Where the jobs are: location, location, location

by Donna Rosato

The latest news on unemployment was as grim as expected: More than 5 million people have lost their jobs since the beginning of 2008 and the unemployment rate surged to 8.5% in March, the highest in 25 years, the Bureau of Labor Statistics reported Friday.

It may seem as if no place in the U.S. is untouched by job losses. But another report the BLS released last week reveals that the jobs market, like housing, is local. Every month, the BLS examines unemployment trends in 372 metropolitan regions (known as Metropolitan Statistical Areas or MSAs). The report lags the more well-known Employment Situation report by one month, so the data is from February. But it clearly shows that some places are weathering this recession better than others when it comes to jobs. According to the report, 14 areas posted jobless rates of at least 13%, including Detroit, Michigan and Fresno, California while 20 areas registered rates below 5% in February, including Ames, Iowa, Manhattan, Kansas, Lincoln, Nebraska , Lubbock, Texas and Lafayette, Louisiana.

Harvard economics professor Edward Glaeser says the disparity in unemployment in regions around the U.S. may seem random but it isn’t.  According to Glaeser, some places are able to weather an economic downturn better because of specific characteristics of their local area. Not surprisingly, Glaeser’s research finds a strong correlation between a skilled workforce and lower unemployment.  Currently, 15.1% of high school dropouts are unemployed while just 4.2% of college graduates are out of work. For people with a high school diploma, unemployment is around 9%. The higher the educational level of a metropolitan area, the lower the unemployment rate.

As in past recessions, there’s also a clear link between unemployment and manufacturing. Industries that have been declining for decades like textile, paper and car manufacturing are more likely to layoff masses of workers during a downturn. You can see that relationship at work in the MSA unemployment report, where old industrial cities like Detroit, Waterbury, Ct. and Youngstown, Ohio have double digit jobless rates.

Most interestingly, Glaeser finds that unemployment also is closely correlated with “job sprawl”. In MSAs where jobs are spread out and people have long commutes to work outside a city core, like Los Angeles and Detroit, unemployment is higher.  Meanwhile, unemployment is lowest in areas where jobs are centralized.  According to a Brookings Institute report released today more than 30% of jobs in utilities, finance, insurance and education are located within three miles of downtowns, while at least half of the jobs in manufacturing, construction, and retail are more than 10 miles away from central business districts.

Of course, you can’t always pick where you work. Family ties or a home purchase often keeps you in a particular geographic area. But if you are looking for work and have any flexibility to move, keep a close eye on the monthly MSA report if you want to know where the jobs are. – Donna Rosato

LINE: Employment Expectations at Four-Year Lows

November 2007—18 months ago as of May 2009—was the last month the Leading Indicators of National Employment (LINE) hiring index was positive, according to the Society for Human Resource Management’s latest LINE data. The LINE Report examines four key areas—employers’ hiring expectations, new-hire compensation, difficulty in recruiting top-level talent, and job vacancies. Its findings are based on a monthly survey of HR professionals at more than 500 manufacturing and 500 private service-sector companies. Together, these sectors comprise more than 90 percent of America’s private-sector employment. Employment expectations for May 2009 are at four-year lows for manufacturing and service sectors—down 34.8 percent for manufacturing and 18.1 percent for service—the report found.  “LINE’s employment expectations index has been negative since December 2007, which is the month when federal officials say the recession began,” observed Jennifer Schramm, SHRM’s manager of workplace trends and forecasting. “While employment expectations for May 2009 are still showing a net annual decline, the numbers are not as devastating as they have been over the previous few months,” she told SHRM Online. Hiring expectations for May 2009—while down—are not as severe as in previous months, according to the report. Although the employment expectations index is still down compared to spring of 2008, Schramm added, “more members of the manufacturing and service sectors say they will add to their payrolls in May than have in the past several months, so we will be watching this index closely to see if this trend continues.” April 2009 was the first April in four years that more manufacturers reported an easier time recruiting. There even was less difficulty in recruiting talent among the service sector. “With millions of people seeking work and fewer opportunities that exist, the LINE recruiting difficulty index is not likely to reverse this trend in the near future,” the LINE report states. New-Hire Compensation Wages and benefits packages for new hires in April 2009 also dropped dramatically compared to April 2008 for both sectors. “Although many companies have scuttled hiring plans during the recession and are cutting jobs, many are also turning to wage and benefit cuts in an ongoing effort to control costs,” the report says. In April 2009, a net 2.3 percent of LINE respondents noted they would decrease new-hire compensation in the manufacturing sector—the lowest April response total in LINE’s four-year history. As for the service sector, “the trend of slashing salaries and benefits was even more pronounced” during that same period, according to the LINE report. It found a net total of 12.2 percent of companies reporting reduced wages and benefits packages for new hires in April 2009. The SHRM LINE Report is released at 9 a.m. Eastern time on the third Friday following the conclusion of the week containing the 12th of the month. The SHRM employment expectations index describes the same time period referenced approximately one month later in the Employment Situation Report issued by the U.S. Bureau of Labor Statistics.