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Not everyone feels Southeast's job boom

US News & World Report
Adina Solomon
A Help Wanted sign is seen in Miami, Fla.
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The Southeast makes headlines for its booming economy, but the region's fastest-growing states have a problem.

Florida, Georgia, North Carolina, South Carolina and Tennessee rank high in job growth, according to U.S. News & World Report's Best States for employment rankings. But these five states also rank among the U.S.'s lowest in labor force participation, the percentage of state residents age 16 or older who held part-time or full-time jobs. High job growth should lead to high labor force participation, but that isn't true in these southeastern states. Richard Shearer pinpoints 2007 as the start of the trend.

"The South was kind of ground zero for the housing bust that occurred at the beginning of the financial crisis," says Shearer, a senior research associate at the Brookings Institution think tank. Housing construction had fueled much of the southeastern economy and consumer-oriented sectors such as retail grew in lockstep.

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"When the bottom dropped out of that boom, it was pretty devastating," Shearer says. "The jobs bust in those places put a whole lot of people on the sidelines of the economy who had been participating before."

The Southeast was slower to recover than other regions, but in recent years, housing construction has made a comeback, along with consumer and health care sectors. This has led to fast job growth that hasn't quite reached everyone.

Florida has the widest gap between job growth and labor force participation of the five states studied by U.S. News. Florida's large population of retirees weighs down participation rates, says Hector Sandoval, director of the economic analysis program at the University of Florida's Bureau of Economic and Business Research.

The oldest baby boomers reached retirement age of 65 in 2011, but the largest share of this generation will move to Florida in five to 10 years, Sandoval says. Compared to previous ones, this cohort has more education, better health and fewer savings. This could affect the labor force participation rate in the future.

"These retirees, although they're in the age of retirement, many of them will still engage and somehow be linked to the labor market," Sandoval says. Sharing economy and work-at-home jobs make this easier.

In interviews, experts from all five states except Georgia say retirees affect their economic rates.

"If you hear people across the U.S. talking about retiring and going somewhere, I don't ever hear of anybody saying, 'I want to retire to Ohio.' I hear a lot of people from Ohio say, 'I want to retire down South,'" says Ted Pitts, president and CEO of the South Carolina Chamber of Commerce.

Pitts says another population that could lower labor force participation is ex-offenders having difficulties getting hired. At least 60 percent of former offenders are jobless up to a year after release from prison. All five fast-growing states in the Southeast, except North Carolina, exceed the national average incarceration rate, according to the U.S. Department of Justice.

Some states focus on helping ex-offenders obtain employment and therefore reduce recidivism rates. In 2016, for the first time, the South Carolina Chamber of Commerce began helping ex-offenders reintegrate into the workforce, Pitts says. Initiatives include providing skills training and working on legislation to offer state tax credits for employers who hire ex-offenders.

The Georgia Department of Corrections began a GED program for inmates because not having a high school education limits career options, says Jason O'Rouke, the state chamber of commerce's vice president of public policy and federal affairs.

"The state can do things to try to address that, and try to address it on the front end," he says. "It's a pretty minor investment to try to make sure that individuals coming out of the prison population at least have a GED."

Demographic trends of more people living in urban areas have also taken a toll.

Jobs locating to cities while leaving rural areas has hit Georgia hard, O'Rouke says. The issue is exacerbated because Atlanta's population is almost 10 times larger than that of Augusta, Georgia's second-largest metro area. In turn, the economic opportunity flocks to Atlanta, O'Rouke says.

Meanwhile, rural areas are losing jobs. O'Rouke blames this trend for low labor force participation, saying rural residents often don't have the mobility or skills to take jobs in Atlanta.

North Carolina also sees rural job growth lag behind that of urban areas.

"I'm real happy that we're starting to have that discussion again and trying to reimagine what the economies of rural America look like because they're not going back to where they were," says Ted Abernathy, managing partner of Economic Leadership consultancy in Raleigh, North Carolina.

At Brookings, Shearer created the Metro Monitor, a report on economic growth in the 100 largest U.S. metropolitan areas. He says metro areas that made the biggest gains in employment rates and median income saw increases in high-skilled industries such as professional services and the information sector. Even though these industries don't provide many low-skilled jobs, people with high-skilled jobs need homes and offices, administrative services and consumer goods. This demand leads to growth in mid-skilled and low-skilled employment.

"This is kind of like a cascading or a spillover effect of the growth of the high-skilled sectors that kind of spilled over and fueled growth of mid-skilled or lower-skilled jobs," Shearer says.

He identified only one city in the five fastest-growing Southeastern states that has achieved this broadly inclusive economic growth: Charleston, South Carolina.

Experts say education and training can also boost labor force participation. Tennessee Gov. Bill Haslam has focused on making post-secondary education more accessible, says Bill Fox, director of the University of Tennessee's Boyd Center for Business and Economic Research.

"Gov. Haslam and his administration started from the presumption that we needed a dramatically improved labor force because of the kind of jobs that are being created and ever more increasingly will be created in the economy," Fox says. "These things are interactive. People need the skills in order to qualify and get the jobs, but also the jobs go where there are people with skills."

He says having learning throughout life, not just in college, allows people to learn new skills.

To make sure rural areas have jobs, states should make policy decisions such as targeting jobs that are more suitable for these regions, including food processing, health care and education, Abernathy says. He says rural counties should also have high-speed internet to enable remote jobs.

"You're not changing the dynamics. You're not changing what sectors need to be close in, but you're strengthening the competitive nature of the counties around urban areas," he says.

Shearer says he feels optimistic about the employment trends in the Southeast, especially in metro areas, as the economy grows based on retail, hospitality and health care.

"[It] is providing a lot of opportunities for lower-skilled individuals trying to put a hold in the economy," he says. "That's really good news for these places when you think about the long-term trajectories of their economies and the stability of their growth."