142 Metro Areas Reach Full Employment and the Potential Impact on Site Selection Decisions

The U.S. government seeks full employment for our nation’s workers in an effort to maintain a stable economy. Many economists believe a labor market achieves full employment when the unemployment rate is 5% or less.

This may be good for the economy, but full employment makes it increasingly difficult for employers trying to staff their facilities around the country as well as economic development organizations trying to attract them. 

Companies should carefully evaluate unemployment conditions during the site selection process for employee intensive operations such as call centers, distribution centers, headquarters, manufacturing plants and shared service centers. To help identify the metro areas at full employment, Site Selection Group researched unemployment conditions across the U.S.

Site Selection Group identified 142 metro areas at or below 5% unemployment — metros that potentially have reached full employment.

The impact of full employment on companies
Despite the macroeconomic benefits of full employment, companies should be concerned about the potential risks. Site Selection Group identified the following four primary risks of full employment on employers:

• Wage inflation — Wages will increase at higher than normal rates as employers compete for skilled labor. 
• Skills shortage — The demand for skilled workers will typically exceed labor supply causing employers to struggle to find qualified workers.
• Employee attrition — As labor demand rises, employees will quickly change jobs for hiring bonuses and wage increases.
• Decreased productivity and performance levels — Due to the constant employee churn, inability of employers to fill open positions, and a less-qualified applicant pool, productivity and performance levels will suffer.

How to mitigate the risk of full employment during the site selection process
As companies search the country for the best location for their new call centers, distribution centers, headquarters, manufacturing plants and shared service centers, it is critical to carefully evaluate unemployment conditions. The risks of future labor problems rise when entering a labor market at full employment. To mitigate the risks of making a bad location decision, Site Selection Group recommends the following techniques for assessing labor conditions:

• Underemployment — Quantify the number of workers with targeted skill sets at various wage thresholds. As labor markets tighten, employers are forced to rely on hiring from the ranks of the underemployed.  
• Historic unemployment — Research the seasonally adjusted unemployment rate for the last decade to identify the highs and lows in the past. This data will potentially indicate how tight the labor market might become in the future.
• Job postings — Research job postings in the targeted positions to identify any unusual high numbers of job postings.
• Industry concentration — Identify any dominance of high-paying industries such as the energy sector, which can often significantly impact other industries.
• Employer interviews — Testimonials of employers currently operating in the market can prove to be an invaluable way of learning about the challenges of hiring and retaining workers.

142 metro areas at full employment
Site Selection Group identified 142 metro areas as potentially reaching full employment. They are shown in the below interactive map and table. Site Selection Group ranked the metro areas based on their unemployment rate as of June.