By Ross DeVol, Minoli Ratnatunga, Dave Shideler and Jonas Crews
America’s small towns are an important part of the economic fabric of the nation. Dotting the U.S. map—in the Heartland and beyond—are more than 500 small towns. These small towns are better known as micropolitans. Statistically, a micropolitan is comprised of one or more counties with at least one city that has more than 10,000 in population but less than 50,000. The Most Dynamic Micropolitan Index ranks 515 micropolitan areas across the U.S analyzing the economies of smaller communities and providing data in an easy and accessible format.
The Most Dynamic Micropolitan Regions report identifies which smaller communities are thriving and which are struggling to provide economic opportunity for their residents. Most Dynamic Micropolitans is an objective, outcome-based measure of the functioning of micropolitan area economies across the nation. The index enables economic development officials, mayors and others to monitor their community’s dynamism nationally or relative to their region and state. Both international and national economic and geopolitical events impact performance metrics. Nevertheless, the index provides a fact-based evaluation of whether development strategies are influencing the trajectory of growth. Most Dynamic Micropolitans helps public policy groups, elected officials, academics and other researchers and businesses in monitoring and assessing small community vitality.
Most Dynamic Micropolitans rankings are derived from stock and flow measures such as job growth, wage and income gains, and new metrics, the proportion of total jobs at private sector firms five years old or less and the knowledge intensity of those young firms. These two measures provide an evaluation of the entrepreneurial ecosystem of communities through which they are creating meaningful jobs for their residents and opportunities for talent and firms that might desire to relocate or expand. While many of our metrics are standard indicators of economic development, the young firm employment and knowledge intensiveness at those young firms are new measures. As Heartland Forward research has documented, young firms’ employment and knowledge intensiveness ratios drive long-term economic growth as new firms develop new products and drive innovation. These ecosystem measures provide information on the ability of entrepreneurs to start new businesses and scale them— critical for future job and wage gains.
In addition to these two entrepreneurial ecosystem measures, we incorporate data on regional price parities from the Bureau of Economic Analysis (BEA). These regional price parities are indexes indicating whether goods and services are more or less expensive than the national average. Therefore, the indexes can be used to adjust income measures for differing inflation rates and differing levels of purchasing power across regions. The level of per-capita personal income reflects these adjustments and can be viewed as a measure of longer-term economic development because it is the accumulation of all prior welfare improvements.
Pecos, Texas, representing the Heartland, is first for the second consecutive year. Pecos leads economic growth across the nation’s micropolitans. Pecos and microencompassing Reeves County are at the epicenter of the shale oil exploration boom in the Permian Basin. The expansion has been so strong that workers have been living in recreational vehicles and trailers. The recent collapse in oil prices, related to COVID-19, will harm future gains.
Combining strong knowledge-based economic growth with thriving tourism, recreational and lifestyle clusters, Jackson, Wyoming-Idaho (second) and Summit Park, Utah, (third) are closing the gap. Jackson has used its stunning beauty to drive tourism, attract remote telecommuters, lure wealthy semi-retirees and develop a distinctive entrepreneurial ecosystem. At $177,570, in 2018, Jackson’s per-capita income is highest in the nation, exceeding Silicon Valley. Summit Park diversified through its fastest-growing sector— professional and technology services. This community boasts 55.3% percent of its residents over the age of 25 have a bachelor’s degree or higher.
Coming in at fourth and fifth are Heber, Utah, and Carlsbad-Artesia, New Mexico. Heber is located in Wasatch Back along with Summit Park and is a 25-minute commute to Provo/Orem and a 45-minute commute to the Salt Lake City metro areas. Heber is diversifying its economy by providing entrepreneurial support and mentoring. Carlsbad-Artesia combines expansion in Permian shale oil with two nearby national parks to foster growth.
Bozeman, Montana, ranked sixth, has thriving clusters in photonics/optics, and software and information processing. Yellowstone National Park is to its immediate south, so travel and tourism play an important role. Hood River, Oregon, at seventh, is the windsurfing capital of the world and has a diverse manufacturing sector, from food to high-tech glass manufacturing. Andrews, Texas (eighth) is in the western edge of the Permian basin; Jefferson, Georgia (ninth) has a recently opened Amazon fulfillment center, and an electric vehicle battery manufacturing plant is under construction. Vineyard Haven, Massachusetts (tenth) rounds out the top ten. Texas and Colorado each had five micropolitans in the top 30, followed by Washington (four) and Utah (three).
The Heartland had seven in the top 30; Fairfield, Iowa (25th) and Oxford, Mississippi (30th) joined the five Texas communities (in addition to Pecos and Andrews)—Big Spring (20th), Fredericksburg (22nd) and Stephenville (28th).
Among those micropolitans ranking 31st to 50th, the Heartland had five: Lewisburg, Tennessee (32nd); Tullahoma-Manchester, Tennessee (37th); Sevierville, Tennessee (44th); Traverse City, Michigan (47th); and Spencer, Iowa (50th).
The Heartland had 21 micropolitans among those ranking 51st to 100th for a total of 33 in the top 100—half of what its proportionate share should be.
There are several industries and structural characteristics that distinguish micropolitans at the top of the rankings from those at the bottom. Many thriving communities score high on quality of life measures. Top performers are among the most closely linked to recreation, travel and tourism. Communities close to national parks that have developed the infrastructure to utilize them for economic development perform well. Attracting international and domestic tourists provides an important advantage for smaller locations. However, those communities that have been able to exploit their natural amenities by attracting talented financiers and entrepreneurs, matching them with local assets such as a university or college, have developed entrepreneurial ecosystems that continuously spawn and scale new firms. The greater the knowledge intensiveness of these young firms— the higher the rate of job creation.
The second clear distinction is one of natural resources: shale oil deposits. Technological advances in locating shale oil deposits and horizontal drilling techniques have facilitated an explosion in production. Communities in the Permian basin have benefitted the most as it is the most productive shale basin in the world. These communities are attempting to diversify their economies by focusing on technical career education at colleges and providing support for entrepreneurs.
Following a broader trend among metropolitan areas, smaller communities able to participate in the expansion of professional, scientific and technical services are seeing strong economic growth. Our top performing micropolitans are full of examples. Advanced manufacturing is another key to success for some regions. An example is that producing batteries for electric vehicles is aiding several communities. Smaller communities that can carve a position in the automotive supply chain and other advanced manufacturing sectors are reaping the benefits.
Communities with key challenges include those with coal deposits, as electricity production is increasingly shifting to natural gas and renewables. Low agricultural prices have impacted many Heartland communities. It remains to be seen whether the U.S.-China Phase 1 trade agreement restores demand for U.S. agricultural products.
The period of analysis does not include the COVID-19 pandemic or its economic and societal effects. The impact on health, employment and consumer spending is significant and will affect specific sectors, including travel, tourism and energy – which have fueled growth in many of the micropolitan areas that excelled in our index. Broader societal changes, including increased comfort with remote work and relocation away from high-cost major metropolitan areas, may also change opportunities for communities in micropolitan areas.