The Big Dynamism of (Some) Small Metros


Charles Davidson: Welcome to another Economy Matters podcast, I'm Charles Davidson, a staff writer with Economy Matters, and today we're visiting with Will Lambe. Will is a senior adviser in the Atlanta Fed's community and economic development department, and Will's specialty is community development finance. Will, thanks for joining us today.

Will Lambe: Sure thing, Charles.

Davidson: We're going to talk about community development generally, and then focus a little on some of the work that Will and the rest of the community and economic development department do regarding smaller metro areas. Will, to sort of set the stage here, why does the Atlanta Fed care about community and economic development?

Will Lambe, Senior CED Adviser, Community Development Finance
Will Lambe, Senior CED Adviser, Community Development Finance

Lambe: We have to harken back to our roots to answer that question. Our department—our function within the Federal Reserve System—comes from the Community Reinvestment Act of 1977, I believe, which compels regulated banks to reinvest or lend into communities from which they take deposits, irrespective of economic means of the community. We really have evolved over the decades since. Here in Atlanta, we have four main thrusts of work, one of which is in the area of community development finance, another in workforce development and labor markets, another in small business and entrepreneurship, and finally in housing and neighborhood stabilization. We have team members who work in all of those areas and cover the Southeast, where we know many of the issues of persistent poverty are prevailing, and so we stay busy.

Davidson: Will, as I mentioned earlier, you do a lot of work in smaller metro areas. First off, how do we define a "smaller metro area"? What does that mean, exactly?

Lambe: The definition of a smaller city—we just refer to them as smaller cities, but they are by definition metro areas. We define them as any place that's within a metropolitan statistical area with less than half a million people. There's no science to this, so much as data that's out there from the Census Bureau and other sources tends to be aggregated at different levels, and this is just a level at which we could access the type of data that we wanted to do the analysis we wanted to do. Smaller cities, intuitively, are those places that have 100,000 to 250,000 people living in them and tend to be of the perception that they are overlooked when it comes to larger-scale economic development and community development investments. It's a little bit of science, but mostly art, to defining the smaller cities, but in the case of our research it's those metro areas with less than half a million.

Davidson: And if I'm not mistaken—our region, the Sixth Federal Reserve District—has a large number of those.

Lambe: We do, right. Of all the Federal Reserve districts, I think we have the most smaller cities as we've defined them and also the highest percentage of the overall population living in smaller metros. As we know in the South, we're really separate and apart from Atlanta and Charlotte and New Orleans and Miami and the small number of larger cities that make up our district and region. We're really a region of smaller cities. We felt like it was important—and continue to believe it's important—that we have a body of work that accounts for, in this case, where 25 percent of the people in our district live, so that's really what this is aimed at.

Davidson: Was that part of the genesis of the Small City Economic Dynamism Index? It's a mouthful, but it's a really cool database and tool that you guys have built over time. Can you talk a little bit about what that is and how it came about?

Lambe: The Dynamism Index is a collection of metrics that we've pulled together including economics, demographics, infrastructure and human capital variables, which we've combined into an index, which is really just a way to give us a sense and to give policy makers and outside investors a sense of the overall trajectory of a small city market. Where is it heading? Is it heading up or down, in an objective sense? And to give practitioners, or local officials at the metro level, at the city level, or the county level, the ability to compare themselves to what they might define as their peers. The index itself includes a mapping tool, which people can access on our website. You can hover over any particular metro area and see how that place stacks up against other small cities. It also includes an interactive data table where you can select any number of small cities and compare them across these index measures.

Davidson: In building that, Will, what did you guys learn? What are some of the things that stand out as far as what makes a smaller city really hum economically and what maybe what doesn't work as well?

Lambe: The creation of the Index itself wasn't structured as a research inquiry around what works in smaller cities, so much as a snapshot in time of where that particular market is trending. That being said, we can look at the cities that are greener in our data set, indicating more positive momentum, and those that are redder, indicating less positive momentum, and make some observations about the underlying fundamentals in those places. Smaller cities that have either colleges or universities tend to do better in terms of our index scores. Smaller cities that have significant defense or military presence also tend to have a positive trajectory. Finally, those that have some significant element of extractive industry—which we've obviously seen much of in our district along the Gulf and elsewhere—tend to have an upward trajectory. Those are just some of the underlying economic assets that jumped out at us when we started to think about what might be underneath the data.

Davidson: What about places that don't have those kind of assets? What's the path ahead for those places?

Lambe: That's one of the $6 million questions. We've got a landscape across our entire country of places, cities, and towns, many of which served an economic purpose 100 years ago or 50 years ago as the mill town, or the railroad town, or the market town for a particular agricultural region. And now those economies may not be viable in an objective sense any more. So what do we do about those places that have been passed by? Well, that's certainly not for me to judge. In my experience, I've seen places that you would otherwise think have been passed by by the economy bounce back. I've seen places where you look at their assets and you raise the question, "How can they not be thriving, where they continue to struggle?"

So what it all tends to boil down to—which is in some ways unfortunate but also within the control of the local leadership—is exactly that: the leadership of the place, and its ability to put together a vision and a strategy to do something productive and useful for the citizens of the community. What doesn't seem to be correlated with that is size or positioning in the economy. It really is just a matter of that local leadership's ability to craft a vision and do something productive.

Davidson: I guess leadership would be really crucial as we see the Southeast, like the rest of the country— and I suppose the world—undergoing some really fundamental economic and demographic transitions. Some of them are really slow moving, others are a little more rapid. You mentioned earlier, old mill towns. It's pretty startling when you look at some of the data on the things like textile mills, sawmills, which used to be pretty big sources of jobs in our region that have really essentially gone away in the last 15 to 20 years. But in other things, like communities that are becoming majority-minority, how does the research that you guys have done shed light on these sorts of phenomena?

Lambe: Here's the way I think about it. Our work, which really is just a drop in the bucket compared to analysis and research that's done at universities and some of the think-tanks, is really aimed at two things. First of all, recognizing that a lot of—not all of, but a lot of—the smaller cities in our region are going to continue to grow and develop. As you suggested, the demographic transition in our region takes shape. The jobs and employment opportunities in these second-tier markets are going to attract people. They will continue to grow, housing will get built, investments will be made, the size of the pie will continue to increase. Not in all places, but in many places. What we also know to be true is that—unless there's some really proactive leadership and local decision making around the distribution of those resources being made more equitable across communities—then the size of the pie may grow, but the opportunities for everybody in the community to benefit from that growth may be limited. So the conversations that we're trying to have in these smaller cities as we take this data on the road are about how we take advantage of the existing momentum in communities, the growth and development in communities, to ensure that opportunities for everybody to benefit from that growth are manifest in smaller cities.

We're spending a lot of time now out on the road in the district in places like Huntsville, Alabama, and Gainesville, Florida, and Savannah, Georgia. Having conversations with local leadership about the positive growth and development that they're experiencing and their strategies, whether it's in the housing space, in the small business finance space—in any other number of community development realms—how they're putting together strategies to ensure that everybody benefits from that growth.

Davidson: Will, what do you get out of those visits that you don't get out of parsing the data and drilling into numbers and statistics?

Lambe: You get the real world. That's the aspect of our work in community and economic development here at the Fed that's most valuable. We can—and our colleagues in the REIN [Regional Economic Information Network] program and otherwise—we really spend time in communities, talking to business leaders, talking to local officials, talking to civic leaders generally about what's happening, because that level of nuance that you can get by actually driving down Main Street and having coffee at the coffee shop is unlike any that you're likely to get through even the most nuanced data. That's really what this is about.

Davidson: Well, Will, thanks so much for your time. It's been interesting.

Lambe: Thank you, Charles.

Davidson: And thank you for listening. Please return next month for another Economy Matters podcast.