Trump country labor markets faring better in the Biden economy, report finds

The places where Donald Trump won in the 2020 election are collectively seeing stronger labor markets in the Biden economy, according to a new report from the Economic Innovation Group.

Why it matters: Beyond the political irony, the last couple of years have seen a boom in the counties that make stuff, where the manufacturing, energy and agriculture sectors are a disproportionate share of their economies. And in a reversal of the 2010s, the status quo has been less kind to big-city knowledge economies.

• That divide increasingly represents politics as well as economics, with the goods-producing areas voting red and the services-producing areas voting blue.

Details: As of the first quarter of 2022, counties that voted for Trump were 0.3% below their pre-pandemic employment levels, according to the report that analyzed government data. For Biden counties, that gap was 1.8%.

Between the lines: To understand why blue state labor markets are bouncing back more slowly, look to the economic makeup of the geographies.

• In many ways, the forces that explained why these areas thrived in the years leading up to the pandemic are now weighing on recovery.

Counties Biden won include nearly all the country's key business districts that were once a consistent bustling center of economic activity.

• Why these areas have fewer jobs now can be at least partially explained by the rise of remote work, a phenomenon that's rippled through these economies.
• Some local businesses have seen demand plummet. For them, fewer office-goers mean fewer customers.

Meanwhile, Trump counties employ a bigger share of workers in the goods-producing sector. For decades, that took a backseat to services — that is, until the pandemic ushered in a historic rotation of consumer spending.

• Roughly 25% of those in areas that Trump won in 2020 are employed in the goods sector, the report finds, compared to Biden counties, where the share is 14%.

• Goods-producing businesses went on a hiring spree to keep up with the pandemic-induced demand. The services sector saw demand bounce back, but not until fear of the virus ebbed and the economy began to reopen.

What they're saying: "It seems that the pandemic has been a force for convergence across the U.S. economy: modestly lifting up many formerly-struggling and right-leaning areas while weighing down formerly-dominant and left-leaning ones," the EIG's Kenan Fikri writes in the report.

Of note: The authors find that six states with high-profile elections this cycle that may decide control of the Senate (Arizona, Florida, Georgia, Nevada, North Carolina and Wisconsin) feature above-average economic performance. All but Wisconsin have surpassed pre-pandemic employment.