Employment growth is highly correlated across regions. The author uses joint movements in
regional employment growth to define and estimate a common factor, analogous to the
business cycle. Regions differ substantially in the relative importance of cyclical shocks and
idiosyncratic shocks in explaining the steady state variance in regional employment growth.
For example, cyclical shocks account for almost 90 percent of the steady state variance in
employment growth in the East South Central region and about 40 percent in the West South