Posted by: Josh Lehner | December 9, 2020

The Urban-Rural Divide has Shrunk in 2020

Strong economies work wonders but they do not cure all ills. Disparities and inequities lessen during good economic times, but tend to widen during recessions. Our office is particularly focused on three main economic disparities: income, geographic, and racial and ethnic. So far, we know that due to the nature of the recession, income inequality is widening today. However, based on limited real-time information in Oregon, it does not appear that geographic or racial disparities are widening, or at least not yet.

In fact, preliminary employment estimates* indicate that the urban-rural divide has actually shrunk so far in 2020. Now it’s shrunk for bad reasons — urban areas have lost proportionately more jobs — and not for good reasons — rural areas growing faster over an entire expansion — but even so, it’s important to note the gap is not widening. So far this cycle rural Oregon is doing somewhat better than urban Oregon. This marks a departure from past business cycles.

Just for a quick comparison, here are the previous 4 recessions in Oregon. Rural areas have tended to lag in recovery compared to the state’s urban economies. Now, rural Oregon is growing overall in recent decades — not something much of rural America can say outside of the oil patch — but the growth is slower. The 2001 dotcom bust is an exception. At that time, the Portland region, with its major cluster of high-tech manufacturing, experienced the deepest downturn and prolonged recovery, whereas other urban parts of the state, namely Bend, Medford, and Salem escaped relatively unscathed at the time.

Back to 2020. The severity of the initial recession varied at the local level mostly due to the industrial structure. Places like the North Coast, Columbia Gorge, and Central Oregon all experienced large declines in part due to their outsized travel and tourism sectors. As the economy reopened and people began to venture out, growth has been strongest among these same places. What’s interesting to see is not that the rebound has been strongest here — that was to be expected. Rather what is interesting is that this rebound in growth has been strong enough to propel these regional economies past those in Portland and throughout the Willamette Valley. These hard-hit economies are now doing somewhat better over the entire cycle to date than the large urban centers in the valley.

In fact, so far in recovery, the Portland region has seen the slowest growth. This may be due to the lack of rebound so far in high paying industries which tend to be located predominantly in urban areas. Additionally major job centers like downtown Portland have seen a large drop in activity due to hardly any business travel, an increase in working from home, and any potential impacts related to the protests and clashes of violence.

Much of eastern Oregon so far as experienced fewer job losses during the recession and while growth in recent months is modest, Southeastern and Northeastern Oregon are the two best performing regional economies in the state so far.

Note that the Rogue Valley outlook may be up in the air today. So far, the Rogue Valley has been one of the best performing regional economies in the state. However the area was directly affected by the wildfires, and has experienced a lot of workplace COVID outbreaks. While unlikely to derail the overall trajectory of the recovery in the years ahead, near-term growth in the Rogue Valley may be weaker than the state in the months to come.

Finally, while the urban-rural gap is not widening today, over the full cycle it may. Long-run economic growth is primarily about the number of workers and how productive each worker is. Population gains are strongest in urban areas, which should propel these regional economies to faster growth in the years ahead. Additionally, urban areas, have larger concentrations in the industries expected to grow the fastest over the entire cycle than do many rural areas. As always, keep eye on capital (financial, human, natural, physical, and/or social) and investments as those will help drive productivity and overall growth in our regional economies. Even so, if these initial employment estimates prove accurate, they effectively are providing rural Oregon a year or two head start on these longer-run trends as the expansion continues and accelerates on the other side of the pandemic.

* As always, take real-time data with a grain of salt. Future revisions will change these numbers some. At this point the data is benchmarked through June and we will have a much better handle on the July-September numbers in early January when the 2020q3 QCEW data is released.


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