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Looking Beyond The Unemployment Rate

State, regional and local employment data are among the key variables assessed by location decision-makers when evaluating sites for new jobs and investment. Analysts and advisors want to understand the number of persons employed by industry and occupation and, perhaps more meaningfully, the supply of experience and talent within the local labor market.

One of the more misunderstood and misleading markers of a region’s labor availability is its unemployment rate. According to the US Department of Labor (USDOL), the unemployment rate represents the number of unemployed people as a percentage of the labor force.  Certainly, those classified as unemployed comprise a latent workforce for any incoming employer, provided that their skills and experiences match the requirements of any new job. However, site selectors who rely excessively on this single metric risk are underestimating the wider potential pool of available workers in a given location.

An unemployed person is someone who is counted within the civilian labor force and is available for and actively seeking work. This is an important distinction; if an unemployed person is not available for work and/or is not looking for work, they are not considered to be a labor force participant and thus will not be tallied in the ranks of the unemployed.

Some of these individuals may still be of interest to a new employer. Some may have never held a job, while others may have dropped out of the labor force having been discouraged by the lack of quality job opportunities or kept from work due to family obligations or health issues. An area with an unusually low Labor Force Participation Rate may possess untapped or unrecorded labor resources that might be drawn into the workforce for the right opportunity.

The USDOL defines the civilian labor force as the sum of all persons in the noninstitutional population classified as employed or unemployed. This group comprises persons 16 years of age and older, persons who are not on duty in the armed forces and anyone who might work 15 hours or more without pay in a family-owned enterprise.

Site selectors might also investigate and benefit from these prospective pools of underemployed workers:

  • Students who may not be in job mode but will soon discover the need to earn. Their nascent talents may render them suitable for entry-level positions in a wide variety of employment opportunities.
  • Persons working less than full-time in family businesses that need to supplement their incomes.
  • Spouses of military personnel, many of whom are often highly educated and/or as highly skilled as their wives or husbands.

The U.S. Census Bureau maintains several data bases that can help a persistent analyst begin to delineate the underemployed in a search area:

What I hope site selectors and location decision makers will take into consideration is the importance of looking past simple numbers, such as the unemployment rate, when assessing a location’s potential to sustain new jobs and investment. Of course, this advice extends beyond labor metrics, to incorporate the whole range of locational variables that will influence corporate location decisions. By doing so, we pave the way for more informed, strategic decisions that transcend the superficiality of numerical metrics, ensuring sustainable development and prosperity for both businesses and communities alike.

Andrew Shapiro

Managing Director

Andy Shapiro heads the firm's location advisory practice from its San Francisco Bay Area office, helping clients translate their business objectives and strategic vision into rational, balanced location decisions. His primary responsibilities include site selection, feasibility economic impact analysis and market analysis.

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