LaborIQ® Market Index: September 2021 Rankings

October 8, 2021
Author: Mallory Vachon, Ph.D., Sr. Economist

National job gains have slowed substantially, following hiring surges earlier this summer. Despite these setbacks, the U.S. labor market has progressed to reach 96.5% of pre-pandemic employment. The recovery has varied significantly based on location; some metro areas in the Northeast, Midwest and California are still experiencing residual challenges, while others — including Austin, Phoenix and Salt Lake City — are seeing job expansion beyond pre-pandemic levels.

Currently, 10 of the 150 metros ranked in the LaborIQ® Market Index have already exceeded their pre-pandemic employment levels, and another 14 are within 1.0%. Progress to recovery is only one variable calculation in the LaborIQ Index. A strong local job market can fuel other important indicators, such as net migration and wage growth. Some of the very strongest labor markets have experienced robust net migration, with people moving for employment opportunities or as a new home base for remote work. These influxes of population drive local economic growth and fuel the supply and demand for talent.

Labor Market Indicators: Road to Recovery

The proprietary LaborIQ Market Index identifies and tracks 10 key performance indicators that best measure and rank a local economy’s performance. These indicators, or variables, represent the greatest drivers of a market’s economic progress or decline, and track each metro’s progression toward pre-pandemic employment levels and recovery.

The Index enables businesses and talent acquisition professionals to closely evaluate which U.S. metros are primed for recruiting and attracting talent.

Many of the metros ranked in the top 10 have been strong performers throughout 2021, but net migration or job gains are what has driven growth in Dallas, Phoenix and Austin, while Denver, Houston and Seattle have recently joined the ranks due to strong labor-market performance through summer 2021.

The Recovery is Bigger in Texas

Texas metros are clearly national leaders when it comes to economic recovery. In addition to Dallas, Austin and Houston top rankings, San Antonio comes in at number 24. Major metros in Texas are in the top-25 of the LaborIQ Index and are expected to remain top-performing metros for an extended period.

Texas’ four largest metro areas also rank among the largest in the country. Due to the sheer size of these labor markets, their recovery will significantly impact the national economy. In August, Austin became one of the three largest metros, along with Salt Lake City and Phoenix, to recover all jobs lost to the pandemic. Dallas and San Antonio are poised to join in 2022, with Houston expected to fully recover in 2023, the year projected for overall national recovery.

Texas has some of the highest population growth in the nation, and these four metros have some of the highest net migration in the country. So even as the labor supply continues to tighten, there should be a strong state-wide talent pool. However, given relative wages across the U.S., Texas may become a source of remote workers for companies in cities with higher wages. Talent acquisition professionals in Texas will need to work quickly and proactively assess total cost to correct in order to retain top talent, as compensation demands increase for high-skilled occupations.

Location Matters

The LaborIQ Market Index illustrates key factors impacting labor market performance and job recovery, including the geographic differences in market strength. The top 25 metros are primarily in the Southeast, Texas, and Mountain West areas of the country. The Northeast, Midwest and California are on the perimeter for recovery and growth performance.

Top 25 Metros

Metros ranked in the top 25 score highly across key categories in the LaborIQ Index, such as population growth, net migration, job gains and job growth. Strong net migration is the result of strong economic fundamentals and job growth, fueling labor supply and creating demand for products and services. Out of 150 metros in the LaborIQ Index rankings, the average population growth and net migration rankings for the top metros are 28 and 30, respectively.

These metros have led the recovery, recapturing many jobs lost to the pandemic. But even with rising populations, talent supply struggles to keep up with demand, which in turn, puts pressure on companies to increase wages.

Recruiters in these top metros will continue to be busy through 2022 and may have to look to other lower-ranked metros to fill open positions.

Bottom 25 Metros

The bottom-ranked metros have an even tighter regional footprint. The Northeast, parts of the Midwest, California and the Gulf Coast comprise 16 of the lowest 20 ranked labor markets.

Most of these metros are not expected to recover until 2024 or later, after the national recovery expected in 2023. There’s still upside for talent acquisition professionals in these areas, which will still have many jobs to be filled, though finding and keeping talent local will be a challenge.

Out of 150 metros in the LaborIQ Index rankings, the average population growth and net migration ranking for these bottom metros is 103, while the average rankings for job gains and job growth are 124 and 116, respectively. These metros also have lower wages and wage growth — with an average ranking for wage growth of 98 — making things even less desirable for local talent.

There is major risk of losing talent to job markets with better opportunities, as individuals relocate to areas with more opportunities and higher wages. Of the 25 metros, 18 are expected to have more people move out than move in during 2021, which could drain the talent supply.

LaborIQ by ThinkWhy reports, forecasts and advises on employment conditions and the impact to jobs, industries and businesses across all U.S. cities.