Jul 17, 2019

The new cities to watch

Data: McKinsey Global Institute; Map: Andrew Witherspoon/Axios

The triumph of rich cities may hog the demographic headlines, but midsize cities' turnaround struggles under the shadow of automation will shape the urban future in the U.S., according to the author of a new McKinsey Global Institute report.

Why it matters: While 2 dozen high-performing cities are poised to pull further ahead of the rest of America, the cities to watch are those in between the mega-cities and the low-growth rural areas — the places McKinsey calls "niche cities" and the "mixed middle," according to report author Susan Lund.

The U.S. is a patchwork of local economies with distinct community profiles. McKinsey sorted 315 cities into segments.

Niche cities have found success by leveraging unique features or locations.

  • Small powerhouses: Reno has taken advantage of its close proximity to Silicon Valley to lure workers trying to get away from the high cost of living there. Google, Tesla, Amazon, Apple and Microsoft have opened operations there. These powerhouses have the fastest economic growth rates of all the segments.
  • Silver cities: Aging Americans are flocking to towns designed for retirees — many in sunny climates, like The Villages in Florida.
  • College towns: Major research universities dominate the economy in some smaller towns that offer low cost of living.

The "mixed middle" is home to about a quarter of the U.S. population and these cities' economic fates could go either way depending on how proactive their strategies are.

  • Stable cities: Places like Columbus, Cincinnati and St. Louis have steady economies but low net migration rates.
  • Independent economies: These cities are reliant on unique industries, like tourism or historical attractions.
  • America's makers: This includes legacy manufacturing hubs devastated by the first wave of automation that are trying to leverage expertise for a high-tech economy — cities like Akron, Ohio, which declined when tire production moved elsewhere and has since developed a new manufacturing business in plastics and polymers.

What to watch: While some of these middle cities have upward momentum, others are at risk of teetering into decline. The most successful strategies will build on existing strengths.

"This is not inexorable. Decisions made by business leaders, local governments, universities and community colleges can create a strategy for local economies and turn this around."
Susan Lund, McKinsey Global Institute

Go deeper: Big cities are poised to get bigger, richer and more powerful — at the expense of the rest of America.

Editor's note: The original version of this story inaccurately stated that Goodyear is no longer headquartered in Akron. The story has been corrected.

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