publications | Business Conditions, Economy

Chart of the week: When a low unemployment rate is not good news

January 06, 2023
  • Yesim Sayin
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Click the chart to enlarge. (Source)

After peaking in April or May of 2020, unemployment rates declined across large metropolitan areas, often to below pre-pandemic levels. For example, in the Washington metropolitan area, the unemployment rate increased from 3.4 percent in January 2020 to 9.6 percent in May 2020. But the most recent data release from the Bureau of Labor Statistics show that in November of 2022, the region’s unemployment rate was at a near-record low at 3.1 percent. 

While a low unemployment rate is generally seen as positive news, how we got there also matters. In our region, the lower unemployment rate has not been driven by growing employment. Rather, it is the result of a shrinking labor force. 

To wit, in November 2022 (the latest month for which data are available), total employment in the region remained at 155,000 below pre-pandemic levels. After losing about 440,000 jobs in the first few months of the pandemic, the region recovered nearly 245,000 jobs over the last 30 months. But, during the same period, the region’s labor force continually declined, and now stands at 3.35 million or, nearly 179,000 below pre-pandemic levels.  As a result, unemployment, and unemployment rate, are down, compared to the January of 2020, but this is a result of people checking out of the regional workforce, either because they don’t want to work any more or because they have moved elsewhere.

The same pattern can be seen in other large and high-cost metropolitan areas. For example, the New York and San Francisco metropolitan areas are experiencing unemployment rates at or below pre-pandemic levels, but both regions lost many more people (in their labor force) than jobs. 

Conversely, lower cost metropolitan areas such as Atlanta, Dallas, Houston, Phoenix, and Riverside have recovered are performing better than they did before the pandemic. All of these regions have managed to return to their pre-pandemic unemployment rates while adding more people to their labor force (thus attracting new workers and enticing more residents to join the workforce) while adding even higher numbers of jobs (thus creating employment for those who were previously unemployed). 

Author

Yesim Sayin

Executive Director
D.C. Policy Center

Yesim Sayin is the founding Executive Director of the D.C. Policy Center.

With over twenty years of public policy experience in the District of Columbia, Dr. Sayin is recognized by policymakers, advocates and the media as a source of reliable, balanced analyses on the District’s economy and demography.  Yesim’s research interests include economic and fiscal policy, urban economic development, housing, and education. She is especially focused on how COVID-19 pandemic is changing regional and interregional economic interdependencies and what this means for urban policy. Her work is frequently covered in the media, including the Washington Post, the Washington Business Journal, the New York Times, the Wall Street Journal, WAMU, and the Washington City Paper, among others.

Before joining the D.C. Policy Center, Dr. Sayin worked at the District of Columbia Office of the Chief Financial Officer leading the team that scored the fiscal impact of all legislation the District considered. She frequently testified on high profile legislation and worked closely with the executive and Council staff to ensure that policymakers fully understand the fiscal implications of their proposed legislation. Yesim also has worked in the private sector, and consulted with international organization on a large portfolio of public finance topics.

Yesim holds a Ph.D. in economics from George Mason University in Fairfax, Virginia, and a bachelor’s degree in Political Science and International Relations from Bogazici University, located in Istanbul, Turkey. 

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