The challenges faced by regional labor markets have been well documented in SouthPoint over the years. Atlanta Fed President Dennis Lockhart has also spoken on this issue in his recent speeches, and macroblog has been all over this issue for some time.
One angle we have not fully reported on is the difference between unemployment in metro areas and non-metro areas. We can use non-metro areas as a proxy for rural areas, even though the U.S. Bureau of Labor Statistics (BLS) does not report specifically on rural unemployment. The U.S. Census Bureau does distinguish between rural and urban—it says an urbanized area of 50,000 or more people is urban, as is an "urban cluster," which has between 2,500 and 50,000 people. Rural, conversely, encompasses all territory not included within an urban area. To remain consistent with BLS definitions, we are going to use metro and non-metro to describe these two divisions.
To calculate the region's metro area unemployment rate, we totaled the labor force and unemployed for all metro areas in the six states of the Sixth District (Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee). To calculate the region's non-metro area unemployment rate, we simply subtracted the total metro area labor force and unemployment totals from state totals. We smoothed the data (because of month-to-month volatility) by using a six-month moving average to ascertain the underlying trend.
Chart 1 shows that unemployment rates in non-metro areas in the Southeast have been and remain above the rates in metro areas. Our business contacts and friends in the community-development area have noted for some time how non-metro areas face significant labor market challenges. Of course, the fact that pockets within metro areas are equally challenged is well documented.
In addition, the metro-area unemployment rate tracks the total regional unemployment rate closely because the regional labor force is 84 percent metro and 16 percent non-metro.
Chart 2 reveals how the gap between metro and non-metro unemployment rates have narrowed over the last few years. In fact, by mid-2012, this gap had declined to its lowest since 2000, when the BLS began reporting labor force and unemployment data in metro areas.
Why this gap has declined in recent years is tied to the nature of the 2007–09 recession and weak recovery since the recession officially ended. The housing crisis had a major impact on cities—especially in suburban areas and along the region's metro area coastal areas, where the residential construction boom was significant. Rural areas were hit as well, but the lingering effect of the housing bust was most intense in metro areas.
An upcoming conference sponsored by the Federal Reserve Banks of Atlanta and Kansas City on workforce development will address some of the challenges faced by both non-metro and metro areas, as well as other important workforce issues that confront us today. Atlanta Fed President Dennis Lockhart and Kansas City Fed President Esther George will share their views, as will some of the nation's leading experts in the field of workforce development.
By Mike Chriszt, a vice president in the Atlanta Fed's research department