SUMMARY

June unemployment rates rose across the Tri-Cities as school support staff moved into their annual summer layoff. That increase is seasonal and expected. The more important movement is the year-over-year picture. Two of the three statistical areas posted lower rates than a year ago, and not because more people are working.

The labor force shrank in all three areas. Labor force participation fell in every county with published data. The cause is demographic. Deaths outnumber births across the region, and a large share of new residents are retirees or people in their mid-50s. Those residents add to the population without adding to the workforce.

The result is a region adding consumers faster than it is adding workers. Recent payroll figures show job growth concentrated in retail, health care, and hospitality, the sectors that serve that population. Employers face a hiring pool that tightens each year, no matter what the unemployment rate says.

 By DON FENLEY

Two numbers in the June labor report point in opposite directions. Unemployment rates improved across most of the region compared with a year ago. The number of people available to work did not improve at all. It fell.

That gap is the most important thing in this month’s data. It does not trace to layoffs or to a weak economy. It traces to who is moving to the Tri-Cities, and to who is leaving the workforce once they get here.

Summer break lifted the June rates

The month-to-month increase is a calendar event. Bus drivers, cafeteria workers, custodial staff, and other school employees are counted as unemployed during summer break. They are available for work, and they expect to return in the fall. State labor officials attributed the June increase to that pattern, which showed up in 94 of Tennessee’s 95 counties.

The Greeneville area felt it hardest, climbing more than a full point from May. Both metro areas moved less than that. The difference reflects how large a share school employment holds in a smaller labor market. None of it signals economic weakness, and none of it should be read as a trend.

Source: Tennessee Department of Labor and Workforce Development. Not seasonally adjusted.

The year-over-year improvement is not what it looks like

All three areas have fewer unemployed residents than they did last June. That is real, and it is the smaller half of the story.

Every area also has a smaller labor force and fewer employed residents than a year ago. When both sides of the equation shrink, an unemployment rate can improve while the local economy adds no workers at all. That is what happened here.

Kingsport-Bristol makes the point. Its labor force, employment and unemployment count all fell at almost exactly the same pace. The three declines canceled each other out, and the rate finished flat.

Participation rates confirm it

The labor force participation rate is the share of working-age residents who are either working or looking for work. It is the cleanest test of whether a shrinking labor force reflects a shrinking population or a change in who takes part.

It fell in every county with published data. The region’s population is growing. Its workforce is not.

Source: Tennessee Department of Labor and Workforce Development. NP indicates not published. Virginia releases county participation rates annually rather than monthly, so no comparable figure exists for the Virginia portion of the Kingsport-Bristol metro area.

Greene County now holds the region’s lowest participation rate. Fewer than half of its working-age residents are in the workforce. That lines up with the June figures, where the Greeneville area posted both the highest unemployment rate and the steepest labor force loss. Three separate measures point in the same direction, which is strong confirmation rather than coincidence.

The pattern across the region is consistent. The area with the highest participation has the lowest unemployment. The area with the lowest participation has the highest unemployment. Washington County anchors one end and Greene County anchors the other.

The region is growing older, not younger

Deaths outnumber births across the Tri-Cities. The region is not producing its own next generation of workers, and that pipeline was set 16 to 20 years ago. It cannot be changed now.

In-migration more than fills the population gap. The region is growing. But a large share of new residents arrive at or near the end of their working lives, either as retirees or as people in their mid-50s.

That reshapes the participation rate through arithmetic alone. A retiree who moves in is counted in the working-age population but not in the labor force. The rate falls even if no existing resident changes anything. Nobody quit. Nobody got discouraged. The mix of who lives here simply changed.

The mid-50s arrivals matter most for what comes next. Retirees are a one-time subtraction that is already reflected in the numbers. People in their mid-50s count as workers today and will exit within roughly a decade. Each year of that migration loads more scheduled departures into the labor force. Today’s participation rate understates the decline that is already committed.

Consumers are arriving faster than workers

Payroll figures released earlier this month show where that shift is landing. Retail led job growth in the Johnson City metro area, at a time when retail has been flat or shrinking in most markets around the country. Health care and hospitality anchored growth in both metro areas. Kingsport-Bristol leaned on professional and business services.

Hospitality is the sharpest illustration. Both Tri-Cities metros added hospitality jobs in June while the nation shed 61,000 of them on weak summer hiring. Local dining and lodging demand ran ahead of the national trend rather than behind it.

Those are the sectors that serve residents rather than the sectors that export goods or services. Retirees buy houses, eat out, shop and use health care at high rates. They do not fill shifts. The industries growing fastest here are the ones built to serve them.

That is the trend line worth watching. The regional economy is increasingly being reshaped by who moves in rather than by who gets hired.

The nation has the same problem on a slower clock

This is not a local anomaly. National labor force participation fell to 61.5% in June, its lowest level since March 2021. The national unemployment rate improved to 4.2% for the same reason the Tri-Cities rate improved. People left the labor force rather than found work.

The mechanism is identical. The scale and the speed are not. The nation is aging because a large birth cohort is reaching retirement. The Tri-Cities is aging for that reason and for a second one on top of it. Much of the new region the region imports retirees from other markets.

Every Tri-Cities county sits below the national participation rate, and Washington County comes closest without reaching it. What the country is beginning to experience, this region is already living through. That gives local employers and local governments a shorter runway than their national counterparts have.

What it means for employers, housing, and health care

For employers, the local hiring pool tightens every year regardless of what the unemployment rate says. A low rate in this setting signals scarcity, not strength. Recruiting strategies built on the assumption of an available local labor pool are working against the demographics.

For health care, retail, and personal services, demand climbs on the same curve that labor supply falls on. Those industries need more workers precisely as the region produces fewer of them.

What to watch next

July figures will show whether the seasonal pattern reverses on schedule. School employees typically return to the employed count in August and September. If the fall numbers do not restore the labor force to its earlier level, the participation decline becomes the more important story.

One national number also deserves attention. Health care hiring came in slower than its normal pace in June. Health care remains the strongest anchor in both Tri-Cities metro areas. If that national slowdown reaches the region, it would pull back the single largest source of recent job growth at the same time an aging population is driving demand for it higher.

Categories: CORE DATA