Rural areas never recovered from Great Recession

Study finds new businesses in 2010s concentrated in metro regions

A Walmart prepares to close in Clinton in 2018. (One Illinois/Ted Cox)

By Ted Cox

Urban areas suffered in the Great Recession 10 years ago, but bounced back quickly, while rural regions never recovered, according to a new study from a nonpartisan, progressive policy institute.

The Center for American Progress published a study last month finding that fewer new businesses were created in the recovery after the Great Recession, compared with previous recessions in 1991 and 2001, and those new businesses were concentrated in metro areas, while rural regions flatlined.

The study found that the total number of new U.S. businesses averaged about 400,000 in the four-year recovery periods after the 1991 and 2001 recessions. By contrast, the nation created just 166,000 new business establishments in the four years following the Great Recession a decade ago, “primarily driven by just 20 counties.”

The study’s findings show that rural areas saw almost no change in the number of new business establishments from 2010 and 2011, when the number of new businesses declined slightly, through 2016, when the number of new businesses remained almost exactly the same year to year. By contrast, metro areas saw steep declines in the number of new businesses in 2010 and 2011, then a 77 percent increase in 2012 followed by additional increases of 36, 55, 60, and 88 percent year to year.

“The net change in the number of establishments in the years following the Great Recession is basically zero in nonmetropolitan communities, while there is growth in metropolitan communities,” the study states. “This meager business recovery is driven by firm growth in metropolitan counties, primarily the 20 largest metropolitan counties. Business growth is crucial for economic development, and this lack of business dynamism may be a factor in why nonmetropolitan counties have yet to recover from the Great Recession.”

Through the mid-2010s, according to data culled from the U.S. Census Bureau, growth in new businesses was largely concentrated in big cities, urban suburbs, exurbs, and college towns, although growth in what the study termed “Latter-day Saints Enclaves,” primarily in the West, was remarkably consistent.

Growth of new businesses was slow but steady in “Graying America” and Hispanic population centers, but the African-American South saw declines persist through 2015, while “Rural America,” “Working-Class Country,” and “Aging Farmlands” registered nonexistent growth if not declines.

Where Illinoisans are concerned, “Aging Farmlands” primarily refers to acreage in the West, although the state has pockets of “Working-Class Country” across the downstate region. Most of Illinois is considered “Rural Middle America,” which saw declines in new businesses in 2010 and 2011, and an increase in 2012, only to be followed by additional declines in 2013 and 2014 before making minimal gains in 2015 and 2016.

The study recommends that the federal government join local bodies in working to spur the creation of new businesses in those blighted rural areas. “Many rural communities are taking steps to support local businesses through community-development corporations and cooperatives,” it points out, “but there may be a role at the federal level to expand the capacity of these organizations. Policymakers need to create a better climate for small businesses to thrive and grow. This is important for all regions but vital for rural communities, as they are also struggling with other problems — such as higher rates of opioid use, hospital closures, and job loss — that harm their viability. Until there are efforts at all levels of government to foster small-business growth and rural entrepreneurship, these communities will continue to fall behind the rest of the country.”

A former drive-in gone to seed alongside the old U.S. Route 66. (One Illinois/Ted Cox)

It also blames population loss for the lack of economic vitality in rural areas, with many workers going to big cities where the job growth is, and the study suggests encouraging immigration as a way of revitalizing those areas. “One lesson that may be applied to all rural communities is the importance of fostering population growth,” the study states. With many nonmetro counties experiencing population loss, with an adverse impact on housing markets, government finance, and business dynamism, “communities that are losing population see a decrease in the demand for goods and services and therefore experience greater firm deaths.”

It adds: “Many communities have tried to reverse the trend of depopulation through welcoming immigrants, a strategy that can be successful. … There are numerous examples of places throughout the country where immigrants have revitalized and benefited rural communities — not just in the agriculture sector, but also in manufacturing, health care, tourism, and startups.” The study recommends adopting policies that target areas for immigrants, including local English as a Second Language programs.

On another relevant note, Illinois’s pension crisis comes in for a lot of criticism, but another new study released just this month finds that public pensions actually constitute a relative boom for rural areas. “Fortifying Main Street: The Economic Benefit of Public Pension Dollars in Rural America,” from the National Institute on Retirement Security, finds that “less-populated counties with smaller economies experience a greater relative economic benefit from the flow of public pension benefit dollars into the county than more populated, urban counties with larger economies because the benefit dollars simply represent a smaller portion of overall economic activity in those urban counties.”

It adds that “rural counties and counties that contain state capitals have the highest percentages of their populations receiving public pension benefits,” while “small-town counties experience a greater relative impact in terms of both (Gross Domestic Product) and total personal income from pension benefit dollars than rural or metropolitan counties.” It finds that, in the more than 1,400 counties studied, public pension benefit dollars typically make up to 3 percent of GDP in those areas.