More bad news for savers where unemployment is high
Louisiana deposit yields double those in Ohio
In the category of more proof that life is not fair, it turns out that bank deposit interest rates are closely tied to state-level unemployment rates.
While yields on deposits are low and trending lower all over the country, depositors in states where unemployment is lower have been enjoying higher interest on their savings.
In Nebraska, which has the nation’s lowest unemployment rate of just 3.7%, bank depositors are earning an average annual percentage yield of 0.45%.
That might not sound like much, because it’s not, but it might sound good to a resident of Ohio, where the unemployment rate is 6.7% and the deposit yield is 0.24%.
In Michigan, which leads the nation with an 8.9% unemployment rate, bank depositors are getting a mere 0.27% yield on their money. The rate is down from 0.38% a year ago.
Dan Geller, executive vice president at Market Rate Insights, said the link between deposit rates and unemployment rates is part of the grim reality that in areas where the economy is stronger banks and credit unions are competing for deposits to fund a higher demand for loans.
“The only way demand for lending will increase is if unemployment goes down, which means more consumers in need of personal loans and mortgages, as well as businesses needing loans to expand,” he said.
In other words, it’s a vicious cycle of adding insult to injury for residents of the worst state-level economies.
According to Mr. Geller’s analysis, the five states with the lowest unemployment rates have an average rate of 5.2% and an average deposit yield rate of 0.47%.
Those states include Texas with a 6.2% unemployment rate, Louisiana at 5.5%, Virginia at 5.5%, Iowa at 4.9%, and Nebraska at 3.7%.
The national unemployment rate is 7.8%.
The five states with the highest unemployment rate include New Hampshire at 5.7%, Ohio at 6.7%, West Virginia at 7.5%, Indiana at 8.2%, and Michigan at 8.9%.
Those states combine for an average deposit yield of 0.26%.
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