What America can learn from cities with super-low unemployment

4.1% unemployment, lowest in 17 years

In one sense, Ames, Iowa, has something any other city might envy: An unemployment rate of 1.5%, the lowest in America.

Buoyed by Iowa State University’s main campus, this metropolitan area with about 100,000 people just 40 miles north of Des Moines has long had a tighter-than-average labor market, meaning that almost everyone who wants a job can find one. But there’s a downside to having that many jobs: Businesses looking to expand or relocate have a tough time finding employees.

“If a company was doing a site search, and were basing it strictly on the unemployment rate, we would be out every time,” said Dan Culhane, president of Ames’ Chamber of Commerce. They’re still able to find the workforce, Culhane explains, but it usually requires luring someone with the promise of higher pay or recruiting from out of town.

Ames’ mixed blessing is an extreme version of what the U.S. may face should unemployment sink further past its current 16-year low of 4.1%: An undersupply of workers readily available for the work that needs doing. Economists at Goldman Sachs expect the rate to get as low as 3.3% by 2019, even if wages rise enough to draw people who had given up looking for jobs following the Great Recession back into the workforce.

That wouldn’t be as much of a problem, of course, if unemployment were uniform across the country. There are still pockets with much higher unemployment rates, particularly in cities in California and New Jersey, where the housing bust hit hard.

So why don’t people just relocate from those cities to places like Ames?

One big reason unemployment is low in the upper Midwest: It’s hard to get people to move there.

The very tightest job markets are overwhelmingly concentrated in a small part of the country.Out of the 20 metro areas with the lowest unemployment rates in November 2017, 14 are inMinnesota, Iowa, North Dakota, and Wisconsin.

Those regions have seen a run of good economic luck. Most of them didn’t overheat during the housing bubble, and thus didn’t fall too hard during the crash. As the recession wore on, agricultural areas were bolstered by high prices for corn and soybeans. These economies relied on some manufacturing, but few whole towns depended on it or suffered terribly as factories disappeared, like those in Michigan and Ohio. The upper Midwest has also largely managed to escape the opioid epidemic that has swept through the rest of rural America.

Meanwhile, North Dakota’s oil-rich Bakken shale formation…

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