Geographic gaps are widening while U.S. economic growth increases

CNN’s Ron Brownstein posted a strong comment this morning on the spatial politics of economic power, using data from Brookings on the nation’s uneven growth map.

Brownstein doubts that the current red-blue political standoff in the country is sustainable. Which seems like an understatement.

Yet while Brownstein’s political take is compelling, there’s another aspect of the underlying economic dynamics in the country that bears noting: that they are all about size. Quite simply, the sharp divergence of large and small communities’ economic fortunes since the financial crisis—something we’ve written about here, here, and here—is becoming even starker than it has been.

Here’s what’s going on in tabular form. And here’s how it looks over time:

2018.01.23_Figure1AB_Output employment by size tier-01Note: Output growth in rural areas was buoyed by the fracking and natural gas boom before stalling out in 2015.

2018.01.23_Figure1AB_Output employment by size tier-02

Basically, the data driving these curves show a truly eye-popping divergence of big-, medium-, small-sized communities’ growth progress—one that’s getting worse. On population growth, for example, the 53 very largest metro areas (those with populations over one million residents) have accounted for fully 93.3 percent of the nation’s population growth since the crisis, but an incredible 96.4 percent of it since 2014 (though they account for just 56 percent of the overall population). Even more significantly, the biggest metros generated fully two-thirds of output growth on the economic front and 73 percent of employment gains between 2010 and 2016—figures that actually have increased since 2014, when they reached nearly 72 and 74 percent.

By contrast, smaller metropolitan areas with less than 250,000 people—representing 9 percent of the nation’s population—have lost ground. Since 2010, in fact, these communities made a negative contribution of -6.5 percent to the nation’s growth, with their contribution ticking up modestly in the last two years and their output and employment growth contributions declining to less than 3 percent and 5 percent of the national total, respectively. As for the rural tier, the trends have been even worse. By the 2014 to 2016 period, rural communities’ contribution to national population growth had turned negative and the ebbing of the earlier oil and gas boom saw output and employment growth decline precipitously as a share of national gains. All of which looks like this:

2018.01.23_Map1_Nat employment growth

Which is to say, growth across communities now tracks exactly with their size. The nation’s bigger communities—powered by well-educated millennial workers and the agglomeration trends brought by digital technology—are now growing notably faster and accounting for more and more of the nation’s growth than before, even as small metros wane and most of the rural hinterland slides into deep decline. In short, fully half of all of the country’s employment growth took place in just 20 metropolitan areas, home to about one-third of Americans, led by the usual suspects of New York, Boston, the Bay Area, Seattle, and Washington, D.C., along with such fast-growing Sun Belt hubs as Dallas, Atlanta, Miami, and Orlando.

Nor are these dynamics solely a national story. Similar trends are affecting the 50 states, though with greater variation, shaped by industrial composition and historical settlement patterns. (See Appendix tables linked below). In New York, for example, 95 percent of the state’s 2010 to 2016 employment growth emanated from large metro counties, while in Alabama just 29 percent did.

What does all this mean for the country? Surely nothing good. To be sure, most Americans now live in big metropolitan population hubs that tend to be more economically efficient than other places. But for all of that, 9 percent of the population lives in smaller metros that are stagnant or slipping as a group and another 14 percent live in rural places that are almost all declining. And these places are losing their economic purchase. One year after the Trump administration’s takeover, in fact, the frustration and narrowed possibilities of these places is now broadly recognized as a threat to the nation’s prosperity—as Ron Brownstein argues.

And yet, it is unclear what should be done to slow the decline of the nation’s small cities and rural tier. Numerous voices, ranging from investor Steve Case and memoirist J.D. Vance to Eduardo Porter, Paul Krugman, EIG, and Emily Badger, as well as Richard Florida, Noah Smith, Conor Sen, John Austin, and The Economist, have all confirmed a state of near-emergency and advanced tentative responses. However, the fact remains that the dynamics underway are at least in part an ineluctable expression of a fundamental change in the nation’s economic order, likely tied to the increased power of tech-related agglomeration economies, which select for large and dense places and that are likely biased against small ones.

In view of that, the political problems dramatized by CNN this week are only going to complicate the work of beginning to push back against the drift toward increasingly uneven community outcomes. To be sure, the drastic divides that Brownstein, we, and others are highlighting are at least now beginning to be recognized as a national problem with sources in need of response. Accordingly, we have offered a few ideas here and here for doing something rather than nothing, while others like Case and EIG are focusing on their own parallel initiatives.

Still, none of us is under any illusion that more and bolder responses—from government, the private sector, and philanthropy—are anything but imperative, even as the politics highlighted by Brownstein make them more challenging. As the evidence of big-city pull-away and small-town and rural decline accumulates, it doesn’t seem right that a great nation would leave the shape of its long-term economic geography entirely to the vagaries of today’s tech-fueled market. Notwithstanding the “economic civil war” detailed by Ron Brownstein, it’s time to get serious about addressing the nation’s dire development trends.

See here for 50-state data on the shares of states’ growth generated by large, medium, and small metropolitan areas as well as rural areas.