Tackling a shrinking workforce in the Cleveland area

Key takeaways

  • Emigration and an aging population have challenged the labor market in the Cleveland area.
  • Hourly pay has not kept up with the national trend, making it more difficult for the area to replace the workers it has lost.
  • Employment in leisure and hospitality is especially low, and the market in manufacturing might tighten soon, creating the potential for a strong uptick in the demand for flexible labor.

The Cleveland metropolitan area lost roughly 10% of its population in the half-century between 1970 and 2020, and the most recent estimates suggest that its population has continued to fall. The decline is sharpest in the city of Cleveland, but several of the largest communities are also affected. The effects on the labor market have been even stronger.

In part, that's because Cleveland has an older population than the rest of the country and other metro areas. Its average age is over 41 years old, versus the United States average of under 39. The New York metro area comes in at 39.5, with 17% of the population over age 65. In the Cleveland area, that share is 19%. As a result, the labor supply needed to service the area's remaining residents is significantly constrained.

A market in need of adjustment

Historically, the unemployment rate in the Cleveland area could vary above or below the national rate but never deviated too far. During the Covid-19 pandemic, the unemployment rate in the Cleveland area stayed higher than the national rate for more than a year:

14 Jun 2023 Cleveland unemp

The reason probably had something to do with the pay rates in the Cleveland area. During the early part of the pandemic, a significant gap opened up between hourly earnings there and the national average:

14 Jun 2023 Cleveland ahe

The gap grew largest towards the end of 2021. At that point, receiving the federal government's enhanced unemployment benefits was relatively more attractive in the Cleveland area than in many other places across the nation. Then, early in 2022, hourly pay finally spiked as consumer spending swung back into services.

The unemployment rate finally began to converge with the national average, but the gap in employment levels persisted – the people who left weren't turning around to come right back. The situation is particularly acute in leisure and hospitality, where employment is still about 10% lower than it was just before the pandemic:

14 Jun 2023 Cleveland emp

That's a far greater drop than the likely decline in the Cleveland area's overall population during the same period. And by contrast, service jobs in education and health care have completely recovered. Of course, those health care jobs are more important to serving the elderly population.

Where the market goes next

Projections from local authorities suggest that the Cleveland metro area's population might grow by about 0.5% per year from now until 2050. Yet this sort of turnaround will require a more attractive labor market. It can happen; at the end of 2018, hourly earnings in the area had almost closed the gap with the national average. Now it needs to happen again.

The labor market for some services is under pressure, and the question is how quickly pay rates will respond. In industrial work like manufacturing and logistics, employment levels are roughly where they were before the pandemic. But pressure in this area of the labor market will also increase as inventories come down and orders resume, possibly as soon as the second half of this year.

To provide more options for businesses, we are expanding our presence in the Cleveland area. In a tight labor market, using a combination of permanent and flexible employees can help businesses to access labor that would otherwise be unavailable – people who want to work extra hours on top of their regular jobs, and people who would not take a full-time position but might be willing to work a few shifts a week. This approach will help businesses to close the gaps in their payrolls, at least until higher pay draws people back to the Cleveland area.

These links offer more information:

Realtime metrics

These metrics, derived from data aggregated across the Instawork platform, compare the two weeks starting 6/1/2023 to the previous two weeks. To control for the overall growth of the Instawork marketplace, only shifts involving businesses that booked shifts in both periods are included:

  • $0.01 rise in hourly pay
  • 1.4% point rise in share of short-notice shifts
  • 2.0 hours rise in hours per existing worker

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