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Who Is Supplying the Labor for Recent Employment Growth in the Rural Fifth District?

Regional Matters
June 20, 2024

Introduction

Although many rural counties in the Fifth District have experienced population growth since 2020, total population has shrunk in rural areas. Rural regions in the United States have long experienced demographic squeezes as older people tend to stay in place and younger people migrate to metropolitan areas. But has the rural labor supply fared better since the COVID-19 pandemic? This post explores how changes in total population, out-of-the-labor-force population, and unemployment explain employment growth across the Fifth District's rural counties. In aggregate, rural counties have experienced modest positive employment growth since 2019, despite a shrinking total population. That growth has stemmed from rural areas that have pulled residents out of unemployment and into the labor force, which differs from urban areas whose employment growth has depended on population growth.

Rural Employment Growth Lagged Urban Growth From 2019 to 2023

Since 2019, rural employment has grown more slowly than urban employment, as measured by the Bureau of Labor Statistics household survey (hereafter referred to as "household employment"). The United States Department of Agriculture (USDA) classifies counties into Rural-Urban Continuum Codes (RUCC) based on their metro status and population. Here, we define "rural" as any county not in a metro area or in a metro area with fewer than 250,000 people. (See this recent Regional Matters for more information.) As of 2023, roughly one of five Fifth District workers live in rural counties, but from 2019 to 2023, only 9 percent of the total net household employment increase came from rural Fifth District residents.

Aggregated, rural areas and urban areas had more similar employment experiences during the pandemic-induced recession than in the ensuing recovery. Employment declined roughly 6 percent between 2019 and 2020 among both rural and urban residents in the Fifth District. In spite of the remote work options enabled during the pandemic, the employment recovery was still stronger among those living in more urban areas. By 2023, employment among urban residents had risen to 2.8 percent above 2019 levels, but only 0.9 percent among rural residents.

So where did this employment growth in urban and rural areas come from? There are three possibilities: (1) New residents became employed; (2) Existing residents moved from out of the labor force into the labor force (and employment); (3) Existing residents moved from unemployed to employed. We examine these three channels below.

Changes in Household Employment, Unemployment, Total Population, and Population Not in Labor Force Across Fifth District Counties From 2019 to 2023, Urban vs. Rural
Employment Change (Level)Unemployment Change (Level)Population Change (Level)Population Not in Labor Force Change (Level)
Urban339,495-34,449839,718534,672
Rural33,352-17,753-59,876-75,474
Employment Change (%)Unemployment Change (%)Population Change (%)Population Not in Labor Force Change (%)
Urban2.8-8.53.44.5
Rural0.9-11.9-0.7-1.6

Source: Bureau of Labor Statistics, American Community Survey

Note: Each series is calculated by summing individual county values by rural-urban status. We assign counties rural or urban status based on the USDA's 2023 Rural-Urban Continuum Codes. We consider counties with a RUCC 1-2 urban and counties with RUCCs 3-9 rural.

Population Has Shrunk in the Rural Fifth District

Although many rural counties grew between 2020 and 2023, in aggregate, population decreased in rural areas in the Fifth District. While rural areas added more than 30,000 residents to employment (0.9 percent), they subtracted almost 60,000 from their population (-0.7 percent). Conversely, employment (2.8 percent) and population (3.4 percent) have risen together in urban areas. Therefore, labor supply (and thus employment) in rural areas has not benefitted from the boost that population growth can provide in urban areas.

Out-of-the-Labor-Force Population Has Declined in Rural Counties

Despite a declining population, a larger share of rural residents is now employed or actively seeking work. In other words, more rural residents have joined the labor force. Urban areas saw a considerable increase (5 percent) in out-of-the-labor-force population. Rural areas, however, saw a notable decrease (-2 percent) in their out-of-the-labor-force population, which was faster than overall population decline (-0.7 percent). This indicates that some rural residents who were previously not in the labor force were pulled into the labor force over the four-year span. The rural labor force participation rate tends to be lower than its urban counterpart, which suggests that rural areas may have had more room to pull people out of the labor force than in urban areas.

Unemployment Has Fallen Faster in Rural Counties

The number of unemployed persons has fallen faster in the rural Fifth District since 2019. Aggregated, unemployment fell more in rural areas (12 percent) than in urban areas (8 percent) between 2019 and 2023. When we compare changes in employment against unemployment in the table above, we can see that urban counties cumulatively added 339,495 to household employment from 2019 to 2023, but their combined reduction in unemployment was only 10 percent of that number (34,449). However, rural counties cumulatively added 33,352 to household employment, and their reduction in unemployment was more than half that number (17,753). These results suggest that the existing pool of unemployed workers provided a source of labor supply for rural areas that it did not provide for urban areas.

Urban vs. Rural Labor Supply in North Carolina: Mecklenburg County vs. Duplin County

To further illustrate the vastly different labor supplies fueling Fifth District employment growth, we contrast the highly urban Mecklenburg County, North Carolina — which encompasses Charlotte — to rural Duplin County. Both counties experienced employment growth (8.4 percent in Mecklenburg and 2.1 percent in Duplin) from 2019 to 2023, but their population growth paths diverged: Mecklenburg (urban) grew by 4.5 percent, and Duplin (rural) fell by nearly 16 percent.

Duplin County's recent employment growth appears to be driven by pulling its existing out-of-the-labor-force residents and unemployed residents into jobs, given the large declines in both measures. Conversely, Mecklenburg County's employment growth appears to be primarily driven by population growth, given the increase in out-of-the-labor-force population and modest decrease in unemployment.

Changes in Household Employment, Unemployment, Total Population, and Population Not in Labor Force Across Fifth District Counties From 2019 to 2023, Mecklenburg County vs. Duplin County
Employment Change (Level)Unemployment Change (Level)Population Change (Level)Population Not in Labor Force Change (Level)
Mecklenburg County, NC49,674-19150,418884
Duplin County, NC507-154-9,282-9,632
Employment Change (%)Unemployment Change (%)Population Change (%)Population Not in Labor Force Change (%)
Mecklenburg County, NC8.4-0.84.50.2
Duplin County, NC2.1-15.4-15.8-28.6

Source: Bureau of Labor Statistics, American Community Survey

Note: Each series is calculated by summing individual county values by rural-urban status. We assign counties rural or urban status based on the USDA's 2023 Rural-Urban Continuum Codes. We consider counties with a RUCC 1-2 urban and counties with RUCCs 3-9 rural.

Takeaways

Collectively, rural areas in the Fifth District have experienced increases in labor force participation and reductions in unemployment that have helped to boost employment from 2019 to 2023. This suggests that these areas have relied on the existing population rather than the new population to fuel employment growth. Of course, individual communities have local and specific labor market dynamics, but overall signs of rural workforce reengagement may bode well for continued economic and community development in rural areas.


Views expressed are those of the author(s) and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.