A Tale of Two Countries: The Rapid Urbanization of America

By Hugo Dante 

The U.S. population is highly concentrated in urban areas, with four out of five people residing in these areas. This is a seismic shift from a century ago when Americans were almost evenly split between urban and rural. As a result of this demographic shift, the characteristics of rural and urban America are diverging in virtually every way imaginablefrom incomes, employment, housing prices and even financial conditions.  

While the national unemployment rate had hit a 50-year low in the months leading up to the coronavirus pandemic and resulting economic shock, conditions were far from even across the country. Americans are moving to urban areas because they offer greater employment prospects. In fact, the average population growth for counties with less than three percent unemployment was twice that of counties where the unemployment is between three and five percent. Counties with unemployment greater than seven percent fared worse, with negative population growth on average. While 40 percent of the population lives in census tracts with unemployment rates below four percent, nearly 28 percent88 million Americans—live in a tract with an unemployment rate higher than seven percent. These census tracts tend to be in rural areas and on urban outskirts. 

As the American economy becomes increasingly service-oriented, technologically sophisticated and reliant on skilled labor, more companies are concentrating in major metropolitan areas to tap into large pools of skilled and educated workers. As a result, job and income prospects are increasingly becoming a function of an individual’s proximity to urban cores.  

Incomes are rising quickly in the largest cities, further widening the gap between high earners in the top metro areas and everyone else. Incomes in the top 20 metro areas grew 24 percent between 2008 and 2017 (according to the latest available BEA data)versus 21 percent in all other metro areas and only 11 percent in non-metro areasWhile this may not seem like a stark difference, the top metro areas have much higher incomes in nominal and real terms. Median household incomes in the top 20 metro areas are, on average, $12,000 higher than the U.S. median of $63,174. The median income for all other metro areas, by comparison, is about $10,000 lower than the U.S. median. Rural incomes fare the worst, with household incomes around $13,000-$18,000 less than the U.S. median, depending on the region.  

Substantially higher incomes in urban cores can lead to a vast divergence in outcomes. Metro areas vastly outperform their rural counterparts in virtually every indicator of wellbeing, according to an NIH study evaluating health and mortality trends between 1969 and 2009, with the largest metro areas presenting the best outcomes. Large metro areas have substantially better scores in educational attainment, poverty rates, income disparity, access to grocery stores, access to medical treatment, health insurance rates, ratio of nurses per capita, diabetes and obesity rates, among others.  

It remains to be seen how persistent the economic fallout from the pandemic will be, and whether the pandemic will alter the urbanization trends described here. Should the divergence of rural and urban areas persist, it will continue to present challenges for banks working to support economies across the country. 


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