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Rural Areas and Middle America See Smaller Employment Losses from COVID-19

Seung Jin Cho (sjcho@iastate.edu), Jun Yeong Lee (jylee89@iastate.edu), and John V. Winters (winters1@iastate.edu)

The COVID-19 pandemic has disrupted economic activity and resulted in historic unemployment levels (BLS 2020). However, the severity of employment losses varies across industries and geographic areas (Cho, Lee, and Winters 2020). While the economic situation is still evolving quickly, it is important to understand where the job losses are most and least concentrated. To do so, we first examine differences in employment losses between rural and urban areas in the United States, and then we examine differences across regions of the United States.

We expect rural areas to have less severe employment losses from COVID-19 than urban areas. COVID-19 confirmed infection rates have been initially higher in densely populated urban areas as compared to less-dense rural areas, and the higher infection rate in urban areas should result in higher rates of firms shutting down and workers losing jobs. Additionally, jobs in rural areas have stronger ties to agriculture and other aspects of food production that are essential. We also expect employment losses in Middle America to be less severe than losses in coastal regions because of lower infection rates and stronger connections to agriculture and food production.

We examined data from the US Current Population Survey accessed from the Integrated Public Use Microdata Series (IPUMS) (Flood et al. 2020). For our purposes, we consider all residents of metropolitan areas as urban, and all persons not living in a metropolitan area as rural. The US Bureau of Labor Statistics (BLS) classifies individuals age 16 and older (excluding active-duty military) as employed, unemployed, or not in the labor force. Individuals are unemployed if they are not working but would like to work and have looked for work in the past four weeks or are on temporary layoff. The labor force includes both employed and unemployed persons. Following BLS definitions, we compute the unemployment rate as the total number of unemployed persons divided by the total number of persons in the labor force. The labor force participation rate is the percentage of the civilian adult population that is in the labor force. Finally, employed persons are separable into those at work and those temporarily absent. We also compute the percentage of the civilian adult population that is employed and at work and focus on that as our preferred overall measure of employment changes, similar to Cho and Winters (2020). This latter measure accounts for changes in labor force participation and changes in workers temporarily absent from work that the unemployment rate does not account for.

Figure 1 reports the monthly unemployment rate from January 2019 to May 2020 separately for rural and urban areas. The rural unemployment rate was consistently above the urban unemployment rate from January 2019 to February 2020. However, the urban unemployment rate surpassed the rural rate in March 2020 as the early effects of COVID-19 began hitting urban labor markets. April 2020 experienced a massive rise in unemployment for both rural and urban areas with the rural unemployment rate rising to 13% and the urban unemployment rate reaching 14.7%. The unemployment rates for both decreased somewhat in May 2020 as some closed businesses began reopening. However, the May 2020 unemployment rate was still painfully high at 10.6% for rural areas and 13.3% for urban areas.

Figure 1
Figure 1. Rural and urban unemployment rates, January 2019–May 2020.

Figure 2 illustrates the monthly labor force participation rate from January 2019 to May 2020. Rural areas have consistently lower participation rates than urban areas throughout this period, which may reflect a combination of differing employment opportunities, age structure, gender norms, and other factors. The COVID-19 pandemic reduced labor force participation rates in both rural and urban areas, but the decrease was slightly larger in urban areas.

Figure 2
Figure 2. Rural and urban labor force participation rates, January 2019–May 2020.

Figure 3 presents the employment-at-work rate for rural and urban areas. Rural areas again have consistently lower rates than urban areas throughout the entire period, likely for similar reasons as for the labor force participation rate. COVID-19 considerably reduced employment-at-work rates in both rural and urban areas with sharp decreases in April 2020 and some recovery in May 2020. However, the magnitude of the decrease due to COVID-19 is much smaller in rural areas, and the urban-rural gap in the employment-at-work rate reached its lowest level in May 2020 among the period examined. That is, the COVID-19 pandemic has thus far imposed greater employment rate decreases on urban areas than rural areas.

Figure 3
Figure 3. Rural and urban employment-at-work rates, January 2019–May 2020.

We examine differences in employment losses across the United States based on the eight broad US Bureau of Economic Analysis regions (see figure 4). Table 1 shows year-over-year changes in employment-at-work rates. The Plains region has the smallest year-over-year decrease for both April and May. Specifically, the employment-at-work rate for April 2020 was 8.01 percentage points lower than in April 2019 for the Plains and 14.75 percentage points lower for the neighboring Great Lakes region. The 2019–2020 decrease for May was 6.01 percentage points for the Plains region, while the corresponding decrease for New England was twice as large. By May 2020, the Southwest and Rocky Mountain regions were also doing much better than New England, the Mideast, and the Far West regions. Overall, the middle regions of the country (i.e., “Middle America”) experienced less adverse employment impacts. Columns 3 and 4 of table 1 show that the less severe impacts in Middle America generally hold even when just comparing rural areas or just comparing urban areas. Furthermore, comparing columns 3 and 4 shows that rural areas have been less severely affected than urban areas within every BEA region.

Figure 4
Figure 4. US Bureau of Economic Analysis regions.
Table 1. Year-over-Year Employment Rate Change by Region and Rural-Urban Status
(1)
April
(2)
May
(3)
Rural
(4)
Urban
New England Region-13.93-12.81-9.30-13.73
Mideast Region-13.91-11.42-10.43-12.79
Great Lakes Region-14.75-10.76-9.01-13.51
Plains Region-8.01-6.01-5.99-7.40
Southeast Region-11.42-8.86-7.98-10.56
Southwest Region-10.71-6.05-8.07-8.60
Rocky Mountain Region-10.23-6.84-5.65-9.54
Far West Region-12.30-11.43-6.70-12.20
Notes: Column 1 shows the change from April 2019 to April 2020 and column 2 shows the change from May 2019 to May 2020. Columns 3 and 4 report year-over-year changes for rural and urban areas, respectively, averaged over April and May.

COVID-19 has severely disrupted the US labor market, and full recovery will take time. However, the early impacts vary across areas. Rural areas have been less hard hit than urban areas, and regions in Middle America have been less hard hit than the Northeast and Far West regions.

References

Bureau of Labor Statistics (BLS). 2020. “The Employment Situation – April 2020.” US Department of Labor News Release USDL-20-0815.

Cho, S.J., J.Y. Lee, and J.V. Winters. 2020. “COVID-19 Employment Status Impacts on Food Sector Workers.” Iowa State University Department of Economics Working Paper No. 20013.

Cho, S.J., and J.V. Winters. 2020. “The Distributional Impacts of Early Employment Losses from COVID-19.” Iowa State University Department of Economics Working Paper No. 20011.

Flood, S., M. King, R. Rodgers, S. Ruggles, and J.R. Warren. 2020. Integrated Public Use Microdata Series, Current Population Survey: Version 7.0 [dataset]. Minneapolis, MN: IPUMS.