Magazine article Economic Trends

Differences in Employment Growth across Metropolitan Areas

Magazine article Economic Trends

Differences in Employment Growth across Metropolitan Areas

Article excerpt

08.14.13

In the last decade, different metropolitan areas of the United States have experienced dramatically different levels of employment growth. Stark contrasts can be seen, for example, when we compare the 50 metro areas with the highest employment growth between 2001 and 2011 to the 50 with the lowest (using the 100 largest metro areas in the U.S. based on their 2001 populations).

Employment expanded by 13 percent in the high-growth metros but only 1 percent in the low-growth group. Though both groups lost significant employment during the Great Recession, the low-growth group lost almost 5 percentage points while the high-growth group lost roughly 3 percentage points. Even if we focused on employment growth only up to 2007, the same patterns would hold and the specific metropolitan areas within each group would change little (12 metro areas would switch categories).

Given these substantial differences between high-growth and low-growth metro areas, it might be surprising that unemployment rates do not diverge across metro areas more than they do. In January 2013, for example, average unemployment rates were 7.7 percent in the high-growth group and 7.8 percent in the low-growth group.

The long-term patterns of employment reflect, to a greater extent, changes in the size of the local economy--not utilization rates of labor. One can see this by looking at the relationship between population and employment. Employment growth and population growth are highly correlated (correlation coefficient=0.72). Metro areas that experience high employment growth also experience high population growth, and vice versa, during the period in question. This does not necessarily mean that population growth causes employment growth. Rather, employment and population growth are jointly determined. Better job prospects in a region will attract people to the area, and higher population growth in an area will cause economic activity to rise and increase the demand for labor.

Employment-to-population ratios diverge much less across the two groups of metropolitan areas than employment-growth rates. Still, low-growth metro areas have underperformed and their employment-to-population ratios have declined by about 1 percentage point more than those of high-growth metros. …

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