Updated May 24, 2018 - Economy

The wildly uneven recovery from the Great Recession

Reproduced from EIG's "Escape Velocity: How Elite Communities Are Pulling Away in the 21st Century Race for Jobs, Businesses, and Human Capital" report; Chart: Axios Visuals

Only the most affluent zip codes quickly recovered from the Great Recession and went on to rack up significant job gains, while the economies of the country's most distressed communities continue to struggle, according to a new report released today.

Why it matters: The report by the Economic Innovation Group, a research and advocacy organization, shows how the spectacular performance of a relatively small number of communities at the top has allowed the overall national story to obscure the decay at the bottom.

The wealthiest regions continue to pull farther and farther ahead of nearly every other region — including those considered to have "comfortable" economic conditions — as white-hot markets like the San Francisco Bay Area, New York and Washington D.C., gobble up jobs, businesses and talent.

  • That means economic growth has consistently failed to reach the communities struggling the most during the 21st century.
  • Having so many underperforming communities makes the country less productive and resilient. The U.S. increasingly depends on a relatively small number of economic engines.
  • And this divergence is accelerating. Less advantaged communities aren't just not keeping pace — their fortunes continue to fall.

"For those regions, there's been nearly uninterrupted, prolonged decline," said John Lettieri, the group's co-founder and president. "For the top, it's been nearly uninterrupted, rocket-ship growth."

The numbers that matter:

  • Total employment increased by 6.8 million jobs across all zip codes between 2000 and 2015, but 6.5 million of them (on net) were added in "prosperous" zip codes.
  • Those prosperous zip codes added three times as many jobs as "comfortable" zip codes and 10 times as many as "mid-tier" ones.
  • Distressed zip codes lost one in eight of their jobs over that period, a total of 2.2 million. Roughly 40% of those losses took place before the Great Recession — suggesting that structural failures in those communities had already started, but were accelerated by the national recession.
  • "Were it not for growth in prosperous communities, the U.S. economy would still have been 1.5 million jobs short of a full employment recovery in 2015," per the report.

The big picture: The diverging fates of local economies goes beyond income inequality. Prolonged economic distress hurts people's health, their financial stability and their families.

  • Prosperous communities have higher access to investment, higher rates of new business formation, better-educated workers and better housing. All of that allows those communities to build on their success by attracting even more workers, more companies and more local investment in a reinforcing cycle.
  • "People in the lowest-performing quintiles feel like they've fallen off the economic map," said Lettieri. Prime-age adults in these areas are twice as likely to be out of work than those in prosperous ones.
  • That can leading to disenfranchised communities and, in many cases, resentment of the drivers of thriving communities (such as large tech companies in Silicon Valley) and status-quo politicians.

Three Americas: American communities now fall into three categories:

  • Prosperous: The nation's most elite 10% of zip codes — home to 41 million people — are thriving by almost every metric of well-being and have claimed the overwhelming majority of net job growth since 2000.
  • Muddling Along: The middle 70 percent of zip codes — including "comfortable" and "mid-tier" conditions — that experience varying degrees of success but are still far below prosperous communities' conditions. Many are barely keeping their heads above water in terms of jobs and businesses, and some still haven't fully recovered the jobs lost to the Great Recession.
  • Distressed: The bottom 20% of zip codes — home to 52 million people — still struggle to escape compounding forces of vanishing jobs, high poverty rates, low education attainment and depressed real estate.

One surprising thing: Despite all the talk about coastal elite cities, prosperous zip codes aren't confined to those areas. These powerhouse zip codes are found in every state in the country, suggesting that their level of success can be achieved elsewhere — even in rural areas, which is home to the highest number of distressed communities.

  • By contrast, the bottom 10% of zip codes are concentrated in Appalachia, the Southeast and rural areas of the Southwest.
  • Minorities are disproportionately concentrated in the country's most distressed communities.
  • There's a catch: Similarly situated zip codes tend to cluster together. Few distressed areas have any prosperous neighbors, limiting access to opportunity.
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