United States Department of Agriculture

Chapter 4

Rural America: Entering the 21st Century

Today, rural America comprises 2,305 counties, contains 80 percent of U.S. land, and is home to one-fifth (56 million) of its people. Rural America is diverse. At the dawn of the 21^st century, no one industry dominates the rural landscape, no single pattern of population decline or growth exists for all rural areas, and no statement about improvements and gaps in well-being applies to all rural people. Some rural areas have shared in the economic progress of the Nation, while others have not. The opportunities and challenges facing rural America are as varied as rural America itself.

Farming no longer anchors most rural communities and economies as it did through the mid-20^th century. Small family farms are now more closely associated with diversified rural economies that offer off-farm income opportunities. Large farms still enhance some local economies, but developments in long-distance purchasing of inputs and marketing of products reduce their contribution. Seven out of eight rural counties are now dominated by varying concentrations of manufacturing, services, and other nonfarming activities. Today, rural regions of the country survive economically on one or more of three basic assets: natural amenities for tourism and retirement; low-cost, good quality labor and land for manufacturing; and natural resources for farming, forestry, and mining.

During the 1990s, the U.S. economy enjoyed an unprecedented period of economic growth. Rural areas generally shared in the good economic times, as earnings and income increased and unemployment and poverty fell. The rural population grew as urban residents and immigrants chose to live in rural areas; almost 8 percent of nonmetro counties, many in the West, increased in population at more than twice the national average. Still, areas of the Great Plains and western Corn Belt lost population as they wrestled with declining agricultural employment and the lack of replacement jobs in other industries. High poverty and unemployment persisted in rural pockets, particularly in Appalachia, the Mississippi Delta, and the Rio Grande Valley.

The diversity of rural economies suggests the need for a variety of rural development strategies to enhance the economic well-being of rural Americans, including improved educational opportunities and capitalization on natural amenities to attract new growth. A recent trend in Federal development policy has been to support new development entities that assist specific regions. Some of these entities cover large regions with significant rural populations, while others cover smaller areas. At the same time, Federal funding for community resource programs, such as housing, infrastructure, business assistance programs, and other programs important for stimulating rural development, continues although at a lower per capita level in rural than urban areas.

Rural Population Growth Levels Off, but the West Continues To Grow

For most of the past decade, rural America enjoyed widespread population growth, rebounding from the wide population losses of the 1980s. The nonmetro population grew by 10.3 percent during the 1990s, below the 13.9 percent growth rate of metro areas. Net migration from metro areas and an increasing flow of immigrants accounted for most of this nonmetro population increase. The pace of nonmetro population growth slowed after mid-decade, however, falling steadily from 1.2 percent in 1994-95 to 0.6 percent in 1999-2000. Metro population growth remained steady at around 1.2 percent.

Regional trends show the continuing attraction of both the West and the South, which together accounted for over three-quarters of rural population growth during the 1990s (figure 4-1). Boosted by both high in-migration and high birth rates, the rural West grew by 20 percent, twice the national average. Moderate climates, scenic features, and other natural amenities stimulated rapid population growth, particularly retirement migration, in parts of the Rocky Mountain West, as well as in the southern Appalachians, and the upper Great Lakes. High population growth in the rural South resulted in part from urban sprawl, especially around large metro areas of the South. As urban areas expanded, more rural residents fell within commuting zones. As a whole, the Great Plains turned around from substantial losses in the 1980s, achieving some population growth, although the majority of counties in this area continued to lose population.

Growing numbers of Hispanics are settling in rural America. Data from the 2000 Census show that Hispanics constituted 5.5 percent of the rural population but accounted for 25 percent of the population growth in these areas during the 1990s. The nonmetro Hispanic population grew by over 60 percent during the decade. Almost half of all nonmetro Hispanics now live outside traditional settlement States in the Southwest. With higher fertility and younger age structure, natural increase alone now propels the growth of rural Hispanics at a higher rate than for other major race/ethnic groups (fig. 4-2).

Rural Areas Benefited From the Nation’s Economic Prosperity

Rural areas as a whole shared in the good economic times of the late 1990s and the longest U.S. economic expansion on record. The nonmetro unemployment rate fell to its lowest levels in 20 years. Employment continued to expand and real earnings increased, although more slowly than earlier in the decade. The share of rural workers in low-wage jobs declined. In late summer 2000, the manufacturing industry went into a downturn, as one of the first signs of oncoming recession.

Nonmetro employment declined by about 0.6 percent from 2000 to 2001, while metro employment remained steady despite the recession. Some nonmetro counties, including areas of the Great Plains, had large employment gains despite the recession. Much of the nonmetro South suffered large job losses in 2000-2001, fueled in part by the recent manufacturing downturn. Employment change in the nonmetro West was mixed, with some counties reporting losses and others gains.

Nonmetro and metro unemployment rates moved together, declining during the economic expansion of the 1990s and increasing during the recession. Nonmetro unemployment rates have been higher than metro rates since 1996. The nonmetro unemployment rate was 4.9 percent in 2001, compared with 4.7 percent in metro areas (fig. 4-3).

Rural areas benefited economically from the economic expansion of the 1990s, with poverty rates falling to 13.4 percent, the lowest level since the 1960s. Almost 7 million rural people lived in poverty in 2000, down half a million from 1999. Despite this improvement, poverty rates continued to be higher in rural than urban areas and almost one in five rural children under 17 years old were in poverty in 2000. In addition, rural areas lagged behind urban places in median household income, per capita income, and earnings per job.

Rural Economies Are Based on Different Assets

A century ago, rural America was the center of American life. It was home to most of the population and most rural residents were involved in producing food and fiber for the Nation. The rural economy has changed, shifting from a dependence on farming, forestry, and mining to a diversity of economic activity. This diversity means that nonmetro areas are differentially affected by global, macroeconomic, and financial events, resulting in different labor market conditions (table 4-1).

Rural regions of the country survive economically on one or more of three basic assets: (1) natural amenities for tourism, second homes, and retirement; (2) low-cost, good quality labor and land for manufacturing, but also services such as prisons and extended care health facilities; and (3) natural resources for farming, forestry, and mining. Most rural jobs are not directly related to these assets, but instead are in consumer services–retail trade, education, health, and other consumer services primarily for local residents. Yet, consumer services cannot thrive without agriculture, recreation, manufacturing, and/or other activities such as commuting that bring money into the community. In contrast, urban areas draw from a different asset base and tend to specialize in more knowledge-intensive activities, particularly producer services. This sector, which includes legal, financial, research, and business services, has grown rapidly in recent decades, with virtually all of the 1989-99 employment earnings growth occurring in metropolitan areas.

Federal Funding for Rural Area Development Smaller Than for Urban Areas

Rural areas received $5,481, per capita, in Federal receipts in fiscal 2000 (table 4-2). This was about $300 less than in urban areas, representing a 5.6 percent Federal funding gap. Most of the nonmetro funding gap is explained by significantly lower nonmetro receipts from defense and space and other national functions. However, nonmetro areas also received significantly less Federal funds from the community resource programs, which include housing, infrastructure, and business assistance programs that are viewed as important for stimulating rural development.

The Bureau of the Census provides data on the geographic distribution of Federal funding through its Consolidated Federal Funds Reports. They include Federal grants, loans, salaries, procurement, and other Federal payments. The data focus on the 90 percent of funding that can most accurately be followed to the county level and includes the total amounts received by metro and nonmetro counties, classified by major program function, and for nonmetro areas broken down by Census regions. The funding amounts are expressed in per capita terms so that meaningful comparisons can be made between more and less populated regions.

Total nonmetro Federal funding levels were highest in the South, $5,625, and lowest in the Northeast, $5,258 (table 4-3). Most rural and urban Federal funds come from income security programs, such as Social Security, Medicare, and Medicaid, which provide significant amounts of transfer payments directly to individuals or to service providers. These programs are allocated largely based on demographic and socioeconomic characteristics. This explains why the nonmetro South, which has the largest concentration of low-income residents, received more in total Federal funds, per capita, than nonmetro areas in other regions. (see Definitions Used in Tables)

However, other regions outpaced the South when it came to nonmetro receipts from other Federal program functions. Nonmetro areas in the Northeast ranked first in defense and space funding; the nonmetro Midwest ranked first in agricultural and natural resource payments; and the nonmetro West ranked first in funding from human resources, community resources, and other national functions.

The Economic Research Service (ERS) is the main source of economic information and research from the U.S. Department of Agriculture. ERS provides comprehensive economic analysis on issues related to agriculture, food, the environment, and rural America. For more information on the conditions and trends in rural areas, visit the ERS Web site at http://www.ers.usda.gov/Emphases/Rural.