Nonmetro vs. Metro Unemployment Rates
April 29, 2024Through the past several decades and into the recovery from the COVID-19 pandemic recession, the nonmetro and metro areas of Oregon have experienced very different economic trends. In Oregon, statewide unemployment rate trends are tightly tied to the metro areas and in particular, to Oregon’s most populated counties in the Portland metro area. When we break out the unemployment rates of nonmetro and metro areas, we can see how economic experiences vary across the state.
For this analysis, “metro” is the group of 13 counties that make up Oregon’s eight Metropolitan Statistical Areas (MSAs) and “nonmetro” is the group of 23 remaining counties. MSAs are defined as having at least one urbanized area of 50,000 or more inhabitants and its surrounding county or counties based on population and commuting patterns. For this analysis, Portland Metro is the counties that make up the Oregon portion of the Portland-Vancouver-Hillsboro MSA.
The MSA definition is used due to the breadth of information available at the county level, but it is not a perfect representation of Oregon’s urban economies. While it encompasses Oregon’s most urban areas, many counties defined as metro are very rural in character outside of city limits, so some rural attributes are included in metro areas.
Unemployment Rates Have Tended to Be Higher in Nonmetro Oregon
Traditionally, nonmetro Oregon has higher unemployment rates than metro Oregon. This has been the case since at least 1990, the furthest back these data are available. From 1990 to the present, the long-run average unemployment rate for nonmetro Oregon was 7.7%, compared with 6.0% for metro Oregon.
There are several possible reasons the nonmetro unemployment rate is higher:
- It may be more difficult for workers in rural areas that lose or leave a job to find their next job due to the smaller number of businesses and jobs within commuting distance, which likely means a longer time spent unemployed and seeking that next job, increasing frictional unemployment.
- Rural economies are often dependent on a single business or a certain type of economic activity. If that business suffers, local workers may have difficulty finding a similar job using their skills at another business, leading to increased structural unemployment. Some examples of nonmetro areas that are dependent on a single industry include communities reliant on wood products and those that are dependent on the tourism related leisure and hospitality industry.
- A larger share of nonmetro economic activity is based on seasonal agriculture and resource extraction industries, leading to a higher degree of seasonal unemployment in these local economies.
Trend data shows that the gap between the unemployment rates of nonmetro and metro Oregon has narrowed over time. Back in the 1990s, nonmetro unemployment rates were often 3 to 4 percentage points above the level in the state’s metros. Early in the 2000s, metro areas were significantly impacted by the bursting of the dot-com bubble, which was particularly acute in the Portland area, Oregon’s largest metro area. At that point, nonmetro unemployment rates converged with the metro rates, bringing nonmetro within a percentage point of the metro unemployment rate.
The subsequent Great Recession caused the gap to widen somewhat as nonmetro unemployment rates remained higher for a longer time during the recovery. By 2012, the gap had widened to 2 percentage points. The recovery from the Great Recession was one of the longest in history and both nonmetro and metro Oregon reached record low unemployment rates in late 2019. The gap once again narrowed to about 1 percentage point. One possible reason the gap narrowed may be that nonmetro counties generally have older populations than metro counties and retirements can keep unemployment rates down since, when people retire, they are not counted as unemployed but often leave an opening that needs to be filled.
Pandemic Restrictions and Economic Recovery Affect Unemployment Rates
Due to the onset of the COVID-19 pandemic and related business closures, both nonmetro and metro areas reached record high unemployment rates in April 2020 of 14.3% and 12.8%, respectively.
All of Oregon’s 36 counties experienced over-the-month increases in April 2020. Counties with a high concentration of jobs in the leisure and hospitality industry had the highest rate increases. Nonmetro Lincoln County had the largest increase of 19.8 percentage points to reach a 24.0% rate. However, because of their concentration of restricted businesses, three of the top 11 counties with the largest increase – Deschutes (18.6 percentage points), Multnomah (11.6 percentage points), and Lane (10.2 percentage points) – are metro counties. All of the 10 counties with the smallest increase were nonmetro counties, except for Benton County.
While all county-level unemployment rates increased, the relative ranking from highest to lowest shifted. The timing of reopening and a county’s relative share of employment in restricted businesses, especially those in the leisure and hospitality industry, caused a shift to lower unemployment rates in nonmetro counties, especially in Eastern Oregon, and to higher rates in metro counties, especially in Western Oregon.
Metro unemployment rates remained elevated into the second half of 2020 for several reasons. First, the delayed opening of counties in the Portland and Salem metro areas kept employment growth down. Second, the Corvallis and Lane metro areas are home to major universities that were affected by school closures and a switch to virtual learning. Finally, the Bend metro area has a large concentration of employment in the leisure and hospitality industry, causing it to have a large unemployment rate increase. Meanwhile, all nonmetro areas were reopening. The nonmetro counties on the coast with high unemployment rates have relatively small labor forces that have little effect on the overall nonmetro rate. Because of this dynamic, in the second half of 2020, the nonmetro unemployment rate was lower than the metro rate for the first time in the history of the data, which began in 1990.
As of the writing of this article in early 2024, the recovery from the pandemic recession is practically complete. Most counties are again near record low unemployment rates and the nonmetro unemployment rate is again higher than the metro rate. The traditional county distribution of unemployment rates that are generally higher in nonmetro areas in southern and eastern Oregon and lower in metro areas especially in western Oregon has returned, although it is not as definitive as in the past. The gap between nonmetro and metro unemployment rates has not quite returned to the pre-pandemic level of around 1 percentage point.
Going forward, several factors could affect the difference between metro and nonmetro unemployment rates. Continued retirements may help keep nonmetro rates low. Additionally, remote work may help the economy of some nonmetro counties, helping to lower unemployment rates. Conversely, it may harm the economy of urban core areas, raising unemployment rates.