What determines county jobless rates?

The unemployment rate is one of the most closely tracked of economic statistics. There are two reasons for this. First, unemployment rates for the nation, state and local areas (counties, metropolitan regions) are released each month and with a rather short lag – so the information is reasonably up-to-date.

Second, an unemployment rate, unlike many economic measures, is relatively easy to understand. It’s the percentage of the adult workforce actively looking for a job.

In any given month in North Carolina the unemployment rate varies by a wide margin among our 100 counties. For example, in February of this year, the jobless rate ranged from a low of 4.1 percent in Alexander and Orange Counties to a high of 15.3 percent in Hyde County.

What’s behind this big difference? At the top of the list is education. Our economy has significantly changed in recent decades. My late father was able to have a successful career and raise a family from the late 1940s to the early 1980s without even a high school degree. His experience is increasingly hard to replicate today.   

This is because the nature of work has changed. Jobs requiring physical strength (like my father did) are now being done by machines and technology. More and more human work today requires cognitive skills learned in school, which often means the worker needs a college degree. Even if the job doesn’t match the individual’s college major, often employers interpret a person with any college degree to have the ability to learn and be productive.

The percentage of adults (age 25 and over) with college degrees varies widely among the state’s counties, from a low of 8 percent to a high of 56 percent.

Employers not only prefer workers who are trained in needed skills, but they also want workers who won’t cost them with higher health care expenditures or greater absenteeism. Two potential measures of these issues – obesity levels and serious alcohol and drug usage – vary significantly across the state’s counties.

Of course, job growth is logically tied to population growth. The more people living in a county, the greater the need for jobs to provide the products and services used by those folks. While several North Carolina counties have had population growth since 2010 approaching 10 percent, over one-third of the state’s counties have actually lost population in recent years.   

Last, the economic prospects of industries are different. At any time, some industries may be growing and adding jobs while others are declining and cutting jobs. Therefore, in analyzing the differences in unemployment rates among counties, it is important to recognize the differences in the industrial makeup of the counties.

To disentangle the effects of these various factors on county unemployment rates, I performed statistical tests of the impacts of measures of the factors on recent North Carolina county jobless rates. For educational attainment, I used the percentage of adults with a bachelor’s degree or higher. County obesity levels and the percentage of the county population being treated in alcohol and drug centers were used to capture personal characteristics that might deter business hiring. Population growth was measured since 2010. The percentage of total county business earnings in key economic sectors controlled for differences in the industrial mix of the counties.

The statistical results were exactly as predicted.  On average, every additional percentage point in the adult population with a bachelor’s degree or more is associated with a 0.05 percentage point lower unemployment rate. Every additional percentage point in county adults classified as obese is related to a 0.1 percentage point higher jobless rate. Every additional percentage point in county individuals being cared for at alcohol and drug treatment centers correlates with an amazing 5 percentage point higher county unemployment rate!

Counties with faster population growth were also found to have lower jobless rates.   Specifically, a one percentage point higher population growth rate during the last five years relates to a 0.07 percentage point lower county unemployment rate.

Regarding economic structure, counties with a higher concentration of manufacturing activity were found to have lower jobless rates. This is probably because manufacturing has enjoyed a strong rebound since the end of the Great Recession.

So what are the conclusions from this analysis of county unemployment rates? First, today’s job market values education. One of the challenges for high-unemployment counties is losing their best and brightest to the state’s big cities.  

Second, the results are consistent with businesses preferring a fitter and “cleaner” workforce.  Anything job-challenged counties can do to reduce obesity and addictions among their workforce can help in job recruitment.

Last, population growth matters. Over one-third of our state’s counties are losing population. It’s difficult to increase jobs and lower unemployment in this situation.

Can we reduce the spread between our county jobless rates? Or, are such differences inevitable and a “fact of economic life” we have to live with? You decide.

Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook, and public policy.