Measuring Labor Market Similarities in Nearby Regions
Labor market conditions are similar in regions that are near each other, known as positive spatial correlation.
Analysis of county-level data from 1990 to 2024 reveals that commuting flows contribute to strong spatial correlation in employment growth.
Spatial correlation has strengthened since the 1990s, coinciding with an increase in workers commuting across county lines.
Regional conditions tend to have positive spatial correlation, reflecting that economic activity seldom stops or starts abruptly at borders on a map.
As connections grow through commuting flows, local economies may become more likely to spread favorable and challenging conditions farther than in the past.
Source: FRBSF Economic Letter 2025-24, October 14, 2025
Author's summary: Labor markets show positive spatial correlation in nearby regions.