Saturday, April 30, 2011

Recovery And Outmigration

Moving from a place of high unemployment to one of low unemployment can help a national economy recover. However, the hardest hit metros must shrink to stabilize. Job creation happens elsewhere:

Using the steel- and auto- related job losses in the early 1980s as an example, a paper discusses the long-run effects of massive job losses. The authors found that after an initial spike in the unemployment rate in the impacted local economies, the rate converged back to the national average after five or six years. However, high out-migration (and low in-migration) led to this reduction in unemployment, rather than an increase in new jobs. Similarly, a landmark study found that those U.S. multi-state regions that experienced downward employment shocks returned to a more normal path of employment growth within five to ten years. However, the lost jobs were never recovered.[1]

I assume "lost jobs" refers to the actual position, not the total number employed. That gets me thinking about the disconnect between population and labor force. In popular parlance, migration is tied to population. If a region is shrinking, that means everyone is leaving.

The picture painted is a distortion of what is really happening on the ground. Population decline will continue long after the exodus ends. The perception is that the brain drain also lasts decades, one of those stubborn mesofacts. The labor force numbers tell a different story. Chris Briem (Null Space) looking at recent Pittsburgh history:

Those numbers reflect the 7-county MSA. The economic crisis is the recession of the early 1980s. The long and painful recovery is evident. Someone correct me if I am wrong. From 1980-2000, the 7-county MSA lost about 200,000 people. Yet, by my reckoning, the labor force is bigger in 2000 than it was in 1980. Whatever the exact numbers, Pittsburgh's population shrank while the labor force is at least the same as it was just before the devastating recession.

Or, look at the 70s. Again, the population declined over that decade. Yet the labor force dramatically grew. Even the powerful correction failed to reduce the number of employment seekers to 1970 levels, not even close. Unless my eyes deceive me, the Pittsburgh MSA has gained about 200,000 workers in 40 years. That's impressive for a dying city.

Back to the original issue of net outmigration and economic recovery ... How much of the labor force is leaving the region and how long before those numbers return to pre-recession levels? The data we typically track include children and retirees. In other words, we consider total population. This is a lousy way to take stock of the situation. If the labor force is growing, then how can a magazine or newspaper label a metro as "dying"?


BrianTH said...

Keep in mind women, who have increased their participation in the labor force. In fact, my understanding is that Pittsburgh was on the low side for female participation in the labor force pre-steel-bust, but that is no longer true. Assuming that is correct, that means women explain even more of the discrepancy between population and labor force trends.

Jim Russell said...

I would guess that you are right about women being a big part of the workforce growth.

This post is an initial stab at replacing population numbers with workforce data. I think that makes more sense given the growing "war for talent".