Unemployment and Urbanization

by Amanda Rohrer - amanda.rohrer@state.mn.us
December 2011

This is the first in a series of articles that use monthly Current Population Survey (CPS) data to explore issues related to Minnesota’s labor force. The series will appear every other month during 2012 in the Minnesota Employment Review.

When we think about regional unemployment, the images that generally come to mind are rural towns decimated by a factory closure or down-and-out urban core neighborhoods. However, much of the population live, work, and are unemployed in places that fall somewhere in between.

In 2011 approximately 12 percent (366,000 people) of the labor force lived in micropolitan areas in Minnesota. Another 13 percent (385,000 people) lived in rural counties outside any metro or micropolitan area. While unemployment rates vary greatly by level of urbanization, no type of urbanization shows a distinct trend over the past 10 years.  No area has gained or lost ground at a significantly faster annual rate than the others for any extended period (see Chart 1).

Unemployment rates in rural counties are the highest in the state. They’re highly volatile, fluctuating from slightly below the statewide average in the warmer months to well above average in the winter. Overall, proximity to a population center is an insulating factor against unemployment (see Chart 1), a luxury that most rural counties lack. The micropolitan areas in aggregate tend to have more seasonal variability and somewhat higher unemployment rates overall than metropolitan areas with the exception of the Duluth MSA. 

Employment numbers tell a slightly different story. In the Minneapolis-St. Paul MSA the average annual growth rate from 2000 to 2010 was 0.03 percent. During that same period only rural counties and the Duluth MSA saw lower rates of growth — rural counties grew 0.01 percent annually, and Duluth employment declined by 0.01 percent annually. Micropolitan areas grew by only 0.1 percent annually, well below growth in the smaller metros. Employment in the Mankato MSA grew at the fastest rate — 0.8 percent annually, with the Rochester and St. Cloud MSAs close behind at 0.7 and 0.6 percent annually. 

From 2007 to 2010, the worst years of the recession, this trend was actually reversed. The largest employment declines were in the Minneapolis-St. Paul MSA, down 0.83 percent annually (see Table 1). All of the other metros also saw declines except for the Mankato MSA, which was up 0.72 percent annually. The micropolitans grew by 0.10 percent annually, while rural counties saw employment grow 0.68 percent annually over the period.

Conversely, between 2007 and 2010 unemployment increased more slowly in the most depressed areas of the state.  Employment increased in rural counties by 15.3 percent, in the Duluth MSA by 16.22 percent, and in the micropolitans by 18.9 percent. The Minneapolis-St. Paul and Mankato MSAs trailed, adding the most to unemployment with rates up 22.5 percent and 23.7 percent respectively.

The U.S. Office of Management and Budget has two designations for cities.  Metropolitan Statistical Areas (MSAs) comprised of counties and not limited by state boundaries, are the most densely populated regions with a minimum of 50,000 total inhabitants. In Minnesota we claim five MSAs – Duluth, Mankato, Minneapolis-St. Paul, Rochester, and St. Cloud. Grand Forks, Fargo, and La Crosse also cross state lines but are assigned to other states based on which has the largest share of the population.  In total Minnesota counties are included in eight MSAs while Duluth and Minneapolis-St. Paul also include Wisconsin counties. Micropolitan Statistical Areas are also county based, but have a population between 10,000 and 49,999; Minnesota has 16. These designations are used by many organizations that produce data, allowing consistent comparisons between data sources.

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