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September 2002, Vol. 125, No. 9

Job flows and labor dynamics in the U.S. Rust Belt

R. Jason Faberman

Differences in growth, wages, and unemployment across metropolitan areas are well documented in the urban and regional economics literature.¹ Researchers, however, know little about the underlying labor dynamics and establishment characteristics related to such differences. With establishment microdata, linked across time, one can analyze employment growth in terms of the number of jobs created and the number of jobs destroyed. One can also look at how various establishment characteristics (for instance, age, size, and wages paid) relate to growth and unemployment. Many of these analyses have been done at the national level,² but research on the regional aspects of these statistics is sparse, and as a result, economists know little of how the microdata-based statistics behave in local labor markets.³ This article documents that behavior so that both researchers and policymakers can better understand how local labor markets function.

The Rust Belt region of the United States, comprising mostly States in the Upper Midwest and Mid-Atlantic portions of the country,⁴ gets its name from the large concentration of manufacturing activity located there. When manufacturing began a steep decline that lasted throughout the 1970s and 1980s, many of the region's local economies followed suit. Consequently, employment growth in the Rust Belt lagged national growth over the period. It was not until the latter part of the 1980s that the rates of employment growth in the Rust Belt came close to those for the entire Nation. Even during the economic expansion of the 1990s, the Rust Belt lagged the rest of the United States in employment growth.⁵ However, over the same period, economic conditions within the Rust Belt varied substantially. Several local areas saw their economies expand, while others maintained the trend of past decades. This variation in growth makes the Rust Belt a favorable setting for exploring employment dynamics across a range of local labor markets. 

This excerpt is from an article published in the September 2002 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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Footnotes
1 For example, see Edward L. Glaeser, Hedi D. Kallal, Jose A. Scheinkman, and Andrei Schleifer, "Growth in Cities," Journal of Political Economy, December 1992, pp. 1126�; and Edward L. Glaeser, Jose A. Scheinkman, and Andrei Schleifer, "Economic Growth in a Cross-Section of Cities," Journal of Monetary Economics, February 1995, pp. 117�.

2 For a review of the research findings, see Steven Davis and John C. Haltiwanger, "Gross Job Flows," in Orley Ashenfelter and David Card (eds.), Handbook of Labor Economics, vol. 3 (Amsterdam, Elsevier Science, 1999), pp. 2711�05.

3 For the purposes of this article, "local labor market" generally refers to the labor market of a metropolitan area.

4 Conceptions of which States make up the Rust Belt vary. Most often, the five core Midwest States of Illinois, Indiana, Michigan, Ohio, and Wisconsin are defined as the Rust Belt. Some add Pennsylvania to the list, others include New York and New Jersey as well, and still others even count at least some of the New England States in the category. In this article, metropolitan areas from three representative Rust Belt States桵ichigan, Ohio, and Pennsylvania梐re examined.

5 On the basis of aggregate employment data from the BLS Current Employment Statistics program, growth in the United States averaged about 2.1 percent annually from 1970 to 2000. Growth in the Rust Belt States averaged 1.2 percent annually over the same period. For the United States, average annual employment growth was comparable in the 1970� and 1985�00 periods. However, for the Rust Belt States, annual growth in the 1970� period averaged 0.7 percent (about one-third of the U.S. average), while growth in the 1985�00 period averaged 1.7 percent (just over three-quarters of the U.S. average).

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