Dive Brief:
- A new study from the Economic Innovation Group found that the recovery from the Great Recession benefited well-off cities and suburbs, while poorer rural areas saw their economic disadvantage widen.
- By comparing regional economic data from 2007-2011 to data from 2012-2016, the report authors found a "great reshuffling" of jobs, capital and business creation that greatly benefited already affluent areas. By contrast, the population of zip codes that were deemed "distressed" — the lowest economic classification — declined, with the number of rural Americans in that category dropping by 1 million between the two periods.
- By 2016, the report found, the top 20% of zip codes had a 3.6 million jobs surplus compared to 2007 levels, more than the bottom 80% of zip codes combined. While it took the top tier less than five years to replace jobs lost during the recession, "distressed" zip codes are unlikely to recover based on current trends.
Dive Insight:
The report emphasizes that even as the national economy has rebounded from the depths of the recession — with a national unemployment rate of just 3.7% in September according to Bureau of Labor Statistics — the recovery has not affected the entire country evenly. In an interview with VentureBeat, EIG president and CEO John Lettieri said "we’ve never really seen this type of concentration, where truly the lion’s share of the benefits of a recovery ... are accruing to a relatively narrow swath of places.”
EIG cautions that with the lowest tier already trailing far behind in recovery, another economic downturn could cause serious problems and set them even further behind. And as the economy continues to evolve to focus more on technology, and as automation takes hold in more industries, that gap could widen without more intervention. The EIG report found that the most prosperous areas had a high concentration of tech or research university jobs, similar to the findings of an October report released by Cushman & Wakefield that detailed how the tech industry is driving the economy in many affluent cities. In that report, researchers found that tech accounted for nearly half of real estate purchases and driving up property prices and the job market.
A June report from the National League of Cities said that automation could displace between 39 and 73 million workers, and that cities needed to start training workers now to adapt to a new economy and not get left behind. Likewise, EIG’s analysis showed that education plays a significant role in the stratified economy — prosperous zip codes contained nearly six times the number of adults with a bachelor’s degree or higher compared to distressed ones, and more than half of Americans without a high school diploma or equivalent live in the bottom 40% of zip codes.
