Where Small Town America Is Thriving

Big city America has long demonstrated a distaste for its smaller cousins. This sentiment has, if anything, intensified with the election of President Donald Trump, whose improbable victory was made possible by strong support in small cities and towns across the country.

Once exemplars of de Tocquevillian American exceptionalism, now they’re subject to such jibes as a Silicon Valley executive’s infamous assertion last year that “no educated person wants to live in a s***hole with stupid people.” And to be sure, “the little town blues” as Brookings has characterized it, are real: many of these smaller communities are in demographic decline as the ambitious young go elsewhere, leaving them ever whiter and older, and the departures of large company headquarters, such as ADM and Caterpillar, has been a blow.

Paul Krugman describes small city America’s “ruin” as a historical inevitability in an era dominated by large, dense urban regions.

Yet America’s smaller communities are far more diverse — and have far greater potential — than is commonly believed. The resurgence of manufacturing and energy development has helped many smaller towns (these sectors tend to be more critical to smaller economies). Recent demographic data show a movement away from expensive coastal cities, including millennials, who tend to look for affordable single-family homes. The number of rural home mortgages has increased for five straight years, though the increase trails the rate in urban areas, and nearly twice as many millennials, according to the National Association of Realtors, bought home in small cities or rural areas last year than in denser urban areas.

Energizing Small City Growth

There is no question that opportunity is generated by agglomeration of talent and economic activity. Yet agglomeration creates benefits at the 10,000-person scale just as it does the 10 million-person scale. Local economic specialization and competitive advantage matter. Easier access to global markets and worker flexibility enabled by technology make local strategy execution more important, not less.

Many small cities present a promise of safety, quality education and work-life balance. The prospect of economic decentralization is a chance to leverage these qualities. However, success will not be evenly distributed. Only those small cities able to assemble the right mix of talent, market focus, and civic cooperation will succeed. Many small and rural places will not.

We have identified the stellar small places — metropolitan areas with populations between 12,800 and 300,000 – based on wages, and wage growth and job creation from 2007 to 2017. Even as most smaller towns have seen rather tepid job growth, these cities at the top of our list are outperforming not only their same-size counterparts, but some major urban competitors as well.

Surprisingly, our list of the best small areas for jobs does not include many of the scenic small communities that tend to attract affluent emigrés from large cities. Instead most of our leading areas from the last 10 years tend to be those driven by the energy industry, led by No. 1 Williston, North Dakota. With 36,000 people, Williston has been at the center of the shale oil boom in the state, growing its job count 121% since 2007. Wages have soared 47% to over $68,000, well above the national median income of $52,000.

Two other hot spots in North Dakota’s Bakken shale boom: No. 3 Dickinson and No. 6 Minot.

Texas oil towns also figure prominently: No. 2 Midland and No. 4 Andrews.

In addition to our overall ranking, we looked for the small cities with the strongest growth in particular sectors. Newton, Iowa, which ranks second on our list of energy cities, pivoted after the economic disaster of a shuttered Maytag plant to become a hub for wind power manufacturing.

Manufacturing Cities

Over the last few decades, manufacturing has been shifting from densely population regions of the country to more rural areas. A recent surge in manufacturing investment and tech investment to allow factories to implement a rugged industrial keyboards in an integrated computing system to streamline the manufacturing process — For example, Foxconn’s planned $10 billion electronics plant to open in 2020 in Mount Pleasant, Wisc., a city of 26,000 – has benefited some smaller cities and towns, where land is inexpensive, energy often cheap and the labor force is seeking higher paid, blue-collar work. Since 2010, the country has added a million industrial jobs, roughly half of what was lost in the recession.

Pullman, Wash., our No. 1 manufacturing small city, has seen industrial growth replace farming as the primary driver of its economy. The area, which abuts the Idaho border and is home to Washington State University, has 60% more industrial jobs per capita than the national average and since 2007 has more than doubled its industrial employment to nearly 2,800. The manufacturing job boom in Pullman has been fueled primarily by Schweitzer Engineering, a maker of electrical equipment.

One striking thing about the small manufacturing hot spots is their diversity. Some have benefited from the domestic energy boom, which has contributed to strong industrial growth, like the Texas cities of Port Lavaca, Andrews and Palestine. No. 3 La Grange, Ga., where manufacturing employment has grown nearly 75% since 2007 to 11,700 jobs, is a carpet manufacturing hub and has attracted factories from Duracell, Caterpillar, and Korean companies including Kia Motors.

For No. 5 McPherson, Kansas, its 37% expansion in industrial jobs over the past decade has been driven by plastics, energy and equipment manufacturing, aided by low energy prices (it’s located in the nation’s “wind tunnel,” ideal for wind energy generation). No. 4 Columbus, Ind., where Cummins Engines is based, has a per capita share of employment in manufacturing four and a half times the national average and has seen its industrial workforce grow by 22% over the decade, making it something of for industrial revival in small towns.

Business And Professional Service Hubs

Ideally the information age should allow smaller cities to compete for jobs in the largest sector of high-wage employment: business and professional services. Growth in high end jobs is very diverse and its leaders widely scattered. Our No. 1 area is Battle Creek, Mich., where the largest employers are Kellogg’s and several auto-oriented manufacturers. Business service employment is up 133% since 2007 to 2,900 jobs in 2017, well above the national average growth of 15%, with particular growth in marketing and computer systems design.

Anchored by manufacturers in textiles, paper products and HVAC equipment, No. 2 Bennettsville, S.C., has grown its business services sector from next to nothing a decade ago after strong expansion of engineering services.

The highest concentration of professional and scientific service jobs can be found in Los Alamos, N.M., where professional service jobs are, on a per capita basis some 9.8 times above the average. This may be something of a special case, as Los Alamos is home to a huge federal research center which seems to be spinning out a lot of technically oriented service jobs.

Emerging STEM Centers

It is widely assumed that high-tech employment, for the most part, will cluster either in big cities or their suburbs. But some venture funders, including some from Silicon Valley, are taking a look at smaller cities, notably in the Midwest. Several smaller cities have achieved growth in STEM jobs (science, technology, engineering and math-related) that are far above the national average over the past decade.

Much of this has to do with the location of federal labs or universities. The leader, California-Lexington Park, located on Maryland’s scenic eastern shore, has a strong presence in the aerospace and defense industries, and has seen its STEM employment, already 3.5 times the national average, grow 22.3% since 2007. Other STEM-rich smaller towns include the afore-mentioned Los Alamos, No. 8 Kennewick-Richland, Wash., home to the Hanford federal laboratory, No. 4 Lawrence, Kansas, home of the University of Kansas and No. 9 Bremerton-Silverdale, Wash., home to the Puget Sound naval shipyard.

Less predictable however has been the STEM growth in No. 3 Jackson, Mich., where a large public utility and post-recession growth of automotive and machinery manufacturing may explain a surprising 26.4% growth in STEM . Jackson is a hub for engineering talent, where the engineering job count is up 44% in the last decade and now 3.2 times more concentrated than national average.

The Road Ahead

Smaller communities often suffer from thin talent pools and long distances from major markets, but as our survey tells us, not all are destined to decline. High-end service jobs have been leaving San Francisco and New York for less crowded and expensive cities like Salt Lake and Dallas. This same formula could lead more firms, and skilled individuals, to smaller places, such as Ft. Wayne or Carmel, Indiana which have been refurbishing their central districts in part to attract or retain younger workers.

Politics could play a role. Even some progressives believe federal agencies should be dispersed to places like the Midwest, which would provide stable employment. The newly proposed Trump infrastructure program places considerable emphasis on rural areas, which after all supported him heavily. This is particularly critical for the poorly maintained nation’s internal waterways, the lifeblood of many smaller cities in the interior. And manufacturers have been boosting investment after the passage of tax reform, which could be an opportunity for smaller cities. Some airlines are now boosting local service, something which could connect these places with the broader economy. At the same time, Trump’s attempts to restructure NAFTA, gut the Farm Bill, or cut rural development and small manufacturer assistance programs could pose threats to smaller cities.

Resuscitating small town economies is critical for all Americans. As migration rates have dropped and high housing costs make a shift to big cities increasingly difficult, we can no longer expect residents of small towns to move en masse to San Francisco, New York, Los Angeles or Chicago. Rather than write off the roughly one-fifth of Americans who live in such places, we should look to expand the map of economic opportunity, taking advantage of our continental scale and economic diversity.

Photo credit: NIOSH via Flickr, under Public Domain license.