Unemployment in Rural Areas: Poverty Rates and Labor Market Trends

Unemployment in Rural Areas: Poverty Rates and Labor Market Trends

Unemployment in rural areas is a significant concern, with poverty rates and labor market trends playing a crucial role in understanding the issues faced by rural residents. While overall unemployment rates have recovered from the pandemic-induced downturn, persistent poverty remains a major challenge in some rural and urban counties.

Poverty Rates

According to the Economic Research Service, the poverty rate in rural areas was 15.4% in 2021, compared to 12.8% nationwide. The poverty rate in rural areas has been consistently higher than in urban areas, with levels of rural poverty often double those in urban areas throughout the 1950s and 1960s.

Rural poverty affects a significant portion of the population, with more than 5 million rural residents, or about 12% of the U.S. rural population, living in counties with high and persistent poverty rates in 2019. Of these, 1.5 million individuals had incomes below the Federal poverty threshold, accounting for 20% of the total rural poor population. Rural residents who identify as Black or African American and American Indian or Alaska Native are particularly vulnerable, with nearly half of rural poor individuals in these groups living in high and persistent poverty counties.

Labor Market Trends

The pandemic had a significant impact on rural labor markets, with unemployment rates in rural counties returning to pre-pandemic levels by November 2021. However, persistently poor urban counties did not recover until December 2022 and continue to have the highest unemployment rates.

The unemployment rates in rural counties varied during the pandemic. In persistently poor rural counties, the unemployment rate had more than doubled to a peak of 12.3% in April 2020. In other rural counties, the unemployment rate nearly tripled, surpassing the unemployment rate in persistently poor rural counties with a peak of 13.4%. In urban counties, the unemployment rate nearly tripled for persistently poor counties and surpassed the unemployment rates in rural counties.

The recovery of employment in rural areas has been slower than in urban areas. In April 2020, metro employment was 15.0% below 12 months earlier, while nonmetro employment was 12.2% lower. By February 2021, metro employment was 5.7% lower than in February 2020, while nonmetro employment was 3.4% lower. This suggests that the employment shock at the start of the pandemic had a larger effect on urban counties than rural counties.

Despite these challenges, rural areas have shown resilience in the face of economic adversity. Rural start-ups have consistently had survival rates on par with or even higher than metro start-ups. This resilience is due in part to more cautious business practices in areas with few alternative employment opportunities.

In conclusion, unemployment in rural areas is a complex issue with significant implications for poverty and labor market trends. While there has been progress in reducing poverty rates in rural areas, persistent poverty remains a significant challenge, particularly in historically disadvantaged regions. Addressing these issues will require a combination of economic development strategies, targeted policies, and a continued focus on improving access to education and job opportunities in rural communities.