Large cities are slowing employment recovery in the U.S. according to new data from the National Bureau of Economic Research (NBER).
In August, the unemployment rate sat at 5.2%. However, this number was nearly double in New York City at 10.2% and Los Angeles at 10.1%.
The NBER says this is mainly a result of “urban and industry bias of remote work,” which refers to large cities employing many knowledge workers that have stopped going to the office and boosting business for the service industry.
“Many high-skill service workers started to work remotely, withdrawing spending from big-city consumer service industries dependent on their demand,” according to the working paper’s authors. “As a result, low-skill service workers in big cities bore most of the recent pandemic’s economic impact.”
The data revealed a large gap between the combined unemployment in Chicago, Los Angeles, and New York metropolitan areas and the rest of the country. In fact, if these cities’ unemployment were not taken into account, the rate would be at 4.9%.
However, the unemployment rate is not the only method of measuring impact. The unemployment rate represents people who are seeking a job divided by those who are employed, plus people actively looking for a job. If a person has stopped looking for a job or left the area, it is not equated into the calculation.
That is why other large metro areas like Boston and San Francisco are not seeing such high unemployment rates, but still have big payroll losses.