America's Fastest-Growing Small Cities

Coverage of America’s changing urban scene tends to focus heavily on large metropolitan areas and the “megaregions” now often said to dominate the economic future. Often missed has been a slow, but inexorable, shift of migration and economic growth to smaller cities, a geography usually ignored or dismissed, with the exception of college towns, as doomed to lag behind by urban boosters.

Part of the problem is that analysts often assume that the decline of small towns, which have been losing population, also means small cities are in trouble. Yet this is simply not true. Since 2000 small cities with between 100,000 and 250,000 residents have enjoyed a 13.6% population growth rate, more than twice that of New York, Los Angeles and Chicago, and roughly 10% faster than the national growth rate. The main driving force, notes demographer Wendell Cox, appears to be domestic migration, which is negative in the largest cities as well as in small towns. However the 167 metropolitan statistical areas with between 100,000 to 250,000 in population have added a net 675,000 people due to domestic migration since 2000.

This performance is also seen in the economic sphere. All five of the nation’s fastest growing economies in 2013 were small cities, which, despite their smaller size, possess the basic infrastructure — hospitals, schools, airports, broadband — that are essential to economic growth.

Of course, not all small cities are doing well. Many, particularly in the industrial heartland, continue to suffer; virtually all the bottom 10 small cities on our list are in old industrial areas in the Great Lakes, the Southeast and Massachusetts,  the birthplace of America’s first manufacturing boom.

In order to determine which small metro areas are booming, and help us understand why, we asked Mark Schill at the Praxis Strategy Group to rank them based on four factors: population growth (2000-13), job growth (2001-14), real per capita personal income growth (2000-12), and growth of regional GDP per job (2001-12) — if GDP per job is increasing, it’s an indicator that the metro area is adding high-value, productive industries to its economy, as opposed to lower-wage jobs.

Boomer Boomtowns

Over the next decade, one major driver for growth in small cities may be demographic factors, notably the aging of the baby boom generation. Contrary to popular press accounts that suggest boomers are gravitating to big cities, demographic evidence suggests the opposite is the case. Demographer Cox says boomers appear to be, on net, leaving both big cities and older suburbs in favor either of exurbs or smaller cities.

Some small cities already appear to benefiting from this trend, including the top-ranked city on our list: The Villages, Fla. This relatively new community, which focuses on “active” seniors has doubled in population since 2000, and last year was the nation’sfastest-growing metropolitan area. The area also has expanded its job base by 186% since 2001. Yet as much of the employment is in services, growth in economic productivity has been lackluster. Critically, this does not mean the area has been getting poorer. Personal income growth, largely from assets owned by seniors, has soared by some 60% since 2000, 10 times the national average growth rate of 6%.

Thriving senior-oriented economies can be found throughout Florida, but they are also emerging elsewhere. St. George, Utah, which ranks 12th on our list, has long attracted downshifting boomers from the West Coast as well as the rest of the Intermountain West. This has helped to power its construction sector, a key element of the local economy. Another hot spot for boomers is No. 17 Bellingham, Wash., which is home to Western Washington University. In the coming decade, we can expect a growing competition among smaller towns for boomer residents, and their sometimes significant assets.

Energy Towns

The oil and gas industry doesn’t need bright lights, but sometimes its presence can create some. Of our top 10 fastest-growing small cities, five are energy-driven boom towns. This includes No. 2 Midland, Texas, which has logged 60% job growth since 2001 and 30% population growth since 2000. The west Texas  city, located in the heart of the booming Permian Basin is also getting richer, with personal income growth of over 96.7% since 2000, a rate well above the national average of 6% and the median for small cities of 10.2%. Last year, Midland led the nation in GDP growth at 14%.

Other high-ranked energy cities include No. 3 Odessa, Texas,  and No. 8 Houma-Thibadaoux, La., which this February boasted the lowest unemployment rate in the nation at 2.8%.

College Towns

One would expect this list to be chock full of university towns, but to our surprise, only one made the top 10: Fargo, North Dakota-Minnesota. The metro area has caught our eye before. Fargo is far more than home to North Dakota State, with almost 15,000 students, but the school’s  expertise in engineering and energy dovetails perfectly with the state’s boom not only in energy but it’s rapidly growing tech and manufacturing sectors. Since 2010, manufacturing employment is up 18% in Fargo, to go along with 21% growth at corporate managing offices, 20% in wholesale trade, 17% in finance, and 14% in professional services.

Perhaps a better example of a small city benefiting from university connections is  No. 12 Morgantown, W.V. The metro area of 135,000 is home to the nearly 30,000 people working or studying at the University of West Virginia. Other college towns that made it to the upper tier include No. 11 Hammond, home to Southeast Louisiana University , with 15,000 students; No. 13 Logan, Utah, which hosts Utah State’s 28,000 students; and No. 25 Auburn, Alabama, home to the 25,000-student university of the same name.

Government Centers

Throughout the Bush years and in the first years of the recession, government centers — such as greater Washington, D.C., Madison, Wisc., as well as towns with military bases — out-performed the overall economy. Today many of the small cities that are thriving remain largely dependent on government spending, including  No. 5 Jacksonville, N.C., home to the Marine Corps’ Camp Lejeune.

Given the long-term fiscal crisis facing many communities, this dependence on government spending could prove problematic, leaving a metro area’s fate in the hands of others. Planned cuts in military spending could undermine growth in many of these communities and is already raising the hackles of some public sector unions.

The Road Ahead

These trends suggest that the future of small city America may be far brighter than suggested by many urban pundits. The movement of boomers and the growth of resource-based industries seem likely to accelerate this trend, although declines in government, and particularly military, spending may impact some communities negatively. Like big cities, their small brethren seem to be divided between those that are thriving and those that are not.

Perhaps the biggest challenge facing small cities will be retaining or attracting enough young families. Already roughly two out of every five millennials lives in one of the country’s smaller communities, and proportionately this population grew faster in these small metro areas than in either core cities or suburbs. In the future the key question is how to get more of them, particularly the better educated, to stay.

Economically, these areas also need to diversify, taking advantage of new technologies that allow many businesses to operate remotely. Too great dependence on government spending, or on boomer migration, tends to distort local economies by fostering too much dependence on Washington or  creates a labor market overly tilted towards low-paying service workers. These smaller places still have their work cut out from them, but their prospects may overall be brighter than many suspect.

Analysis by Mark Schill, mark@praxissg.com. Measures are normalized and equally weighted. Sources: U.S. BEA (GDP/Job, PCPI growth), EMSI (employment growth), U.S. Census Population Estimates Program (population growth).

This piece originally appeared at Forbes..

Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. His newest book, The New Class Conflict is now available at Amazon and Telos Press. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

Fargo photo by David Kohlmeyer.