25 Cities with the Highest Employment Rates in the US

Published on July 28, 2024 at 12:50 pm by Ramish Cheema in Economy, News

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In this piece, we will take a look at the 25 cities with the highest employment rates in the US.

With 2024 having settled in, investor attention has turned to the economy once again. As has been the case for more than a year, key metrics like unemployment, inflation, and interest rates are on Wall Street’s radar. These indicators are important to gauge the long to medium term direction of the American economy.

On the employment front, the US job market has managed to hold its ground despite 23 year high interest rates. The job market has been a key focus of the Federal Reserve’s interest rate hikes. The Fed’s mandate is to regulate prices and keep the labor market robust. To achieve stability in the job market, officials have been careful to create a balance between monetary policy restrictiveness and laxness in order to avoid exerting economic damage.

The tail end of May 2024 has seen revisions to economic indicators and fresh data confirming that the US economy is facing the pressure of high interest rates. A fresh data set comes courtesy of the Commerce Department showing that the US GDP grew by 1.4% in the first quarter and 2.8% in the second quarter. This shows an acceleration in GDP growth rates amid rate cut expectations. Another key metric that saw a downward revision was consumer spending. Tied closely to the job market, consumer spending is key to economic growth. Initially revised downwards to 2% by economists, consumer spending registered an annualized growth rate of 2.3% during the second quarter.

In contrary to these positive numbers the job market is facing the heat. Just like the broader stock market’s performance is tied to economic indicators, the job market also influences payroll and other stocks related to human resource management. These stocks tend to do well when hiring is strong, and the recent slowdown that has seen businesses remain cautious about hiring has affected stocks too.

One such stock is the Pleasanton, California based workforce management software provider Workday, Inc. (NASDAQ:WDAY). Workday’s shares have slipped by more than 20% in the final week of May, after the firm, which allows businesses to manage their financial operations including payroll, reported its earnings for the first quarter. This report was important for the future of the labor market as it saw Workday tone down its annual subscription revenues to barely meet analyst estimates. For its current fiscal year, Workday expects subscription revenue to sit between $7.70 billion and $7.73 billion. The previous estimate was $7.73 billion to $7.8 billion, and the high end of the current estimate is also the analyst average.

Workday shares recovered 10% since then and its forward price to earnings ratio currently sits at 34. This means that the shares are trading at a higher multiple compared to the S&P 500 index which has a forward P/E of 21. The firm has grown its revenue by roughly 67% over the past five years, while the stock is up by roughly 25% over the same time period. This shows that Workday’s shares are quite sensitive to any shift in investor outlook. Software stocks haven’t been doing very well in 2024 because investors believe that emerging AI technologies will make it easier and cheaper to create alternative software products at a fraction of the current cost. We agree with the market’s sentiment and believe that AI stocks will outperform software stocks. If you are looking for an AI stock that is more promising than WDAY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Another staffing stock that closely tracks the job market is Automatic Data Processing, Inc. (NASDAQ:ADP). Its shares have delivered around 50% through price appreciation over the past five years, while revenue has grown by roughly 24%. Automatic Data Processing, Inc. (NASDAQ:ADP)’s forward P/E ratio is 25, which is more in line with the S&P 500. Of course, this also means that the ADP has to grow faster than the market to justify its current price.

As for Workday, Polen Capital had some relevant insights to share about the firm in its first quarter of 2024 investor letter. The fund commented:

Finally, weakness in Workday during the quarter is likely more a function of the stock taking a breather than any adverse fundamental development.

From the end of October through the end of February, the stock was up 40%, buoyed by the company’s better-than-anticipated earnings in 3Q 2023, and management raised revenue guidance for their fiscal 2024. In 1Q 2024, the stock sold off on results and guidance that did not exceed the elevated expectations some investors anticipated. We believe Workday has ample room to continue taking share in a nicely growing $100 Billion+ global human capital management (“HCM”) market and remain confident in the company’s ability to generate 20%+ annualized free cash flow per share growth over the next three to five years.

So, as investors take a cautionary approach to the economy and the job market for 2024, we decided to take a look at which US cities have the highest employment rates.

25 Cities with the Highest Employment Rates in the US

Our Methodology

To make our list of the American cities with the lowest employment rates, we used the Labor Department’s April 2024 unemployment rates for April 2024 covering metropolitan areas and picked out the areas with the lowest seasonally adjusted unemployment rates.

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25. Decatur, AL Metropolitan Statistical Area

April 2024 Unemployment Rate: 2.2%

Decatur, Alabama has four principal cities. These are Decatur, Hartselle, Moulton, and Huntsville. Decatur is the area’s most populous city, and it had a population of 57,922 in 2022. Decatur is located on the Tennessee River, and it also houses key facilities for the rocket company United Launch Alliance

24. Blacksburg-Christiansburg-Radford, VA Metropolitan Statistical Area

April 2024 Unemployment Rate: 2.2%

Blacksburg-Christiansburg-Radford houses Giles, Montgomery, and Pulaski counties. It is located in New River Valley, Virginia. Its most populated city is Blacksburg, Virginia.

23. Bismarck, ND Metropolitan Statistical Area

April 2024 Unemployment Rate: 2.2%

The Bismarck metro area is primarily dominated by Bismarck City, which is also the capital of North Dakota. The city had a population of 74,445 as of 2022. Its economy sees heavy involvement from healthcare and the public school system.