Study Says U.S. Economic Expansion is Unevenly Spread

By Jeffrey Sparshott Features Dow Jones Newswires

The U.S. economic expansion is lifting a handful of vibrant communities to new heights but also leaving broad tracts of the country stagnant or sinking, according to a new report.

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The study, by the Economic Innovation Group, finds that a small number of high-growth cities and towns are fueling U.S. growth and masking economic struggles in decaying industrial towns, swaths of the rural South and other areas of the country.

"The prime years of the national economic recovery bypassed many of America's most vulnerable places altogether," the report said. "Far from achieving even anemic growth from 2011 to 2015, distressed communities instead experienced what amounts to a deep ongoing recession."

The Washington policy group set up shop in 2015 with funding from Silicon Valley, tech and financial entrepreneurs, and an advisory board that included Kevin Hassett, now President Donald Trump's top economist, and Austan Goolsbee, a former chairman of President Barack Obama's Council of Economic Advisers. Much of the group's work focuses on how business in the private sector can help distressed communities.

EIG's latest findings concerning health statistics are especially stark.

On average, residents of the distressed counties die almost five years younger than residents of the most prosperous counties. Mortality rates from mental and substance abuse disorders are 64% higher in distressed counties than prosperous ones. Cancer, pregnancy complications, suicides and violence also contribute to the elevated mortality rate.

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The U.S. economy has added more than 16 million jobs since 2010, the unemployment rate is hovering near its lowest level in a decade, household incomes set a record last year and the share of Americans living in poverty is back to levels last seen in 2007.

EIG, however, documents the stark divide between the most prosperous and poverty-stricken tracts of the U.S. with granular measures of educational attainment, housing vacancy rates, labor-force participation, poverty rates, incomes, job creation and business creation for each ZIP Code in the U.S. It then breaks the zones down into quintiles.

According to EIG's calculations, about 85 million Americans, or 27% of the population, live within the most prosperous communities, typically suburban, in the Western half of the country and often tech hubs. The top one-fifth of ZIP Codes accounted for more than half of the country's job growth from 2010 to 2015.

Gilbert and Chandler, Ariz., both Phoenix suburbs, Plano, Texas, Irvine, Calif., San Francisco and Seattle are among the haves. An even larger number of people are left fighting for economic scraps or sidelined entirely. The bottom 60% of ZIP Codes -- home to about 168 million individuals -- accounted for only one of every four new jobs during the same period. The absolute bottom fifth, home to one in six Americans, lost jobs.

The worst-off areas are clustered around once-mighty industrial hubs in the Northeast and Midwest, rural tracts in the Deep South and isolated Native American reservations. Cleveland, Newark, N.J., Buffalo, Albany, Ga., and Memphis, Tenn., make the list of have-nots. Youngstown, Ohio, ranks as the most distressed among small- and midsize cities.

"Although we deserve our ranking, I can tell you there are many things that are starting to show there is hope and prosperity in the future," said Thomas Humphries, president and CEO of the Youngstown/Warren Regional Chamber of Commerce. "Every morning we get up thinking about how we're going to win, not how we're going to slide further backward."

In the bottom fifth of postal codes, almost 23% don't have a high school diploma, more than a quarter of the population lives in poverty, and more than 40% of adults ages 25-64 are neither working nor looking for work.

John Lettieri, co-founder and senior policy director at EIG, pointed to policies that might help shift these trends. That includes removing occupational licensing requirements and limiting noncompete agreements, which make it harder for workers to move for job opportunities. Restrictive zoning and discriminatory housing policies also can increase the cost of housing and hinder the movement of people.

And educational policy that offers different tracks, such as an option to train for a trade rather than pushing all students into courses that prepare them for college, might encourage more high-school students to graduate.

Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com

(END) Dow Jones Newswires

September 25, 2017 09:14 ET (13:14 GMT)