Magazine article Economic Trends

Some Popular Locales Now Facing Gloomier Labor Market

Magazine article Economic Trends

Some Popular Locales Now Facing Gloomier Labor Market

Article excerpt

05.14.10

While the national employment numbers give the most up to date reading of the employment situation in the nation, they mask a lot of variation in employment conditions at the local labor market level. This variation has increased dramatically during the recent recession.

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The national employment numbers released on May 7, 2010 reveal that while the unemployment rate increased from 9.7 percent in March to 9.9 percent in April, the employment to population ratio increased from 58.6 percent in March to 58.8 percent as well. While the employment to population ratio and the unemployment rate usually move in opposite directions, they can both increase if the number of people employed increases but the size of the labor force increases at a faster rate.

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Simply looking at the national average of the unemployment rate masks the fact that there is a large amount of variation in unemployment rates at the Metropolitan Statistical Area (MSA) level. MSAs are the typical geographical entity that defines a local labor market. As of March (the most recently available month of data at the MSA level), the unemployment rates in MSAs with at least one million people ranged from a low of 6.1 percent in the Oklahoma City MSA to a high of 15.5 percent in the Detroit-Warren-Livonia MSA. A sample of other MSAs--those with the highest and lowest unemployment rates in March of 2010, those with the largest population as of the 2000 Census, and two in the fourth Federal Reserve District--gives an idea of the variation since January 2006.

The variation in unemployment rates across MSAs increased markedly beginning around January 2009. This increase is reflected in the entire set of 46 MSAs with a 2000 population above one million. While the mean unemployment rate of that set of MSAs changed from 4.6 percent to 10.0 percent from March 2006 to March 2010, the standard deviation also increased from 0.9 percent to 2.2 percent during that time period. In all MSAs with a population greater than one million, the unemployment rate increased from March 2006 to March 2010. Remarkably, the largest increase (10.2 percent in Riverside-San Bernardino-Ontario) was almost an order of magnitude larger than the smallest increase (1.3 percent in New Orleans- Metairie-Kenner). MSAs in the Fourth District (Pittsburgh, Cleveland, Columbus, and Cincinnati) saw below average increases in the unemployment rate during this period. Thus despite having higher than average unemployment rates before the most recent recession, Fourth District MSAs with populations greater than one million currently have unemployment rates that are average or slightly below average.

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While this may sound like a relative improvement for the region, it is important to consider whether the improvement in Fourth District MSAs unemployment rates relative to other MSAs was achieved through a relative decrease in the number of unemployed people or a relative decrease in the size of the labor force. In fact, the size of the labor force in the Cincinnati, Columbus, and Pittsburgh MSAs grew slightly from January 2006 to March 2010. The size of the labor force in the Cleveland MSA fell, but only slightly. The main reason why the unemployment rate of Fourth District MSAs improved relative to other MSAs over this period is that the number of unemployed people grew at a slower rate in Fourth District MSAs than in many other MSAs. …

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