A Tough Row to Hoe: Economic Growth in Rural America

The timing of Dean Barber’s commentary on Rural Economic Development couldn’t have been better.  We are just off the Florida Rural Economic Summit here in Orlando and getting ready to roll out a Rural Florida marketing campaign following next week’s Enterprise Florida/Team Florida Marketing meetings.  So stay tuned.

Here’s Dean’s column in full.  A good read for anyone interested in economic development in Rural America.

Published on September 18, 2016 – Featured in: Economy
by Dean Barber
President/CEO at Barber Business Advisors, LLC: Corporate Location Analysis and Economic Development

 

A report released last week by the Census Bureau showing that Americans, rich, poor and middle class, saw their incomes rise last year was greeted gleefully by economists.

But in rural America, where I have spent much of my time of late doing economic development consulting work, the reaction will be more of a shrug. The government may say the economy is getting better, but many of the people in non-metropolitan counties aren’t feeling it.

Still, the report was eye opening. For the first time since 2007, the median U.S. household saw a healthy bump in income last year — up 5.2 percent to $56,500 from $53,700 in 2014. Much of that gain came from the drop in the unemployment rate that created more paychecks for American workers.

No doubt the economy has improved. Unemployment is at 4.9 percent, down from its October 2009 peak of 10 percent. Home foreclosures have eased dramatically, with 97 percent of major metropolitan areas logging rates below their Great Recession peaks in the first quarter of 2016, according to Realtytrac.com.

By the end of 2015, net private business investment had recovered to pre-recession levels, according to the St. Louis Federal Reserve Bank.

A crucial takeaway from the Census report last week was that economic gains were not isolated to the rich. Poor Americans, those at the bottom 10th percentile of the income scale, saw the strongest gains, with 7.9 percent growth over the last year.

Yielding Fruit

The latest Census data confirms that that the recovery, now in its eighth year, is finally yielding fruit to people other than the very rich. A Gallup poll in August found that 68 percent of workers said they are making more money than they did five years ago.

Correspondingly, the number of people living in poverty dropped by 3.5 million, falling from just under 15 percent in 2014 to 13.5 percent in 2015, the largest drop since 1967. More than 8 million families were in poverty last year, down from 9.5 million in 2014. And the number of children under 18 dropped by 1 million.

On the face of it, this is all very positive news. It would appear that we as a nation have recovered from the Great Recession — albeit at a far slower pace than anyone would have liked.

Worth reiterating is the fact that the Census Bureau report showed that income gains were spread across nearly all age groups, household types, regions and racial or ethnic groups.

One Big Exception

But there was one exception. Incomes didn’t rise for households outside metropolitan areas.

And that is where I have seen varying degrees of pessimism firsthand in recent months in Appalachia and in farming communities on the Great Plains. I will not name specific rural communities because that would be unfair.

But the pain is out there, even with full employment.

“There a huge urban-rural divide today in wage growth,” Andrew Chamberlain, chief economist at Glassdoor, a job-listing site that collects salary data, told CNBC. “It’s becoming harder to earn a living wage and have a fulfilling career in rural areas.”

Options are Limited

Advising economic development organizations on making transformation change that would go far in the creation of fulfilling jobs does not come easy in rural communities. The options are often very limited by geography, infrastructure, and the fact that skill sets are limited by little or no vocational training.

What’s more, these are typically places with older populations of a more conservative bent that are more resistant to change. And they have a bleak view of the nation’s economic future prospects.

The American public as a whole is significantly more confident about current economic conditions than about the future. Earlier this month, 26 percent of people surveyed in Gallup’s poll of Americans’ confidence in the economy rated current economic conditions as excellent or good, while 30 percent labeled them poor. Thirty-seven percent of those surveyed said their economic outlook was “getting better” compared with 57 percent who said it was “getting worse.”

I live in Dallas, where the poverty rate has dropped to 5.1 percent from 5.9 percent a year ago. Here the economic gains have been particularly strong for those with college degrees.

But press these same educated urbanites a little bit over cocktails, as I tend to do, and while they may be doing better financially than they were five years ago, they still see the recovery as fragile and not long lasting.

If I talked to their counterparts in rural, non-metro area communities, they might very well look at me cockeyed and say, “What recovery?”

Rural versus Metro Areas

And this might sound cockeyed, but most rural Americans actually reside within metropolitan areas. Nearly 54 percent of people living in areas classified by the Census Bureau as rural also live in a county that is part of one of the nation’s 383 metropolitan areas.

A metro area, or “metropolitan statistical area,” to use the formal term, has a core urban area of 50,000 or more people, and “consists of one or more counties and includes the counties containing the core urban area, as well as any adjacent counties that have a high degree of social and economic integration (as measured by commuting to work) with the urban core.”

The U.S. Department of Agriculture defines rural America simply as counties that aren’t in metropolitan areas.

About 32 million residents of rural communities are part of wider labor markets that cluster around one or more cities, and most of them live within a reasonable commuting distance of those cities. Of those 32 million, about half live within the confines of one of the nation’s 100 largest metropolitan areas, many of which have sprawled into the surrounding countryside.

The Great Emptying Out

Per capita income of people living in non-metro counties has been about 75-80 percent of metro dwellers since the early 1990s. No significant difference there. But what does look significant is the loss of population. In short, we appear to be seeing an emptying out of rural America.

The population in U.S. non-metropolitan counties stood at 46.2 million in July 2015—14 percent of U.S. residents spread across 72 percent of the nation’s land area.

According to the USDA, 2010-2014 is the first period of overall population decline on record for rural America as a whole. While there were 230,000 more births than deaths in non-metro counties over that period, 346,000 more people moved out than moved in.

Those who choose to remain in rural counties are more likely to be 65 or older, and receiving Social Security disability checks, than people in metro areas.

The painful truth is that economic growth has been largely limited to metro areas, where successive generations gather to pursue work. There has and there will continue to be an exodus of young people leaving rural areas to chase jobs in the cities.

That does not mean that we give up on rural America as a lost cause. It does mean that we come up with strategies to prevent it from becoming an economic desert. There are target industries, particularly related to valued-added products associated with agriculture that makes sense. But it will be a harder row to hoe.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733. Mr. Barber is available as a keynote speaker.

 

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