This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
3/30/2009
Mid-Size Success
I ran across this article on the WSJ website today. The article caught my interest immediately because Provo and Ogden were among the cities that were beating the recession. The article did mention that a lot of the smaller cities that are doing well have been fortuitous with regard to the housing crisis that has stopped a lot of lending, yet that cannot be the only reason they are doing well.
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The article mentioned that a possible reason that these mid-size cities are weathering the recession better than other areas could be because of more disciplined economic-development strategies. Also, most of these cities were also ranked highly as the "top-performing" cities in 2008, measured in job, wage and salary increases. Because of this, banks see many borrowers as low risk and are willing to lend to these individuals and businesses. This says something about these smaller cities and their economic policies. It may be a good idea for lager cities and the U.S. government to take a deeper look inside these smaller cities' economic policies and strategies to find ways in which they can improve their own economic situations.
I find it hard to believe that we can simply classify the cities doing well or not by their sizes. I think there are some places that are simply doing better because of what they do. There are many industries still doing well in spite of the recession and much of that can be attributed to the success of individual companies in many cities. A smaller city would obviously benefit more from a large company doing well in their city. There's more to any economical situation then just the size of the population.
It would seem more likely to me that the reason for these cites beating the recession would have more to do with those cities expansion efforts. Is it possible that the cities that are faring well now, might have not been such an avid player in the housing boom and might have not seen as much growth? Of course the smaller the city is the less it is expanding (in terms of new businesses), so with less expansion, the banks are lending fewer funds and those banks are not possibly making “bad” loans to consumers. As Trevor did say above, these cities where some of the top paying with the most jobs available, with that, if there is not substantial growth to eat up the funds in the past I would imagine the cities would far well.
I can see where size would matter. My home town of 700 people in Nevada has had in a lot of people’s opinions very little fall out or effect from the recession. My parent’s home value has stayed the same. I don’t know of any foreclosures or bankruptcies. Job loss, as far as I know from talking to everyone I know back home is essentially zero. And the home town bank that has just a couple branches in small Nevada towns has not really been financially strained. I think size matters a great deal.
The fact that Provo is doing so well is very confusing to me, as Provo has a poverty rate of 25-30% depending upon which website I looked at. Dr. Tufte said that the people hurt most in recessions are primarily the lower class, but Provo's statistics seem to say otherwise. I wonder what could be the cause of this.
I touched on this in class, so my comment will be shorter.
I wouldn't read too much into Provo/Orem being high on this list. If we did the same thing for the recession of 1981-2 they'd be near the bottom of the list.
Having said that, I do think that our big cities are likely to rank low because of chronic mismanagement. I think a lot of this is lack of competition with other cities: the Orange County model of many competing communities is likely to work a lot better in the long-run.
And ... I didn't say that the poor are hurt the most in recessions. People who move down the income distribution (including some of the poor) are the ones who are hurt the worst. As to Provo/Orem, I really can't say too much, although they are part and parcel of the generally good economic climate that Utah has had for about 20 years now.
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