Place-Based Labor Market Inequality

Agnes, Isabella; Liu, Jessica; Troland, Erin; Webber, Douglas A.

doi:10.17016/FEDS.2025.040

Working Paper

Place-Based Labor Market Inequality

Abstract: This paper presents an overview of how various labor market indicators differ across geography. While many indicators are often discussed in terms of national aggregates, such discussions obscure the large degree of variation that exists across localities. We primarily use counties as a geographic unit, and document both structural differences that persist over time as well as differences in the past two business cycles. The racial composition of communities plays a large role in explaining geographic differences in labor market indicators, in some cases even more so than income. We specifically focus on the importance of labor market tightness in the general economic development of counties and in the recovery from the pandemic recession. We find substantial heterogeneity in the degree of labor market tightness across counties, as measured by the vacancy rate using job postings from Lightcast, and moreover find a close connection between this rate and county income growth. Finally, we show how the distribution of labor market tightness evolved over the course of the pandemic.

JEL Classification: J20; J60; R00;

https://doi.org/10.17016/FEDS.2025.040