Every month, the U.S. Bureau of Labor Statistics (BLS) releases its report on employment and unemployment rates in the nation’s 372 metropolitan areas. Along with other economic indicators, these figures can tell a lot about a local area’s economic health – particularly for job seekers.
But as with any type of statistics, it is important to be an educated consumer when considering these numbers.
Remember the theory of relativity
In September, for example, El Centro, California and Elkhart, Indiana experienced the largest annual decline in unemployment, dropping by 3.1 percent and 3.0 percent, respectively. Impressive! But before we all pack our bags and move to Elkhart or El Centro in search of jobs, it is important to note that despite this modicum of good news, both of these metro areas have a long way to go given the severity of the economic downturns in their local economies over the past decade.
In fact, while El Centro posted the largest decline in its employment rate, it still retains its dubious distinction as one of the two highest metro areas with the highest unemployment rate in the nation.
And forgive the obvious, but note that larger areas will require larger gains or losses to yield significant percentage changes. The New York-Northern New Jersey-Long Island, NY-NJ-PA metro area often dominates employment growth rankings by the numbers, but rarely on a percentage basis. It takes much slighter changes in the numbers to impact higher percentage changes in smaller metro areas than in larger ones.
Understand that sustained trends over time paint the clearest picture
November BLS data revealed that the Las Vegas-Paradise, Nevada metro area experienced the largest year-over-year unemployment rate decline among large metro areas (populations > one million residents) – news that certainly bodes well for a city that has faced tough times over the past several years. Over the past year, the Las Vegas metro area experienced a 2.6 percent decrease in unemployment, the biggest decline among large metro areas.
Hit hard by the recession, Las Vegas has found the need to focus on diversifying its economy. Perhaps this strategy is beginning to work, and is a sign of better roads ahead. While sustained trends over time will reveal the story as it unfolds, Las Vegas’ employment fluctuations will be worth monitoring.
Bismarck, North Dakota posted the lowest unemployment rate (2.6 percent) among all metro areas in November, but it is no newcomer to that position. Bismarck’s economy strongly benefits from the oil, natural gas, and energy industries, and has demonstrated strength in its employment numbers over time.
Don’t be fooled: the unemployment rate is not the only game in town
Unemployment rates make the headlines, but employment growth trends, often overshadowed, can be an equally telling (if not greater) indicator of an area’s economic health. In September, the Elkhart-Goshen metro area fared well in job growth as well as in unemployment decline. In fact, it ranked among the top three metro areas for the largest year-over-year percentage gain in nonfarm employment (+8.0 percent).
Employment growth signals expansion, relocation, or simply putting people back to work. Either way, it is a positive sign for a local economy.
In addition to unemployment and employment trends, labor force participation rates need to be considered as an important factor in the equation. Have out-of-work, but qualified, age-eligible employees given up on looking for work? Taken early retirement? Dropped out of the workforce to raise a family, pursue a hobby, or volunteer instead? If so, unemployment rates may appear lower than they actually are.
Together, a balanced view of sustained trends in unemployment, employment and labor force participation rates over time paint the most accurate picture of an area’s economy. Neither Elkhart nor Las Vegas is celebrating an economic victory just yet. But in both cases, a turnaround in a negative trend could signal better times ahead – and certainly bears monitoring.
MuniNet Guide provides snapshot views of metro area employment, unemployment and labor force trends, along with comparisons across time and to state and national benchmarks. Visit the Employment & Unemployment Trends for U.S. Metro Areas page for an index of metro areas, listed by state and available for all metro areas.