Jobs growing fastest in “red” counties, though wages lag

U.S. counties that voted for Donald Trump in the 2016 election are enjoying an unusual about-face, with their job growth now outpacing that of counties that supported Hillary Clinton. Yet these Republican “red” counties are facing several red flags that may signal long-term problems for their residents, such as lower wages and economic output.

The turnaround is remarkable given Trump-supporting counties had lagged their Democratic “blue” counterparts for the better part of the last decade, according to research from the nonpartisan Brookings Institution. But in 2017 and 2018, red counties pulled ahead of blue counties with annualized job growth of 2.6 percent compared with 2.1 percent growth recorded in Clinton-voting counties, the researchers found.

While the difference isn’t large, it’s significant because the regions that supported Mr. Trump have largely been left behind in the current economic expansion since the financial crisis. While the recent turnaround in job growth could provide more support for the Trump administration’s economic policies going into the 2020 election, rural regions continue to face long-term headwinds, such as lower wages and workers who are at risk of losing their jobs to automation.

“Red places are winning a little,” said Mark Muro, senior fellow and policy director at Brookings’ Metropolitan Policy Program. “They might well feel that, even if they are over the long haul on the wrong side of the economic divide.”

And the long haul isn’t a pretty picture for rural America. Rural areas and small cities saw cumulative job growth of 2.7 percent since 2009, compared with a job growth of almost 14 percent in cities with at least 1 million residents, according to Goldman Sachs.

Lower wages: The real long-term challenge

Wages are also lower in rural America, with Goldman finding that workers with college degrees earn about $71,000 per year if they work in big cities. But if they remain in rural areas, those college grads earn about $50,000 annually.

And despite the higher job growth in Trump counties, output per worker — a measure of prosperity and economic-value creation — remains 30 percent higher in Clinton counties, Brookings found.

“There’s no doubt that the highest-productivity, best-paying jobs are in the big blue coastal metropolises,” Muro said. “The jobs that are created in red places tend to be lower quality and in very cyclical industries that are vulnerable to automation.”

Trump tax cuts: Not much of a boost

It’s unlikely that the tax cuts signed into law by Mr. Trump are directly juicing jobs in red states, Muro said, although it provided fuel for economic growth on a broader basis. Instead, it’s likely that the red states are enjoying faster job growth because of the current business cycle, which is expanding to the cyclical industries that dominate red states, such as manufacturing, energy, construction, transportation and warehousing.

U.S. employers added 263,000 jobs in April

“Growth is expanding beyond the big blue cities, more into rural and ex-urban areas,” Muro said. “I think cyclical effects are probably the real explanation rather than any particular set of tax, deregulatory or trade policies.”

The economic divide between red and blue America risks leaving behind talented individuals and intriguing businesses simply because they aren’t located in big coastal cities, Muro noted. At the same time, college grads are increasingly opting to settle in big cities because of higher wages and better job opportunities, creating a “brain drain” for rural communities.

“Creating a more balanced economy may create a more effective national economy,” Muro noted. But specific policies that encourage investment in red states and rural areas may be necessary to make a real difference, he added.

“It might be tempting to see the beginning of balancing in these statistics but I think it’s a very modest uptick that will likely be erased in the next downturn,” he said.

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