Weekly Economic Trends and Indicators

Last week, we examined the recent history of economic growth in the Quad Cities area. This week, we take a historical perspective on the local labor market. By looking at employment and labor force numbers, we can see how the Quad Cities labor market has been shaped by demographic factors as well as national events such as recessions and the COVID-19 pandemic.

Entering the 1990s, the Quad Cities labor market was growing at a pace consistent with national trends in the context of local population growth. From 1990 to 2008, the labor market in the four-county metro area rose from about 188,250 to 206,275, or an increase of about 9.6%. Labor force growth was interrupted during this period by two recessions which adversely affected manufacturing and other key local industries.

A combination of demographic factors and the global financial crises made 2008 a critical year for the national and local economies. The severity of the recession caused the labor force and employment to drop precipitously. The unemployment rate hit its highest level in decades at 8.4% in 2009 and stayed elevated at 8.3% in 2010. By around 2011, the national and local economy were both on their way to recovery, but demographic change would make this recovery different from those in the past.

The “baby boom” generation was starting to reach retirement age at about this time. (Early “boomers” would have turned 65 in 2010.) For many, the recession was a catalyst to retire following the loss of their jobs, particularly in the financial sector, which was hit very hard by this recession. Thus, without population growth, there would be no way to return to pre-recession levels of the labor force. At the national level, the labor force was roughly unchanged from 2011 to 2014 as population growth matched the boomer retirements. However, because the local population was not growing as rapidly as the national population, local labor force and employment declined steadily.

Despite this, the unemployment rate trended down from 2009 to 2019 due to strong economic growth both nationally and locally. Then, the COVID-19 pandemic upended the entire economy. Labor force and employment plummeted in 2020 but began to recover quickly. At present, employment has almost returned to the level of the middle of the last decade, but the labor force has lagged. This has led to an extremely tight local labor market, mirroring conditions throughout the country.

It is possible that the COVID-19 recession acted as a catalyst for another segment of the boomer generation to permanently leave the labor market (“pulling forward” retirements). If so, the labor force should stabilize briefly in the years that follow. However, by 2026 we will begin to experience a nationwide decline in new entrants to the labor market due to a decline in births during the 2008 recession. This will lead to intense competition for younger workers to fill entry level positions going forward into the 2030s and continued historically tight labor markets both locally and nationally.

Next week: National employment and unemployment for May