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St. Louis’ unemployment rate is historically low. That’s a good thing for the region, right?

Andreas Klinke Johannsen
St. Louis has a historically low unemployment rate, and that means many employers are having a tough time finding workers. It also may be a problem in the future if St. Louis' population continues to decline.

2.6% of the St. Louis region’s workforce is unemployed according to the most recent observation by the Federal Reserve Bank of St. Louis.

That number is lower than the national rate of 3.4% reported along with the April jobs numbers released this morning, and it’s even lower than the region's unemployment numbers in the months directly before the coronavirus pandemic.

Overall, this is a good thing because you want to have people working, said Nathan Jefferson, an associate economist at the St. Louis Fed.

“It’s just creating some tension in different parts of the economy, but I think they’re good problems to have for the broader U.S. economy, much more so than the previous decade before the pandemic where it took us almost a decade to get back to full employment,” he said.

Many people dropped out of the regional and national labor force during the pandemic, he said. While employment has returned to a higher level than before, the low unemployment rate reflects strong demand for workers and businesses struggling to get the workers they need, Jefferson added.

“We have heard it’s starting to get a little easier for employers, they’re having a little more applicants, they’re having a little easier time finding workers,” he said. “But it still is a really tight labor market for a lot of firms across all different levels of job, both low skilled and high skilled.”

Lower wage sectors of transportation, food service and hospitality have struggled to hire back people, and some businesses have even cut services because they don’t have the staff to support them, Jefferson said.

But it’s not just a low wage phenomenon, he said.

“There’s also a lot of high skilled jobs where we hear employers saying that it’s difficult to find or retain workers,” Jefferson said. “We hear reports of people just being poached off of job sites, that if you’re a skilled craftsman, you can pretty much name your price right now.”

He explained for the St. Louis region overall, there is a mismatch between the number of unemployed people and the number of open jobs, and job turnover on top of that is leading to such low unemployment.

It’s also reflected in the region’s need for more trained workers for higher tech positions. At the moment, there are tens of thousands of technology jobs going unfilled in the St. Louis region.

Jefferson points to the rise of remote work as one challenge local tech firms face in hiring.

“Instead of worrying about losing somebody to a competitor across the street, now you can lose somebody to a job in San Francisco or New York City or Chicago because the company is willing to pay them to work remotely,” he said.

There are plans from regional tech businesses and leaders to position the region nationally as a source of high-quality tech jobs, said Tech STL Executive Director Emily Hemingway.

“We need to in essence, double the tech workforce,” she said. “If our region isn’t making that investment, a strategic aggressive investment, it will be very difficult for us to keep up.”

Demographic headwinds

There are some underlying long-term concerns for the region’s labor force because people continue to leave the region year over year.

“The region’s losing people and we can see from 2010 to 2021, we just have fewer people in the labor market overall,” said Ness Sandoval, a professor of demography and sociology at St. Louis University. “We want our population to be growing, we want more people actually who are actively working in the labor force who are employed.”

Sandoval said nearly every database he tracks is highlighting this exodus from the St. Louis region, which has big implications decades down the road.

“If you’re losing 26,000 people over a 10 year period you may be losing anywhere from 75,000 to 100,000 in 20 years,” he said. “That’s a pretty significant dent in your labor force.”

This demographic reality will likely mean the St. Louis region has slower employment growth moving forward, Jefferson said.

“Even if St. Louis has gotten back up to its pre-pandemic levels of employment, it’s seen growth slow and it’s adding jobs at more of a modest, lower rate of growth over the last year or so,” he said.

To Sandoval, the challenge comes when companies perform the same analyses he does on the region’s overall population.

“If we want to encourage companies to move to St. Louis, the very first question they’re going to ask is: What’s the workforce like?” he said.

St. Louis isn’t alone in this demographic struggle, with other Midwestern metro areas facing similar scenarios of population outflow to places further south, Sandoval said. And while larger organizations will likely survive, smaller businesses may not be as lucky, he added.

“You’re going to see more of the businesses go under, not because they’re bad businesses but because there’s just not enough people to make these businesses viable,” Sandoval said.

Eric Schmid covers business and economic development for St. Louis Public Radio.