Rural Employment and Unemployment

This topic page provides information and research findings about rural (nonmetro) labor markets, with a focus on 2007-16. Highlights include the profound effects of the 2007-09 recession and the slowness with which rural employment has recovered. While nonmetro employment has increased, especially in 2014-16, the share of the rural (nonmetro) population that is employed remains low relative to pre-recession levels.

The labor market measures discussed here include the level of employment, the employment-to-population ratio, the unemployment rate, and the labor force participation rate. The labor market data are from the Bureau of Labor Statistics, whose Local Area Unemployment Statistics (LAUS) program prepares quarterly county-level estimates of employment and unemployment. The LAUS county-level data are aggregated into urban (metropolitan/metro) and rural (nonmetropolitan/nonmetro) summaries for the United States, based on the Office of Management and Budget's 2013 metropolitan classification. Data are adjusted for seasonality, and corrected to reflect updated estimates of national trends in total employment. County population data are from the Bureau of the Census, and were adjusted to reflect only the civilian noninstitutionalized adult population. Information on industrial employment trends comes from the U.S. Department of Commerce, Bureau of Economic Analysis.

Labor market measures include:

Nonmetro Employment is Growing but Has Not Fully Recovered From Great Recession

The number of employed nonmetro residents (people employed in full- and part-time wage and salary jobs, as well as the self-employed) peaked in the first quarter of 2007 and had begun to fall prior to the official onset of the recession in December 2007. By the end of 2009, nonmetro employment had fallen by more than 6 percent relative to its peak. Metro employment, by contrast, grew during 2007 and peaked in the first quarter of 2008. Metro employment then fell for the next 2 years, and by the end of 2009 was 5 percent below its peak. Estimated employment losses as a proportion of their peak values were thus somewhat larger in nonmetro than metro areas, and began a year earlier.

Employment began to recover over the course of 2010 and 2011 in both metro and nonmetro areas. But nonmetro employment growth stalled and then turned slightly negative in 2012 and 2013. Nonmetro employment growth resumed in 2014, but stalled again in 2015. Nonmetro employment in the first half of 2016 rose above its 2015 level, but as of the 2nd quarter of 2016, there were still fewer nonmetro jobs than at the start of the recession. Nonmetro employment was estimated at 20,091,000 in the 2nd quarter of 2016 (seasonally adjusted), 2.9 percent below its level in the 1st quarter of 2007 (20,684,000). By contrast, metro employment had exceeded its pre-recession peak by 4.8 percent by the 2nd quarter of 2016.

Statistical analysis reveals that about half of the nonmetro employment growth deficit relative to metro areas between 2010 and 2013 was due to the fact that nonmetro population growth was near zero over this period, while metro population was growing. Employers also created more jobs in areas with younger and better educated workforces, and both of these factors work against nonmetro areas. Together, these effects outweighed the benefits of a more favorable mix of industries in nonmetro counties, in particular a higher employment share in agricultural and extractive industries that have fared relatively well. See the ERS report for more information:

 

Employment-to-Population Ratios Remain Depressed in Both Metro and Nonmetro Areas

The employment-to-population ratio expresses total employment as a share of the civilian non-institutionalized population of working age (the number of adults 16 and older who are not on active duty in the military and are not residents of institutions such as nursing homes or prisons). On the eve of the 2007-09 recession, 63 percent of these adults were employed nationwide. By 2010, this ratio had fallen by 5 percentage points, to levels not seen since 1983. Since then, it has recovered very slowly, and remains well below pre-recession levels.

Metro area adult employment-to-population ratios are consistently higher than in nonmetro areas, due to the younger average age of the metro population. The metro employment ratio reached its low in the 4th quarter of 2010, at 58.4 percent. Since then, metro employment has grown by 9.5 percent while the adult population has grown by 6.1 percent. The metro employment-to-population ratio, consequently, has gradually risen (to 60.3 percent) but is still 3.2 percentage points below its value at the start of 2007.

The nonmetro adult employment-to-population ratio reached a low of 54.3 percent in the 4th quarter of 2009. Since then nonmetro employment has grown by 3.7 percent while the adult population has grown by just 0.6 percent, and the employment-to-population ratio has gradually risen to 56.0 percent, still 2.7 percentage points below its value at the start of 2007.

Only a portion of this decline in the employment-to-population ratio can be attributed to the aging of the workforce and the ongoing retirement of the "baby boom" generation. This can be illustrated by looking at employment rates for the prime working-age population, those age 25-54. These data are not available separately for metro and nonmetro counties, but at the national level, the employment rate in the 2nd quarter of 2016 was still 2.4 percentage points below its value in the 1st quarter of 2007.

Unemployment Recovering More Rapidly, Largely Due to Falling Labor-Force Participation

Unemployment rates have recovered significantly since the end of the recession. In 2007, the nonmetro unemployment rate averaged 5.2 percent, compared to 4.5 percent in urban areas. As the recession unfolded, metro and nonmetro unemployment rates rose rapidly, peaking at 9.9 and 10.3 percent respectively in the 1st quarter of 2010. Since that time, the two unemployment rates have followed similar downward trends. The seasonally adjusted nonmetro unemployment rate stood at 5.4 percent in the 2nd quarter of 2016, while the metro rate fell to 4.8 percent.

Slightly more than half of these declines in the unemployment rate, however, is due to a reduction in the number of people seeking work, not an increase in the number of people working. As illustrated below, the share of the adult population that was either employed or actively seeking work (the labor force participation rate) has fallen steadily since the end of the recession. If participation rates had held steady at the levels observed in the 1st quarter of 2010, and given observed rates of population and job growth, we can calculate that the nonmetro unemployment rate would have been 7.8 percent in the 2nd quarter 2016, rather than 5.4 percent. Thus, roughly half of the observed decline in the unemployment rate since 2010 is due to a reduction in the size of the labor force, not an increase in employment. In metro areas, the calculation yields the same result: the unemployment rate would have been 7.3 percent, not 4.8 percent, in the second quarter of 2016 had labor force participation rates remained constant.

Labor Force Participation Continuing To Fall, in Part Due to Aging Population

The decline in the labor force participation rate has followed a similar trend in metro and nonmetro areas. Statistical analysis by the Council of Economic Advisers concludes that roughly half of the national decline between 2007 and 2014 was due to the aging of the population; one-sixth was a "cyclical decline in line with historical patterns in previous recessions;" and the remaining one-third was due to other factors. In particular, the Council noted that age-specific participation rates had been declining for both prime working-age men and women prior to the Great Recession, a trend which has continued. In addition, the severity of the Great Recession, which has resulted in unusually high rates of long-term unemployment, may have further discouraged workers from entering or remaining in the labor force.

In metro areas, the growth in population means that the total size of the labor force is still growing. However, in nonmetro areas, where population growth is near zero, the decline in labor force participation translates into a shrinking labor force.

Geography of Employment Growth

Roughly three-fifths of nonmetro counties (1,227 out of 1,976) experienced employment growth between the first half of 2015 and the first half of 2016. This represents a slight decline in the number of counties with growing employment compared to the prior year: when we compare the first halves of 2014 and 2015, we find rising employment in 1,336 counties (68 percent of nonmetro counties).

Many counties with falling employment levels were located in States with significant oil and gas resources that had seen employment growth in past years—such as North Dakota, Oklahoma, and Pennsylvania—and the trend reflects a recent decline in mining activity.

Industrial Composition of Employment

In 2014, farm employment (both self-employed farm operators and their hired workers) accounted for about 6 percent of all nonmetro employment, compared to 1 percent in metro areas. Manufacturing also employed a larger share of the nonmetro than the metro workforce (11 percent versus 6 percent in metro areas). Services such as finance, real estate, and administration were more common in metro areas, while government employment was marginally more common in rural counties (16 percent) than in metro (13 percent).

The industries that have driven job growth between 2001 and 2014 (the last year for which data are available), and those that are contracting, are fairly similar in metro and nonmetro areas. In particular, manufacturing contracted sharply (declining by 22-24 percent) in rural and urban areas, while almost all industries in the services sector grew. Mining employment more than doubled (albeit from a low base year share) in both metro and nonmetro counties.

Download a detailed table of employment levels and shares for metro and nonmetro areas, 2001 and 2014.