Friday, November 28, 2014

Untangling Rural Unemployment Rates

04/20/2009

pawnee city mural Nebraska National Register Sites Post office mural in Pawnee City, Nebraska; Pawnee County's solid showing in recent studies of rural employment rates may mask a declining population, due to outmigration.

Articles in the Daily Yonder have shown the dramatic impact of the nation’s economic crisis on rural America in recent months. The Yonder has also reported on research by economists Sean Moore and Mark Drabenstott showing that the downturn has been harder on rural manufacturing areas than on farming communities.

Taking a close look at how rural counties have fared, we have found that out-migration, education, and long-term poverty may account for these differences. These socioeconomic features may underlie the different employment outcomes in farming and manufacturing communities.

To gain an understanding of why some types of rural communities have fared better or worse in recent months, we looked at the best and worst performing nonmetro areas in terms of their average two-month unemployment rates for January-February 2009. (Though we studied nonmetro counties, we based our definitions of high and low unemployment on the average unemployment rates for all 3100+ counties in the nation during these two months.)

We found that 146 nonmetro counties had unemployment 15% or higher during January-February 2009, and labeled them high unemployment rate (HUR) counties; the 823 nonmetro counties with unemployment rates at or below the two-month national average (7.8% or lower) we labeled low unemployment rate counties (LUR).

Then we compared the two groups, using the 2004 Economic Research Service/USDA County Typology codes associated with these counties. These codes sort and describe counties using 6 non-overlapping economic sectors and 7 overlapping policy categories. The typology is a valuable source of information regarding the core economic and social characteristics of these counties (circa 2000).

Figure 1 highlights five of the six non-overlapping categories of economic dependency associated with the high unemployment (HUR) and low unemployment (LUR) nonmetro counties (we do not report on mining dependent counties since few of the counties in our sample were so designated).  The results provide an interesting snapshot of the economic drivers associated with the two groupings of nonmetro counties. 

unemployment chart by econ type Beaulieu/Gallardo (SRDC) Figure 1: Economic Dependency Classification of HUR & LUR Nonmetro Counties (using Average of January & February 2009 National Unemployment Rates). For explanation of the ERS economic classifications, look here.

Nearly 47% of the high unemployment nonmetro counties are classified as manufacturing dependent counties, while only a handful are dominated by farming (6.2%).  On the other hand, the largest share of low unemployment counties is farm dependent (36.2%), with only 11.2% being defined as manufacturing dependent counties.

A similar proportion of counties in both sets is classified as non-specialized (28.1% for HURs and 27.1% for LURs, respectively), suggesting that their economic activities may be spread across a variety of industry types, with no specific sector playing a dominant economic role.  One could surmise from this finding that the economic problems facing our nation are negatively impacting even those nonmetro counties having more diverse economies.   

As reported in recent research by Moore and Drabenstott, the more favorable employment conditions in farm-dependent nonmetro counties can be linked to record 2008 net farm incomes.  Actually, a December 2008 report released by the Economic Research Service/USDA makes clear that the exceptional earnings captured by the agricultural sector have now been taking place for approximately four years. 

In light of the lower unemployment figures detected in nonmetro farm-dependent counties, we wanted to determine if the ERS policy themes could shed some additional light on these farm-dependent counties.

unemploment chart by soc type Beaulieu/Gallardo (SRDC) Figure 2:  Policy Attributes Associated with HUR & LUR Nonmetro Counties (using Average of January & February 2009 National Unemployment Rates). For explanation of the ERS "policy types," look here.

While Figure 1 reveals that the group of counties with low unemployment is dominated by farm-dependent areas, Figure 2 makes it clear that a sizable proportion of these LUR nonmetro counties (40.6%) have experienced net population losses over the last two decades (1980-90 and 1990-2000).  

More specifically, two-thirds of all farm dependent counties also constitute “population loss” counties (data not shown).  This finding suggests is that the lower unemployment rates uncovered in many farm dependent nonmetro counties are masking some broader economic challenges facing these communities.  Simply put, lots of these farm dependent counties have witnessed the outmigration of many workers and families in past years, many of their residents moving on, in search of better economic opportunities (see report by Partridge et al. for further discussion of this important issue). 

Among the high unemployment nonmetro counties, nearly 46 % are designated as “low employment counties,” that is, counties where a third or more of the working-age population (21-64 years of age) was not employed in the labor force in 2000.  Such counties may be experiencing high underemployment or the presence of a large number of discouraged workers who no longer consider themselves part of the labor force. 

chester county rifle range The Herald, Rock Hill, South Carolina In Jan-Feb 2009, unemployment was above 15% in Chester County, South Carolina. Residents Rog Rodgers, left, and Dean Brady recently opened a shooting range there.

Roughly 38% of the high unemployment counties are low education counties, suggesting that in a sizable proportion of these counties, the economy may be tied to low-skilled manufacturing jobs. We checked into this matter further and discovered that about 52% of the manufacturing-dependent nonmetro counties labeled as “high unemployment” for the January/February 2009 period were simultaneously considered low education counties (data not shown).  

Finally, over 28% of the high unemployment nonmetro counties are persistently poor, suggesting that the high rates of unemployment reported in January and February 2009 is simply the continuation of longstanding economic struggles these counties have faced for many years.   

Lionel "Bo" Beaulieu directs the Southern Rural Development Center at Mississippi State University; Roberto Gallardo is a research associate at the Center.

Comments

persistent poverty

Congratulations Bo and Roberto for untangling the data that help us understand the trends of our time. Sally