The (Kinda Sorta) Comeback of the Midsize Metro Area

(Bloomberg Opinion) -- For the first time since 2007, America’s midsize metropolitan areas (population 250,000 to 999,000) grew faster than the large ones in the 12 months ending July 1, 2018 — 0.8 percent to 0.7 percent. That fun fact, culled by Indeed chief economist Jed Kolko from the new population estimates released by the U.S. Census Bureau last week, was a tantalizing hint that maybe the tables are finally turning and growth shifting to the country’s smaller cities.

Or maybe not. What stood out as soon as I started looking through the metropolitan-area population numbers is that while the three biggest metropolitan areas — New York, Los Angeles and Chicago — have gone from growing slowly to actually losing population, most of the rest of the country’s large metropolitan areas are plowing right ahead.

The (Kinda Sorta) Comeback of the Midsize Metro Area

Put another way, the 21 metropolitan areas with more than 2.5 million and less than 9 million people, which make up 28.3 percent of the country’s population, accounted for a remarkable 48.1 percent of all U.S. population growth from 2017 to 2018. Overall, 56.2 percent of Americans lived in the 53 metropolitan areas with 1 million people or more in July 2018, up from 54.6 percent in 2010 (when there were 51 such metro areas) and 56.1 percent in 2017 (when there were also 53). The country continues to get, if not necessarily more urban, at least more large-metropolitan.

Still, there are signs of a modest momentum shift. If you look at the share of U.S. population growth contributed by metro areas of varying sizes, there has been an inflection since 2015 away from the big-but-not-biggest metros and toward the midsize and smaller ones (I left the big-three metro areas and the non-metro areas off this chart because their contributions to U.S. growth have been so small and in some cases negative).

The (Kinda Sorta) Comeback of the Midsize Metro Area

One way to see this is as a contest between economics and livability. The bigger metropolitan areas continue to have a clear advantage in the former. Not only do incomes rise with metro-area population, but the growth in per capita income from 2010 through 2017 (the 2018 income numbers aren’t out yet) has also generally favored the large:

The (Kinda Sorta) Comeback of the Midsize Metro Area
Large metro areas have been experiencing more income growth because “the knowledge economy has an inherent tendency toward geographical agglomeration,” University of California at Berkeley economist Enrico Moretti wrote in his important 2012 book “The New Geography of Jobs”:

The success of a city fosters more success, as communities that can attract skilled workers and good jobs tend to attract even more. Communities that fail to attract skilled workers lose further ground.

There are smaller metropolitan areas that outdo bigger ones in, say, the percentage of the population with college degrees, but on balance the bigger metro areas have had an advantage in attracting such people because their size allows them to offer more opportunities. If your first job doesn’t work out, there’s probably another one you can jump to. Your spouse is also likelier to be able to find an appropriate job.

Still, there are trade-offs. Housing costs tend to be higher in larger metropolitan areas. Commutes are longer, too:

The (Kinda Sorta) Comeback of the Midsize Metro Area

Bigger metropolitan areas have often had the edge in harder-to-measure aspects of livability like entertainment options and food quality. Having spent time in the past year in 17 of the 135 U.S. metros with populations between 250,000 and 999,999,  though, I’ve got to say that a lot of them are quite appealing, with great restaurants, impressive cultural attractions, and neighborhoods with a vibe that, for lack of a better word, one could describe as “cool.” Frequent midsize-metro visitor (and small-metro resident) Anne Helen Peterson of BuzzFeed News used that word recently in recounting the attractions of such places for a new generation of creative workers:

In Des Moines, you can start the bespoke leather shop you’d have to keep on Etsy somewhere else. You can move your food truck to a brick and mortar. You can buy a car to get you out of town, and afford a plane ticket to get you to whatever large city you need to get to. You can take entrepreneurial risks and save for a down payment on a home. You can model your newly expansive lifestyle on Instagram to compel your still-urban friends to move. And you can frequent the cool restaurants and cool events in town, keeping the newly cool-ified business economy alive and thriving.

Yes, the success of the Des Moines metropolitan economy is probably more dependent on such uncool sectors as state government and the insurance industry than on its bespoke leather shops. It is also possible to find indicators (tech industry hiring, for example) that show accelerating agglomeration rather than a dispersion of economic activity. And even the population data I cite above show the percentage of Americans living in large metropolitan areas continuing to rise, albeit at a slowing rate.

Still, any sign of a midsize metro revival, however tentative, should be probably be welcomed. The remedies to the concentration of wealth in bigger metropolitan areas that Moretti and other economists have proposed — such as subsidizing moves to higher-income regions and dismantling zoning regulations and other barriers to housing construction in in-demand cities — don’t seem to be getting a huge amount of traction. As Jason Segedy, planning director of Akron, Ohio, the main city of a less-than-booming midsize metro area, argued in a recent critique of what he called the “U-Haul School of Urban Policy”:

Expecting everyone to be a rugged individualist and an economic free agent who is willing to uproot their family and move to a new place whenever their corporate overlords tell them that they must, simply runs counter to human nature.

I’m not sure that this necessarily leads to Segedy’s conclusion that “we need to refocus national, state, and local economic development policy to adopt a place-based orientation.” Some places, especially rural ones, don’t have much of a shot at revival. They may have a midsize or smaller metropolitan area with promise in the neighborhood, though. Metro areas of between 250,000 and 999,999 people can be found in 44 states,  and they “are poised to determine whether our country grows together, or grows apart,” the Brookings Institution’s Alan Berube wrote in January:

Although these regions lack the size and global reach of their much larger metro counterparts, they arguably retain the requisite scale to offer a distinctive economy and quality of life to their businesses and residents. Moreover, their size may also facilitate the sort of pragmatic, cross-sector problem solving that often bedevils larger metro areas; to wit, the average midsized metro area encompasses just 2.8 U.S. counties, versus 8.2 counties in the average large metro area.

That’s the case for believing that midsize metros can mount a comeback. Which is why even the sparse evidence so far that they actually are mounting one deserves attention.

They were, in descending order of population (and naming only the primary city and state): Tulsa, Oklahoma; Worcester, Massachusetts; Omaha, Nebraska; Albuquerque, New Mexico; Albany, New York; New Haven, Connecticut; Des Moines, Iowa; Fayetteville, Arkansas; Lexington, Kentucky; Santa Maria, California; Salinas, California; Davenport, Iowa; Peoria, Illinois; Lincoln, Nebraska; San Luis Obispo, California; Hagerstown, Maryland; and Sioux Falls, South Dakota.

Two of the remaining six states (Arizona and Rhode Island) have larger metropolitan areas, while five of them (all but Rhode Island) have metropolitan areas of fewer than 250,000 people.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”

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