Once the vaunted bellwether of labor availability in a given market, I now only casually look at, and then dismiss, unemployment rates. As a site selection professional who advises industrial manufacturers on where to locate operating facilities, knowing the availability of workers with a specific skill set is critical. However, the process of determining it is not as simple as it once was.
In years past, a local unemployment rate of four percent or less was an indication of a white-hot economy. Finding enough qualified workers to fill the needs of a new large employer in such a community would be challenging at best, painful and expensive at worst. Conversely, an unemployment rate of more than eight percent meant that a local community suffered from a weak economy and a possible deterioration of skills needed by industry. Although there may have been plenty of people in the job market, their skills were almost never on par with a manufacturer’s needs. Historically, the sweet spot for unemployment rates was somewhere between four percent and eight percent, depending on the overall economy.
The most recent data from the Bureau of Labor Statistics shows that the unemployment rate in the United States is currently 3.7 percent, the lowest recorded rate since we first sent a man to the moon in 1969. Only 17 percent of Metropolitan Statistical Areas (MSAs) have an unemployment rate of five percent or higher. Thirteen percent have an unemployment rate below three percent. More and more, we are seeing that anyone with the skills and work ethic to work is working.
In short, a low unemployment rate means a community has very few unemployable people. A high unemployment rate simply means it has more unemployable people. What I can glean from the unemployment rate is extremely limited. Instead, I must look at other factors, such as population and workforce growth rates, median age and labor force participation rates.
Population growth rates and median age are indicators that people, especially those with long careers ahead of them, are moving into a particular area. Population growth rates express the change in population size as a factor of time. Knowing an area’s average annual growth rate allows me to better predict future years of growth or decline for the population and workforce.
This is important because companies want to go where people want to go. If you have a slow growth rate with few millennials and Gen Z’s, perhaps you should think of ways to attract them. Smaller cities and rural areas must get creative to make their location enticing to the younger generation. Incentives such as student loan repayments, paying college tuition for them or their children, providing housing subsidies or even tax breaks, are all serious options to consider in today’s competitive marketplace.
Aside from cash and tax incentives, communities that invest in creating a sense of place definitely have a leg up in the race to attract young talent. My current hometown of Greenville, S.C. has done this. Located nearly halfway between Atlanta and Charlotte, N.C. on the I-85 corridor, Greenville is a relatively small town (68,200 city; 507,000 county) with big aspirations. Efforts to transform a downtown from urban blight into metropolitan might have gained widespread notoriety. Last year CNBC reported that Greenville was the ninth best city in the U.S. for people under the age of 35. Some of the considerations for the ranking were the number of available entry-level jobs; how much time is spent commuting into the city; and the local after-work and weekend scene.
Greenville’s metamorphosis has been decades in the making but with vision, commitment and time, it has reaped tremendous dividends. Other communities situated outside of major metro markets must take similar creative measures to attract and retain qualified talent.
The third factor I consider when determining workforce viability is labor force participation rates. This is the percentage of working-age population (16 years and older) that are either employed or actively looking for work. The U.S. average is around 63 percent. That’s down from around 66 percent before the Great Recession. Anything below 60 percent gives me reason for pause. Does this community have a really young adult population that still may be in school (good)? Does it have a large cohort of baby boomers that are entering retirement (ok)? Or, are there more serious underlying issues such as opioid addiction or low educational attainment (not good)? These are things that are not readily apparent in the statistics, but require a bit more sleuthing at the local level to fully discern.
The bottom line is, unemployment rates are no longer good indicators of a community’s workforce strength. If you want to attract labor-intensive business to your region, communities and states must commit to fostering population growth and addressing the underlying reasons for low labor force participation. If these numbers are weak, there is no time like the present. If your numbers are strong, don’t rest on your laurels. Continue to invest time and energy in making your community a dynamic place to live, work and play for all.