The November jobs report from the Bureau of Labor Statistics showed the U.S. unemployment rate in the U.S. was down to 7.0% from 7.3% in October.
Many regional centers and developers may question how an improving unemployment rate at the national level will affect their ability to obtain high unemployment Targeted Employment Area (TEA) certifications. The answer to this question cannot be garnered from the headline rate of unemployment; rather the answer lies in the variation in unemployment rates among local areas relative to the national unemployment rate.
To qualify as a high unemployment area, area unemployment must be at least 150% of the national average. For calendar year 2012, the national unemployment rate was 8.1% – equating to a high unemployment threshold rate of 12.2%. Therefore, the high unemployment threshold rate, if based on November’s 7.0% unemployment rate, would fall to 10.5%. The lower threshold unemployment rate for qualifying high unemployment areas indicates a lower hurdle in absolute terms but one must remember that a decrease in the national unemployment rate typically indicates lower local area unemployment. In other words, unemployment rates at the local level will also likely be falling if the national unemployment rate is falling. Of course, it is possible for the local area unemployment rates to increase while national rates are decreasing. Accordingly, the headline unemployment rate is not as important as the change in local area unemployment in comparison to the change in the national unemployment rate.
As national and local area unemployment rates change over time, the process to evaluate prospective TEA sites remains unchanged. A prospective site must be evaluated on an individual basis considering the local area unemployment conditions, while keeping in mind the methods and processes used by the corresponding state agency that has been designated to certify TEAs.