By Daniel Newman and Kenan Fikri
The country’s economic prosperity has shifted decidedly toward the Mountain West and coastal Southeast in recent years. Idaho, Montana, Utah, Nevada, and Georgia have seen the largest increases in the share of residents living in prosperous zip codes since the early 2010s. Over the same time, economic distress became more common in the heartland and states especially hard hit by the disruptions wrought by the pandemic, such as Hawaii and New York.
These findings are based on EIG’s Distressed Communities Index (DCI) summarizing how economic well-being changed between two 5-year periods covered by the Census Bureau’s American Community Survey: 2011-2015 and 2017-2021. In the first era—coming out of the Great Recession—economic success was largely concentrated in coastal metropolitan areas and superstar cities as highly-educated knowledge economy workers powered them ahead, while distress was more pervasive across Sun Belt metros which were slower to recover from the housing bust.
Fast forward and much of that narrative has flipped. Communities across the South and Mountain West, where housing is more affordable and job bases are rapidly expanding, are climbing in the rankings of economic well-being, while many of the places that thrived a decade ago are struggling to regain their footing after the destabilizing forces of the pandemic reshaped where many Americans work and live.
From prosperous to distressed, the average community is generally better off today than a decade ago.
The DCI assigns a single score for communities based on seven metrics and then classifies them into five tiers (or quintiles) of economic well-being based on their performance, running from distressed (the bottom 20 percent) to prosperous (top 20 percent). What it means to be economically distressed or prosperous has changed over time, and communities across tiers are better off today on indicators of poverty, education, and work relative to a decade ago.
Today, the most economically prosperous communities (those landing in the top-performing quintile on the index) are also the most populous with 80.6 million residents across the country. Access to economic opportunity is a major benefit afforded to these residents, with these zip codes on average enjoying nearly triple the increase in jobs from 2017 to 2021 compared to comfortable ones and 10-times the increase observed in at-risk ones.
Meanwhile, distressed communities now have lower poverty rates, fewer adults lack basic educational credentials, and fewer adults are out of work than they were in the years following the Great Recession. Distressed zip codes lost jobs on net, however. Even as distressed communities have ridden a rising national tide of steady progress, absolute disparities in well-being relative to the top remain as wide as ever.
Counter to the general improvement in most metrics, employment growth rates weakened and the change in the number of business establishments largely held steady across all five tiers of communities over the study period, primarily because the 2017-2021 window includes the onset of pandemic and only a portion of the economic recovery that followed.
Economic prosperity has clearly shifted toward the Mountain West and Southeast.
Today a much greater share of the population in several states across the Southeast and Mountain West live in the DCI’s top-ranked prosperous zip codes than did a decade ago. Missing from the group of states seeing improvement are most of the country’s most populous states; among the five largest states, only Florida claimed a growing share of residents in the top tier of national well-being over the period.
The most striking change is in Idaho, where the share of residents living in economically prosperous zip codes roughly doubled from 19 to 39 percent. Hit hard by the housing bust and financial crisis, the state has come roaring back to become an economic success story. The state’s rise on the DCI was likely powered by a combination of rapid recovery from the Great Recession and strong population growth in the state’s better-off corners.
Utah remains far and away the national leader when it comes to community prosperity, though, with its share of residents in the top tier of economic well-being growing from 47 to 55 percent in recent years. Nearby, Colorado, Nevada, and Montana also rank highly, further highlighting the region’s ascendance.
In the Southeast, Clayton County, GA, is a prime example of how economic growth is leading to improved opportunities. Located just south of Atlanta, Clayton recorded the biggest improvement in its DCI score among the country’s most populous counties (>100K). Most strikingly, the county saw 6 percent growth in employment and 12 percent growth in the number of businesses between 2017 and 2021. Both rates were much higher than the average among large counties over this time. Accordingly, the suburban jurisdiction hopped from the bottom rung of distress to its new mid-tier status, the third highest tier of well-being.
The majority-Black county of nearly 300,000 residents improved on nearly every component measure that goes into calculating the overall distress score, all while adding about 30,000 new residents. More prime age adults are now working, the share of residents in poverty declined, while employment and business growth increased substantially. The county recently had the largest over-the-year percentage increase in average weekly wages (+7.7 percent) among the country’s largest counties. Only a single component went in the wrong direction, with the county’s median household income slightly worse off relative to other counties in the Atlanta metro area. A companion analysis from EIG also suggests that families in the county still struggle with affordability and the high costs of securing a good standard of living, demonstrating how the community’s ascent up the rankings of American well-being remains a work in progress.
Distress increased considerably in many heartland states and parts of the Northeast.
Since the DCI is a relative measure, one community’s gain is another’s loss, meaning that the flip side of progress in ascendant regions is relative decline in others. Over the past decade, the country has seen economic distress largely consolidate in the heartland and Deep South, although it is on the rise in parts of the Northeast, as well.
Louisiana recorded the largest increase in its share of residents in distressed communities, growing by 10 percentage points. The state now has the second highest share of residents in the lowest tier of economic well-being, behind only neighboring Mississippi. Oklahoma and Hawaii also saw an increase of nearly 10 percentage points in the share of their populations slipping into distress over this time.
New York, although a knowledge economy superstar that excelled in the first half of the 2010s, wasn’t far behind with an 8.4 percentage point increase in the share of people living in distressed communities. Nearly all of that increase is attributable to zip codes in metropolitan areas like New York City, which particularly struggled in the pandemic. The state’s economic performance has deteriorated across a range of measures important for economic dynamism, and the Empire State is now home to the second largest number of people in distressed zip codes—over 4 million—trailing only Texas.
Rocky Mountain high
Stepping back, Census divisions summarize the shifting sands of American economic well-being nicely.
Weighted by population, the typical zip code in the Mountain West and South Atlantic Census divisions rose four points on the DCI, equivalent to climbing four percentiles in the national rankings (zip codes are scored on a scale from 0 to 100, ranging from most prosperous to most distressed). As communities in these regions rose on the index, they traded places with communities in New England and the Mid-Atlantic, where weighted for population, the typical zip code fell five percentiles in the rankings. These relative declines were functions of slower growth rather than falls in other aspects of well-being or living standards.
The typical community in the East South Central region (AL, KY, MS, and TN) also made some improvement, but those states still trail far behind other parts of the country.
The changing landscape means that the average Mountain West community is now the clear leader in offering its residents the highest levels of economic well-being in the United States, displacing New England. Looking across components of the index, residents of New England still enjoy lower poverty rates, higher employment rates, and higher relative incomes than their Mountain counterparts, but their communities have seen nowhere near the levels of growth in jobs and business establishments in recent years.
The relative standing of zip codes in the West North Central region (IA, KS, MN, MO, NE, ND, and SD) also fell as the fracking boom has faded, but aging and population loss across much of the region is also dragging on its economic vitality.
The virtuous circle of people, growth, and prosperity
It is notable that across all five tiers of the DCI, the smallest slice of the U.S. population (51.5 million) lives in distressed zip codes. This is in part because less than half of the zip codes that fall into the bottom quintile on the index are metropolitan, with the remainder being rural (by contrast, 83 percent of prosperous zip codes are metropolitan). The share of the nation’s population in this tier has ticked down slightly since 2011-15, too. But these communities continue to stand out for their high levels of job losses and net business closures.
This lack of growth and investment in particular is one of the key distinguishing features of distressed communities. And its inverse, robust growth, continues to propel communities into the upper echelons of American well-being. The rise and fall of communities on the DCI largely reflects the shifting geography of economic growth. As the U.S. economy continues to evolve, so will the landscape of community prosperity—channeled through long-standing divides in some places but breaking out with new opportunities in others.
