Why Does Unemployment Differ Persistently Across Metro Areas?

Unemployment rates differ widely across U.S. metropolitan areas. In 2007, they ranged from 3.1 percent or less among the 25 lowest unemployment metropolitan areas to 6.6 percent or more among the 25 highest unemployment metropolitan areas. Such large differences in metro unemployment rates have held continuously since at least 1990. Moreover, those metro areas that had a relatively high unemployment rate in one year tended to have a high unemployment rate 10 years and even 20 years later. How can such large differences in unemployment rates persist over such long periods? Why don’t households move from high long-term unemployment metros to low long-term unemployment metros in order to improve their chances of finding a job? Why don’t firms move from low long-term unemployment metros to high long-term unemployment metros in order to more easily hire workers? While such moves might seem sensible, they might not actually improve household welfare or firm profitability. A first possibility is that the skills of workers in high unemployment metro areas poorly match the hiring needs of firms elsewhere. Conversely, the needs of firms in