Small-Town America: A Growing Economic Power

"We are here. We are here! We are here!!" — Residents of Whoville, Horton Hears a Who, by Dr. Seuss

Small-town America is finally on the map—the statistical map, that is. As a result, the spotlight is now being shined on some of the fastest growing areas in the country, highlighting new opportunities for firms that have saturated the bigger U.S. markets.

Previously, government statistical definitions focused only on larger (metropolitan) geographies, which, while covering more than 80% of the country’s population and jobs, also left a vast undefined territory comprising two-thirds of the nation’s counties and 50 million residents. That all changed with the recent metropolitan redefinitions, when the government designated a new geographic definition: the micropolitan, representing communities too small to qualify as a metro, but too populous and economically integrated to be considered rural. Officially, a “micro” is defined as an urban cluster of 10,000–49,999 residents, along with any surrounding areas. According to the U.S. Census Bureau, there are currently 575 micropolitans in the country, home to 30 million residents—slightly more than 10% of the national population.

While the pop-culture view of small-town America is places such as Dodge City, Kansas or Mount Airy, North Carolina (television’s Mayberry), the list of micropolitans also includes historical sites (Gettysburg, Pennsylvania), tourist destinations (Hilton Head, South Carolina; Branson, Missouri; and Key West, Florida), college towns (Manhattan, Kansas; Oxford, Mississippi), manufacturing or mill towns (Martinsville, Virginia), and other well-known locales such as Los Alamos, New Mexico and Roswell, New Mexico.

From an economic perspective, micropolitans seem unremarkable—even as a whole, they are a small part of the country and not growing as rapidly as the nation’s metro areas, which offer greater opportunities in terms of education, employment, and health care. However, a closer look shows a highly varied picture across the micros. Some are single-company towns that were decimated when the local mill or manufacturing shop closed up and moved operations overseas. But a host of others are thriving, luring retirees, vacationers, or those escaping urban sprawl. In fact, over the last 10 years, 8 of the top 12 metro/micro areas in job growth were micropolitans, led by Palm Coast, Florida, which averaged 6.9% gains annually (an overall increase of 95%). Combined, the 50-fastest growing micropolitans had 1.2 million jobs and average annual employment gains of 3.2%—comparable to booming metros Orlando and San Diego. With some firms considering many metro areas to be mature markets, micro areas offer new opportunities for U.S. growth.

Looking ahead, those prospects are expected to increase. Using results from Global Insight’s new forecast of micropolitan areas, we project that the top job generators over the next 10 years will be dominated by micropolitan areas. Rio Grande City-Roma, Texas is a Mexican border town with a thriving education/health-care industry that will continue to see an influx of immigrants, while more remote Clearlake, California will continue to attract Bay Area escapees. Meanwhile, Granbury, Texas and Palm Coast, Florida may not be micropolitans for long—both are sufficiently close to current metro areas (Dallas-Fort Worth and Deltona-Daytona Beach, respectively), that they are likely to be absorbed eventually. Branson, Missouri and Jackson Wyoming-Idaho remain tourist hotspots on the rise.

Micropolitan areas will succeed because of their appeal to a changing U.S. society. As baby boomers retire, there will be even greater demand for Sun Belt residences, while others (and businesses) will be lured by the lower costs of living (particularly housing) and reduced congestion that micropolitans offer. Meanwhile, the increasing prevalence of technology means that people can work, shop, and even talk to doctors from hundreds of miles away—lessening one of the main traditional drawbacks to small towns.