College towns have always been known for their low unemployment figures thanks to large university systems providing droves of students and infrastructure. The picture is the same these days as a greater number of Americans turn to higher education as an alternative when out of work. In fact, of the six metropolitan areas with unemployment below 4%, three of them are college towns!

Many economists believe that highly skilled labor is to thank for low unemployment figures in college towns. One Harvard economics professor found that as the share of an adult population with college degrees increases 10%, wages for the population tend to rise by about 7.8%. As a result, this so-called “human capital” may be to thank for the success of many college towns.

Small businesses also find it very beneficial to operate in college towns as cheap talent can be found in student populations. In fact, a lot of labor can be obtained for free via unpaid internships that are required in many college classes. These lower payroll costs and overhead expenses can help college town businesses increase their output substantially.

However, while these cities have been known to be recession-proof for some time, the big question is whether they can outlast the largest recession in at least a quarter century. Student populations may be rising, but many universities are seeing lower endowments and less state funding. As a result, one of the largest employers in these towns (the colleges) are not hiring as much as they were able to earlier.