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The Numbers, Philosophy Behind The Rust Belt's Recovery

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The Numbers, Philosophy Behind The Rust Belt's Recovery

July 11, 2014
Urban PolicyOther

It has been a long slog of a recovery from the Great Recession. Only lately, after more than six years, has America finally regained all the jobs it lost. But some cities and states got a head start on the road back to prosperity, and it is important for the others to find out why.

A new Manhattan Institute study profiles these leaders, ranking the 100 largest metropolitan statistical areas, or MSAs, by their economic performance from 2009 to 2012. Some are well known success stories such as the San Jose area (aka Silicon Valley) and most of Texas. Some are more surprising - Rust Belt comeback kids such as the Detroit, Youngstown and Toledo areas. All are in the Top 10 metros ranked in the study.

Leading the pack and setting the tone for the region is Grand Rapids, Mich. Its message to cities across the country: diversification of industry and a business-friendly climate work. Its 2009 to 2012 performance, based on gross domestic product, personal income and job growth, ranked third behind San Jose and Nashville. Since then its growth seems to have accelerated while other leaders of the recovery have held steady or started to flag.

A closer look at the data shows why these metros were transformed from has-beens to stars. They were all part of an industrial renaissance. In Detroit, Youngstown, Grand Rapids, Toledo and Cleveland, growth in employment earnings was led by manufacturing. All saw healthy increases in manufacturing jobs.

It would be nice to be able to say that this Rust Belt revival is still going strong. Since the end of 2012, however, there are signs from more recent data - on job creation - that the momentum in most of these areas is flagging.

In the latest 12-month period (ending in May), Grand Rapids' private-sector employment was up by 4.2 percent. In the latest Manpower Inc. nationwide survey on employers' hiring plans, for the third quarter of 2014, Grand Rapids has the strongest job outlook among all areas.

What has made the difference? A diversified industrial base is a key factor, certainly. Grand Rapids makes office furniture (Steelcase and Herman Miller are based here) as well as shoes (Wolverine World Wide), auto parts, plastics, machinery and much else. But its business climate may be even more crucial. It is known for an entrepreneurial culture and a limited-government political tilt.

Tax and regulatory policies in its state, under Republican Gov. Rick Snyder, have taken a strong pro-business turn. It is making a name for itself by showing that a city can succeed without obvious advantages like oil in the ground and world-beating technology companies. Energy and brainpower are important, but taxes and business climate still matter.

San Jose is doing well, too. Its private-sector employment is up 3.4 percent year-over-year. Nashville is holding its own with a 3.6 percent boost. There are lessons to be learned from these and all the other MSA leaders. But for most cities seeking a model, Grand Rapids may be the easiest to emulate if the political will is there.

San Jose should have a "Kids, don't try this at home" warning.Taxes are high, housing costs are through the roof and regulations are onerous. Companies there power through these obstacles with a critical mass of brains, academic and corporate research, and venture capital. On the other hand, when they want to expand, they tend to look to places like Oregon and Texas. Or maybe western Michigan, the way things are going. "Do you know the way to Grand Rapids?" may never make it as a song, but it does suggest a formula for success.