Monthly state-level full-employment unemployment rates for 2001–2025 reveal persistent regional differences. Using national rather than state benchmarks changes whether a state is classified as slack, near full employment, or tight in 15.5 percent of state-months.
The paper lets the unemployment-gap coefficient in Taylor-type rules vary with cross-state dispersion. In a pre-COVID VARX shock replay, dispersion-based attenuation lowers stabilization loss by 4 to 15 percent relative to matched benchmarks and outperforms constant attenuation. The national gap is also less informative about inflation when dispersion is high.