Measuring Labor Market Similarities in Nearby Regions
Labor market conditions are similar in regions that are near each other, a phenomenon known as positive spatial correlation.
Analysis of county-level data from 1990 to 2024 reveals that commuting flows may contribute to strong spatial correlation in employment growth.
Spatial correlation appears to have strengthened since the 1990s, coinciding with an increase in workers commuting across county lines.
As these connections grow through commuting flows, both favorable and challenging conditions in local economies may become more likely to spread farther than in the past.
According to the FRBSF Economic Letter 2025-24, regions that are geographically close are more likely to share similar economic conditions than regions that are farther apart.
This is because economic activity seldom stops or starts abruptly at borders on a map.
Author's summary: Labor market conditions show positive spatial correlation in nearby regions.