Small Cities – No. 7: Auburn-Opelika, AL
A look at job growth in America’s small and medium-size cities provides a very different, perhaps more intimate portrait of the ground-level economy across a wider swathe of the country than our survey last week of The Best Big Cities For Jobs. It takes us to many states that lack large cities, particularly in the Midwest and South. In contrast to our big city list, information technology is a driving factor in only a handful of smaller metro areas – grittier sectors like energy and manufacturing are the livelihood of a good many, as well as tourism for a surprisingly large number of thriving places that have become vacation meccas for the increasing number of affluent residents of major urban areas.
The 421 metropolitan statistical areas we evaluated in our rankings, ranging from large to small, account for 87.6% of all U.S. nonfarm employment. Of them, the country’s small MSAs (those with less than 150,000 nonfarm jobs) and medium-sized ones (between 150,000 and 450,000 nonfarm jobs) account for just over a third of U.S. urban employment. Job creation in these communities since 2000 has been roughly comparable to the nation’s larger metro areas — total nonfarm employment has increased 7.5% in small and medium-size MSAs compared to 7.8% for large ones.
Our rankings are based on employment growth over the short-, medium- and long-term, going back to 2003, and factor in momentum — whether growth is slowing or accelerating.
The Slipstream Economies
A good number of our top-ranked smaller cities are posting strong job growth in the slipstream of larger economies. This is clearly the case with our top-ranked medium-size metro area, Provo-Orem, and its northern Utah neighbor, No. 7 Ogden-Clearfield CLFD -0.46%. Both are located along the Wasatch Front not far from the somewhat bright lights of Salt Lake City (and more importantly its airport) and are heavily Mormon. Provo is home to Brigham Young University, the academic center of the Mormon universe with over 29,000 students. That group’s social cohesion, which translates into a high percentage of families with children, as well as emphasis on education and enterprise, underlay the success of these areas.
But what is most striking about these two metro areas is the diversity of their economic growth. Since 2009, for example, employment in the Provo-Orem area is up 23.5%, with gains in virtually every sector, paced by increases in construction and natural resources (60%), information (30.1%), business services (46.5%) and even manufacturing (16.4%). With the exception of information jobs, Ogden has showed a similar, albeit less spectacular pattern of widespread economic growth over the same time period.
Other slipstream economies that are thriving include our second-ranked small city. Greeley, Colo., slightly over an hour’s drive from the Denver airport. Greeley rose seven places from last year, powered largely by 114% employment growth since 2009 in construction and natural resources (oil and gas mostly) as well as solid expansions in business services (up 29.8%) and manufacturing (up 17.2%). As in the case of Provo and Ogden, Greeley benefits from being close to a dynamic large metro area, but can couple that with prized small town attributes like less traffic, good schools, relatively low housing prices and safe streets.
Energy Hot Spots: Not All Cold Yet
Until the recent tumble in energy prices, big oil towns reliably dominated our list. For all sorts of reasons, including fierce local opposition, big metro areas don’t tend to produce oil and natural gas, though the technical and business aspects are dominated by a few, notably Houston. The price plunge had not yet translated into heavy job losses in many energy towns by January 2015, which is as far as our data goes, although some clearly were already hurting.
Take our top-ranked small city, Midland, and nearby No. 3-ranked Odessa, which are in the oil-rich Permian Basin of West Texas. Employment grew 9.1% in Midland last year, the fastest pace of any metro area in the country. Since 2009 the west Texas town has logged almost insane 45.8% expansion in its job base, with a large boost not only in natural resources and construction (108.4% growth), but also manufacturing (up 72.2%), wholesale trade (80.6%) , professional business services (up 40%) as well as leisure and hospitality (likely rooms for the roughnecks). Odessa boasts similar, albeit somewhat less gaudy numbers.
But you don’t have to be in Texas to be an energy boomtown. Bakersfield, Calif., No. 6 on the medium-size list, has managed to retain a strong energy economy in a state that has all but declared war on fossil fuels. Bakersfield has been described as “little Texas,” and it has enjoyed strong, very un-Californian employment growth in such areas as manufacturing, up 17.8% since 2009, trade (19.8%) and natural resources and construction (40.8%). Blue collar employment may be suffering in much of California, but not down in this metro area, best known for country stars like Merle Haggard and highly resistant to the San Francisco-style economic post-industrial model that dominates the state.
Yet there’s no question that there are problems in the oil patch. Some of the biggest decliners on our list from last year are big energy towns, such as Lafayette, La., which slid 43 places to 48th on the mid-size cities list, and Anchorage, Alaska, down 25 places to 63rd. On our small city list, Bismarck, N.D., a major hub for that state’s shale boom, dropped from second last year to 19th this year, and Houma-Thibodaux, La., tumbled 61 places to 81st.
Looking across the country, however, many of the small cities doing the best are not those that produce anything tangible like energy or cars. There’s been a strong resurgence in what may be considered playgrounds for the expanding ranks of the affluent residents of major urban areas, particularly on the West Coast, where Silicon Valley is minting many millionaires along with its famous billionaires, as well as along the East Coast, where second home and retirement-oriented communities are booming. Last year, vacation home sales broke the national record.
Among the playground areas that are prospering on our small cities are No. 4 Naples-Immokalee-Marco Island, Fla., where employment expanded 5.4% last year to 136,200 jobs, Napa, Calif. (eighth, with 15.6% job growth since 2009), and Redmond-Bend, Ore. (12th). On our mid-size list, Santa Rosa, Calif., (Sonoma County) ranks 12th and Santa Barbara- Santa Maria, Calif., 17th.
In some of these places, not surprisingly, leisure and hospitality are the largest industry — 19.6% of the workforce in Naples is employed in this sector. Economist Bill Watkins, who has studied these trends in California and Oregon, suggests that the growth of the playground cities reflects the emergence of America’s haute bourgeoisie. “The well-to-do go to these places,” he notes, fueling both their growth and, in hard times, their sometimes sharp declines. “They have second homes and can spend a lot of money.” Watkins’ analysis of Bend, Ore.’s economy, for example, shows that upwards of 80% of the volatility in its economy can be traced to what is occurring in California, notably the Bay Area.
Industrial Cities: Some Up, Some Down
For generations manufacturing in the U.S. has been moving to smaller cities, largely in the South, while Midwestern and northeastern industrial cities have been taking it on the chin. With a modest growth in manufacturing, some small and mid-size cities have done surprisingly well, although many continue to lag, and even fall further in the rankings.
Columbus, Ind., a manufacturing hub that is home to diesel engine maker Cummins CMI +0.2%, epitomizes the up and down nature of industrial economies. Right now Columbus, riding a new wave of investment from Cummins and other manufacturers, has risen to fifth on our small city list, and is at record high employment. Since 2009 the Indiana metro area’s job count has expanded 23.4% to 51,800, paced by an impressive 43.2% jump in manufacturing.
Sadly, this is not the case for many manufacturing towns. As with the large city list, many of the bottom dwellers are old industrial centers. On the mid-size list, take 91st place Youngstown-Warren-Boardman, Ohio-Pa., where employment is down 6.6% from 2003, or No. 85 Toledo, Ohio, off 5.4% from 2003. Among small cities furniture manufacturing center Rocky Mount, N.C., fell to 255th, down 4.4% since 2009, while old steel center Weirton-Steubenville, W.V.-Ohio, dropped to 254th place, with employment down 12.7% since 2003.
College Towns And The Future For Small Cities
The future of small city America depends heavily on how these areas adjust to changing economic times. Given that manufacturing and agriculture are becoming less labor intensive, to stay competitive, smaller cities will need to move more aggressively into knowledge-based fields like software, medical services and higher-end business services. Mid-sized college towns like No. 1 Provo, Boulder, Colo. (14th), Lexington, Ky. (19th), and Madison, Wisc. (20th), have experienced steady growth.
Diversification of the economy may be the best guide to future smaller city growth. Madison, for example, has a strong government and education employment base but also is home to growing number of technology firms, with information employment up an impressive 36.1% since 2009. Medical software maker Epic employs 6,800 at its sprawling campus in nearby Verona.
But perhaps the best example of successful small city growth may be Fargo, N.D., a long time butt of sophisto jokes, which ranks sixth on our small metro area list. Fargo, which is also home to North Dakota State University, may not have the cool factor of San Francisco or even Madison, but its economy is extraordinarily balanced, and not nearly as energy-dependent as other North Dakotan cities like Bismarck or Williston. It has posted double-digit employment growth since 2009 in everything from construction and manufacturing to business services and hospitality.
As many of America’s most prosperous metro areas become ever more expensive and highly regulated, notably in California and the Northeast, small-city America could enjoy a renaissance in coming years. But it will take determination on the part of local leaders and residents to begin expanding their economic strategy beyond any one niche, and instead develop a growth economy that can insulate themselves from the downturns that affect any single industry over time.