ease the concerns of Portland leaders, who thought that, compared to similarly-sized cities, Portland was lagging behind on financial recovery from Covid-19.


Georgia’s largest city with a population of 496,000, Atlanta had a jobless rate of 3.4% in September. Georgia’s unemployment rate rate was 3.4% as well. The sectors with the most job gains included accommodation and food services, health care and social assistance, arts, entertainment, recreation, and management of companies and enterprises.


The largest city in New Mexico had a jobless rate of 3.5% in September, a nice drop from 4.1% in August, steadily decreasing since its pandemic high of 10%. Albuquerque and the rest of the state are on a growth curve — the top three industries are oil drilling and gas extraction, scientific research and development, and hospitals. New Mexico’s unemployment rate was 3.7% in September, the same as August.

Faina Gurevich/istockphoto

Seattle, population 733,000, is tracking above the national unemployment rate with a jobless figure of 3.8% in August. Thousands of tech sector layoffs in the Seattle area have had an impact, but the city continues to support innovation. Overall, the unemployment rate is considered low. Washington’s economy gained an estimated 2,900 jobs (seasonally adjusted) and the monthly unemployment rate remained at 3.6% in August.


Anchorage, the city with the largest population in Alaska had a jobless rate of 3.7% in September, edging up from 3.5% in August. Alaska often shows a relatively high unemployment rate. Over the last 40 years, the average unemployment rate in the United States has been 6.3%, while in Alaska, it averaged 7.9% since 1976. Therefore, the September rate of 4.1% is low for this state,

Jacob Boomsma/istockphoto

The September 2023 jobless rate of 3.7% in the Big Easy ticked up slightly from 3.6% the previous month. And unemployment has come a long way since its alarming Covid-19 days of 20% in April 2020 and an April 2021 rate of 9%. As a tourist favorite and a major port on the Gulf Coast, New Orleans is considered an economic and commercial hub, and Louisiana’s 3.3% unemployment rate is a continued low for the state.

Sean Pavone/istockphoto

With an unemployment rate of 3.7% in September, the city is seeing job growth as payrolls have managed to expand. However, it’s worth noting that in April the city showed unemployment of 2.8% so it has seen almost a full percentage point increase over those months. Louisville, with a population of 628,000, is known for shipping and cargo and, more recently, for major manufacturing, with two Ford plants in the region, and health care. Kentucky’s jobless rate of 4.1% is higher than the national average.


The state of Wisconsin had a jobless rate of 3.1% in September after setting a new unemployment rate low of 2.4% in April 2023. Its largest city, Milwaukee, is a different story. It has an unemployment rate of 3.7%. The three sectors that comprise most of Milwaukee’s workforce are service sectors, manufacturing, and retail trade. 


Phoenix, population 1.6 million, had an unemployment rate of 3.8% in September, down from 4% in August. One of the fastest-growing cities in America, Phoenix reached a record jobless high of 13.7% in April of 2020 and a record low of 2.5% in April of 1998. In the last 50 years, Phoenix’s economy has been powered by hospitality and leisure, but the city is also home to a growing number of high-tech, IT, renewable energy, and bioscience industries. Arizona had a 4% jobless rate in September.


The unemployment rate for Philadelphia stood at 3.8% and the state of Pennsylvania ranked at 3.4% in September 2023, and while that may not sound like one of the good news stories, Pennsylvania’s jobless rate continues a record low for the state. This low unemployment bolsters the region’s ongoing recovery from the pandemic, which hit Philly hard and led to the loss of more than 100,000 jobs in the first two months alone of Covid-19.

Sean Pavone/istockphoto

The city with the largest population in West Virginia has 46,700 people and an unemployment rate of 3.9% in August, down from 4.3% in August. As it is the state capital, Charleston has government jobs as well as those in trade, utilities, education, and medicine. The chemical industry and the manufacturing sector are also significant.


Located midpoint between Washington, D.C. and New York City, Wilmington is Delaware’s largest city and its economic engine. Wilmington had an unemployment rate of 3.9% in September, down from 4.5% in August 2023. The state itself is at 4.1% unemployment, which is above the national average.


Houston’s September unemployment rate at 4.4% was higher than the state rate of 4.1%. Since June 2022, Texas employment grew by 542,500 positions— the largest annual increase in the nation. The expanding ranks of the unemployed is believed to reflect an increase in the size of the metropolitan workforce rather than layoffs in the state with the second-highest population in the United States.

Sean Pavone/istockphoto

The unemployment rate of 4.5% in Detroit in September 2023 is quite a feat in a city that went through bankruptcy and experienced a 61% decrease in population from 1950 to 2010, lowering its ranking from the 4th most populous city in America to the 27th. Detroit’s jobless rate was an eye-popping 27% in June 2009. But new development in the city fuels talk of a real comeback post Covid-19. The state’s jobless rate is 3.9%.

Sean Pavone/istockphoto

The Big Apple had a jobless rate of 4.7% in September, down slightly from 4.9% in August, which makes it one of the cities on our list with an unemployment rate higher than the national average. However, New York City, with its population topping 8.4 million, is also beginning to show gains in employment three years after the start of Covid-19. New York is estimated to have lost about 2 million jobs in the immediate wake of the pandemic. The state has a jobless rate of 4%.


The September 2023 unemployment rate of 4.7% ticked down from 5.1% in August. The city and its suburbs are home to 35 Fortune 500 companies, with strengths in manufacturing, printing, insurance, transportation, financial trading, and food processing. Illinois’s rate of 4.4% remained higher than the national unemployment average.  

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In September the city’s unemployment rate was 4.8%, slightly down from the city’s unemployment rate stood at 4.8% in August. This is a marked decrease from a high of 9.7 percent in 2010. The city of Newark has a population of over 305,000, and some 25% of residents are living in poverty, according to U.S. Census data. The state’s unemployment rate was 4.4%., the largest increase over the last year of 1.2 percentage points from September 2022.


On our list, Nevada had the highest unemployment of any state in the nation at 5.4% in September same as in August, and Las Vegas, its largest city, showed a rate of 5.7%, down from 6.1% the previous month. Las Vegas shows a lot of turbulence in employment, with a high number of people in the workforce actively looking for jobs while the city shows the lingering effects of the Covid-19 lockdown.


The city on our list with the second-highest population in America at 3.9 million had an unemployment rate of 5.8% in September, up from 5.4% in in August, which makes it the city with the highest jobless rate of all. The state has struggled since Covid-19.  The state’s unemployment rate is 4.7%. Several factors are believed to contribute, including a mismatch between job skills among those who seek employment and what skills are needed. 

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Unemployment is a key measure of the health of the American economy and considerable resources are put into analyzing it. There are many different reasons for unemployment. Apart from the common causes found in any economy–a worker leaving for another job or being fired–there is cyclical unemployment and structural unemployment.Cyclical unemployment is caused by economic downturns or is related to changes in business conditions, As the name indicates, it can be temporary. After a recession ends, unemployment falls.Structural unemployment is different.  It usually means there is a mismatch between the jobs available and the skill levels of the unemployed. Technological changes, a lack of relevant skills, and jobs moving overseas to another country cause structural unemployment. Structural unemployment can be hard for a society to deal with — it produces permanent disruptions in the economy and obviously a lot of stress among the people who want to work but can’t get a job.


In autumn 2023, the problem of high unemployment seems far away indeed. A reasonable unemployment rate is somewhere between 3% and 5%.  The current low rate of unemployment means that the economy is producing near its full capacity, maximizing output, and driving wage growth.However, the labor market can reach a point where each additional job added does not create enough productivity to cover its cost. This causes an output gap, or the “slack,” in the labor market. The economy is in danger of becoming “overheated.”


When there’s an increasing demand for labor yet the unemployment rate keeps falling, this causes wage inflation. With fewer people available to work, employers have to increase wages to attract and hold on to talent. While that’s pleasant for the workers, some businesses can’t afford to pay a lot more. The money that might go to growing the business has to go toward payroll.

And when there are more jobs than there are people with the necessary skills and experience, this leads to employees feeling overwhelmed and stressed. Small businesses typically have less money to funnel toward training and recruitment. This is a time when small businesses may turn to debt financing, whether it’s seeking a small business loan or looking for investors.


In September 2023, the Bureau of Labor Statistics showed a national unemployment rate of 3.8%, the same as in August. Los Angeles, overtook Las Vegas, Nevada, as the city with the highest unemployment on our list, but a number of cities–Sioux Falls, South Dakota, Fargo, North Dakota, Baltimore, Maryland, and Burlington, Vermont–had unemployment rates in August of less than 2%. This low jobless rate has various implications for the economy — and for small business owners.

This article originally appeared on and was syndicated by

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