KANSAS CITY, MO – Higher farm commodity prices do more than improve producer revenue – they are also linked to lower unemployment and stronger wage growth across farming-dependent counties.
New Rural Labor Indicators from the Federal Reserve Bank of Kansas City show farm product prices have a strong negative correlation with unemployment in farming-concentrated counties and the strongest positive correlation with wage growth.
The Fed reports an unemployment correlation of minus 0.33 and a wage-growth correlation of 0.19 in those counties. Previous research cited in the report found local income increased 64 cents for every additional dollar of crop revenue during commodity booms.
The relationship is much weaker in metro areas, where more diversified economies reduce the influence of agricultural commodity prices on local labor markets.
The Kansas City Fed created the new quarterly indicators to better distinguish labor conditions in farming-heavy counties from other rural and metro areas.
Farm-Level Takeaway: Stronger commodity prices can ripple through farm-dependent communities by supporting wages, reducing unemployment and increasing local income.