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The region's changing economic landscape: urban/rural economic trends during the 1980s.

Two major trends are transforming America's economic landscape. One trend is the continuing shift of jobs away from primary production and manufacturing to services and trade employment. The other is the continuing shift of population and economic activity away from rural areas and small towns to urban areas and metropolitan centers.

During the 1980s, services and retail trade accounted for three-fourths of new jobs created in the United States. Retail trade employment grew by 27 percent while employment across a broad array of services increased an incredible 56 percent. Meanwhile, U.S. manufacturing employment fell by 7 percent; mining employment fell by 16 percent; and agricultural employment dropped by 18 percent.|1~

Also during this period, "employment rose by nearly 21 percent in metro areas..., but by only 12 percent in rural areas."|2~ Furthermore, "rural unemployment rates were consistently higher than urban unemployment rates; the gap between rural and urban income levels began to widen for the first time in the post-World War II period; and rural poverty rates rose dramatically and remained high." In 1990, "rural median household income was 75 percent of urban income, and the rural poverty rate was 3.6 percentage points higher than the urban rate."|3~

Between 1982 and 1987, half of all U.S. nonmetro counties lost population. "The pull of rapid economic growth in urban areas, coupled with the push of stagnating conditions in many rural locations, led to increased outmigration and widespread population losses in rural countries...."|4~ As one report noted; the "Rural Renaissance" of the 1970s, in which many rural areas in the U.S. saw population gains for the first time in years, "is looking more like an interlude than a harbinger of the future."|2~

What are some dimensions of these trends in Montana and its surrounding region? Do recent population trends differ markedly among the region's urban and rural places? Where is the fast-growing services sector growing fastest? How do income levels of the region's rural and urban residents vary? Is the gap growing between rural and urban income levels? What might the region's future economic landscape look like? These questions are the subject of this discussion.

The Region

Identifying the relevant region for a large state like Montana can be perplexing. Parts or all of the state's roughly 150,000 square miles are regularly included in three different general subregions. For purposes of this discussion, these subregions consist of:

* the greater Pacific Northwest subregion, including Washington, Oregon, and Idaho;

* the Rocky Mountain subregion, including Colorado, Utah and Wyoming; and

* the upper Great Plains subregion, including Minnesota, North Dakota, and South Dakota.

Economic trends in each subregion will be examined and compared with those in Montana. The region as a whole--including Montana and the three subregions--encompasses ten states; this region will be examined for population and economic trends using a framework known as "central place analysis."

Central Places

Often a simple distinction is made between strictly "rural" places and strictly "urban" places in the United States. According to U.S. Census Bureau definitions, rural places include all towns with populations of less than 2,500 people, and the open countryside; urban places include all towns and cities with more than 2,500 residents. The Census Bureau also defines the category "urbanized areas," as any incorporated place with a surrounding densely settled area having at least 50,000 residents. Figure 1 shows all forty-one such urbanized areas in the ten-state region. These range in size from Logan, Utah (1990 population 50,401) to Minneapolis-St. Paul (2.1 million). The region's second most-populated urban area is Seattle (1.7 million), followed by Denver (1.5 million), Portland (1.2 million), and Salt Lake City (789,000).

Colorado has eight urbanized areas, northern Utah four, and Washington eight. The vast expanses of Wyoming and Montana's include only five urbanized areas. Montana's are Billings (88,181), Great Falls (63,506), and Missoula (57,196).

The Census Bureau also distinguishes "metropolitan areas," core cities of 50,000 or more with area populations that boost this total to at least 100,000 people.

"Central place" theory and analysis offers a more elaborate differentiation of urban and rural places. According to this theory, cities or towns ("central places") with progressively larger trade areas and trade area populations tend to have progressively greater levels of business activity (particularly retail and services trade activity), and progressively larger places offer progressively greater economic diversity. What's more, this relationship between area population and local business activity varies fairly systematically: Trade centers with similar size populations throughout a region tend to have very similar types and levels of business activity.

Together, similar size and similarly diverse trade centers form various levels or "tiers" within an overall central place or regional trade center hierarchy. Many central place studies have found that, over time, population and economic activity are steadily concentrating at higher, more urbanized levels while steadily consolidating and declining at lower, more rural levels in the hierarchy.

Regional Trade Center Hierarchy

Figure 2 and Table 1 depict a trade center hierarchy for the ten-state region.|5~ The region's 496 counties are organized into a ten-tier hierarchy based on county population figures for 1980. Bear in mind that a trade center located in a particular county may in fact serve populations from several counties. Thus, a trade area may include all or part of several counties.

Tier 1 includes the region's least-populated, most-rural counties--113 of them, all with populations under 5,000. Tier 2 includes 109 rural counties with populations between 5,000 and 10,000 people. Not counting Montana, the Pacific Northwest states in 1980 had thirty-six Tier 1 and 2 counties, the Rocky Mountain states fifty-three such counties, and the upper Great Plains states ninety-nine.

Tier 3 and 4 counties are "subregional trade centers." These contain communities (such as Miles City or Lewistown) large enough to serve as subregional centers of commerce and trade. Throughout the ten-state region, there are 110 Tier 3 counties (10,000 to 20,000 people) and sixty-three Tier 4 counties (20,000 to 35,000 people). Larger and more dominant "regional trade centers" (such as Great Falls and Missoula) are located in the thirty-two counties with populations between 35,000 and TABULAR DATA OMITTED 55,000 (Tier 5) and 26 counties with populations between 55,000 and 85,000 (Tier 6).

Regional trade center counties in turn are part of even larger "supra-regional" trade center areas that have far-reaching trade and market impact. Counties with supra-regional centers occupy the next two levels in the hierarchy. Regionwide, there are seventeen Tier 7 counties (between 85,000 and 150,000 people) and thirteen Tier 8 counties (between 150,000 and 250,000 people). Examples include Yakima, Washington; Fargo, North Dakota; and Billings, Montana.

At the next level (Tier 9), are the region's nine counties with populations between 250,000 and 500,000. This group of counties contains cities such as Spokane, Colorado Springs, Tacoma, and Eugene; Tier 9 also includes several densely-populated counties near large cities like Denver.

Occupying the trade center hierarchy's highest level (Tier 10) are counties with populations exceeding 500,000. Mostly core areas of the region's very largest metropolises, this tier includes four counties: King County (Seattle); Hennepin County (Minneapolis); Salt Lake County (Salt Lake City); and Multnomah County (Portland).

Population Shifts within the Hierarchy

Between 1980 and 1990, the U.S. population grew by about 10 percent. During that decade, as Table 1 shows, the region's population grew by 11 percent. Two of the three subregions grew faster than nationally: the Rocky Mountain subregion had a 14 percent increase in population; the Pacific Northwest grew by 13 percent. Growth in the Plains states' population lagged at 5 percent.

Overall, the region's population increased by 2 million during the decade. Most of this growth occurred in the region's most urban counties. The top four tiers include only 43 counties (9 percent of the total), yet they account for 86 percent of the region's population increase. On average, the populations of Tier 7, 8, 9, and 10 counties grew by 14 to 18 percent in the Pacific Northwest states; by 11 to 17 percent in the Rocky Mountain states; and with the exception of Tier 9, by 10 to 17 percent in the Plains states. Regionwide, the greatest population growth (up to 18 percent) was among counties with populations between 150,000 and 250,000.

The region's next most-populous tiers also grew, but at more moderate rates, and with one notable exception. Regionwide, Tier 5 and 6 counties (with populations in the 35,000 to 85,000 range) grew an average of 6 to 7 percent. Counties in Tier 4 (20,000 to 35,000 people) also grew--up 7 percent regionwide. Tier 4 growth was smallest in the three Plains states--up only 2 percent. While Tier 4 counties grew a solid 17 percent in the Rocky Mountain states, Tier 5 counties in that subregion lost 10 percent of their population over the decade.

Among more rural counties, population loss is pervasive. Regionwide, 271 counties lost population during the period and 84 percent of these are rural counties in Tiers 1, 2, and 3. Over the decade twenty-two counties experienced population losses of at least 20 percent. Of these counties, 21 are in the bottom three tiers, and eastern Montana has five--Prairie, Petroleum, Daniels, Valley, and Dawson Counties. Regionwide, the 113 Tier 1 counties lost 6 percent of their population; Tier 2's 109 counties lost 4 percent.
Table 2
Montana's "Fastest Growing" Counties during the 1980s(*)
 Populations Pop. Change, 80-90
County Tier 1980 1990 Amount Percent
Gallatin (5) 42,865 50,463 +7,598 (+17.7%)
Stillwater (2) 5,598 6,536 +938 (+16.8%)
Park (3) 12,660 14,562 +1,902 (+15.0%)
Glacier (3) 10,628 12,121 +1,493 (+14.0%)
Flathead (5) 51,966 59,218 +7,252 (+14.0%)
Jefferson (2) 7,029 7,939 +910 (+12.9%)
Ravalli (4) 22,493 25,010 +2,517 (+11.2%)
Lake (3) 19,056 21,041 +1,985 (+10.4%)
Lewis & Cl. (5) 43,039 47,495 +4,456 (+10.4%)
Madison (2) 5,448 5,989 +541 (+9.9%)
* Counties in Montana with population increases of 10 percent
or more between the 1980 and 1990 censuses.
Source: U.S. Census Bureau.

Rural population loss may be the general rule, but there are exceptions. Nearly half (21 of 49) the counties with population gains exceeding 20 percent are in the bottom three tiers. The Vail, Colorado resort area (Eagle County) grew 65 percent over the decade. A ski and recreation area east of Salt Lake City (Utah's Summit County) was up 52 percent. Southwest Colorado's Archuleta County grew by 46 percent, as did Colorado's Summit County (the Dillon-Breckenridge resort area). Another ski and recreation area, southwestern Wyoming's Uinta County, also grew substantially, as did Blaine and Custer Counties in Idaho (the Sun Valley area), and several rural counties nearby Denver and Colorado Springs.

Figure 4 maps the region's growth areas. Population is increasing throughout much of Washington (particularly in the Seattle area); in portions of western Oregon; in the southcentral and panhandle areas of Idaho; throughout much of Utah and the mountainous and Front Range portions of Colorado; in and around Minnesota's Twin Cities area; scattered locations in the Plains states; and in the mountainous areas of western Montana and Wyoming.

Montana Population Trends

In light of regionwide trends, it's easy to understand why Montana's overall population increased only 2 percent during the decade 1980-1990. Montana has no counties populous enough to be placed in the fast-growing, top three tiers, and only one--Yellowstone County--populous enough to be among the relatively fast-growing counties of Tier 7. Even so, Yellowstone County's growth rate lagged behind the regionwide average for Tier 7 counties (5 percent compared with 14 percent) because the Billings' area economy was hit hard during the 1980s by sagging conditions in agriculture and in the oil and gas industry.

Montana has only two Tier 6 trade center counties. Missoula County's population grew by 4 percent, while Cascade County lost 4 percent of its 1980 population. The state's other major trade centers--Kalispell, Helena, Bozeman, and Butte--are all Tier 5 counties. Overall, Montana's Tier 5 population grew by 9 percent. Gallatin County's population increased the most (18 percent) followed by Flathead County (14 percent), and Lewis TABULAR DATA OMITTED and Clark County (10 percent); offsetting some of these gains, Silver Bow County's population declined by 11 percent.

Montana's only Tier 4 county (Ravalli) increased its population by 11 percent, considerably more than the Tier 4 average regionwide. All remaining Montana counties are in the bottom three tiers. As a whole, they lost population, particularly those with fewer than 2,500 people (or Tier 1 counties).

In recent years, Montana's population growth has been heavily concentrated in the state's western portion. Its population losses are concentrated in Montana's eastern and north-central portions.

Shifts in the Retail Trade Sector

There is another major trend in the decade's employment patterns, one which precedes, accompanies, and follows the shifts in population described earlier. That is, the shift from goods producing jobs to jobs in retail trade and services. Examined next are labor earnings (including wage and salary, and self-employment income) among retail trade workers at various levels in the region's trade center hierarchy.

Table 3 shows that between 1979 and 1989, regionwide retail labor income increased only 2 percent in inflation-adjusted dollars, while the increase nationwide was 14 percent. Retail sales activity in the region, however, grew faster than income figures suggest. In part, the discrepancy occurs because, while total retail activity is steadily increasing, labor income's share of that activity is steadily declining.

As Table 3 shows, retail trade sectors in urban and rural areas fared quite differently. Regionwide, trade centers as a whole from Tier 6 down in the hierarchy suffered substantial losses in retail labor income. Progressively greater losses occurred among smaller, more-rural trade centers. Retail labor income declined by 30 percent among Tier 1 counties (1980 populations under 2,500) and by 22 percent among Tier 2 counties (populations between 2,500 and 10,000).

Meanwhile, the region's most urbanized areas increased their prowess as retailing centers. Tier 8 counties posted the greatest gains (up 15 percent), with Tier 10 counties next (up 12 percent). The pattern is remarkably similar across all three subregions, although the Rocky Mountain's small rural trade centers suffered losses that were substantially less than losses in similar-size centers in Plains and Pacific Northwest states.

Without large population centers, Montana's overall retail labor income fell by 16 percent during the period. The state's more rural trade centers sustained the greatest losses. Montana's larger trade center counties experienced moderate declines--as did similar size trade centers throughout the region.

Patterns in Services Sector Expansion

Labor income patterns also shifted in the service industry, where health, legal, and business services are large components. Regionwide between 1979 and 1989, services labor income increased by 66 percent in inflation-adjusted dollars--somewhat less than the nationwide increase of 77 percent.

Services labor income grew at all levels in the trade center hierarchy, but growth clearly concentrated in the region's more urbanized centers. Counties in the top three tiers saw growth of 70 to 80 percent, while the rate for Tier 1 and 2 counties lagged at 10 to 25 percent over the period. Among middle-range trade centers, services labor income growth averaged about 40 percent.

This pattern too appears similar across the three subregions. With one notable exception, growth is differentiated fairly systematically up and down the trade center hierarchy. The exception is small, rural trade center counties (Tiers 1, 2, and 3) in Rocky Mountain states which saw services labor income increase an average of 50 percent over the period, vs. much smaller gains in their Plains and Pacific Northwest counterparts.


Figure 5 compares retail labor income changes with changes in services labor income, one tier to the next, regionwide. Clearly visible is the systematic, differential pattern of this change across the trade center hierarchy. For small and moderate size trade centers, retail activity is declining and growth in services lags behind that of larger, more urbanized centers. By contrast, large urban centers are retaining and expanding retail activity while their service economies grow rapidly. This pattern of change will largely continue in the 1990s.

Urban/Rural Patterns in Income Growth

What are the effects of these patterns in population and economic activity on the region's overall income growth? Figure 6 charts changes in regionwide real income by tier for the period 1979-1989. Real labor income includes labor earnings of all employed persons in an area, and for most rural areas (Tiers 1, 2 and 3), that figure actually declined during the 1980s; losses averaged about 10 percent. Meanwhile, in the top tiers (8, 9, and 10) where trade centers drew from surrounding populations of 150,000 persons and more, total labor income expanded by 20 to 25 percent.

Regionwide real labor income increased an average of 16 percent. The Pacific Northwest states led with a 17 percent average gain, followed by the Rocky Mountain states (16 percent), and the upper Great Plains states (13 percent).

The region's rural areas fare somewhat better when the measure is total personal income, but are still outstripped by urban growth rates, as Figure 6 shows. Total personal income includes labor income and other non-labor forms of income such as investment income and government transfer payments. The total personal income bases of the region's rural areas grew an average of about 2 to 5 percent regionwide during the 1980s. By contrast, the total personal income bases of counties in the top four tiers grew by 24 to 31 percent.

The widening gap between urban and rural areas is also evident in per capita income, or the region's total personal income divided by its population. In 1979, per capita incomes of the region's most urban (Tier 10) counties averaged $18,903--39 percent higher than per capita incomes among residents of the region's most rural (Tier 1) counties. By 1989, Tier 10 per capita income had increased 12 percent to $21,194, while per capita income in Tier 1 counties increased only 6 percent. Thus the income gap between the region's most urban and its most rural counties widened to 47 percent.

Per capita income gaps also widened over the period between Tier 9 and Tier 2 counties (22 percent in 1979, 29 percent in 1989), and between Tier 8 and Tier 3 counties (13 percent in 1979, 20 percent in 1989). Thus, the region's urban and its rural incomes more sharply diverge today than they did ten years ago. What's more, the income gap is likely to continue expanding.

In Montana, where there are no top tier population centers, real per capita income grew by 5 percent during the period, less than average for the three subregions.

Regionwide per capita income in 1989 averaged $17,384--7 percent lower than the nationwide figure of $18,625. Figure 8 shows that the region's "poorest" counties, as measured by per capita income, are largely ag-dependent, rural counties in the Plains states; rural, resource-industry dependent counties in the Rockies (including Montana); and Indian reservation counties.
Table 5
Montana's "Lowest Income" Counties in 1989(*)
 Per Capita Percent Below
 Income, $1990 National P.C.I.
County Tier 1979 1989 in 1989
Sanders (2) $10,901 $10,902 -41.0%
Mineral (1) 11,304 11,321 -38.8%
Lincoln (3) 12,014 11,407 -38.3%
Roosevelt (3) 11,468 11,728 -36.6%
Blaine (2) 10,930 12,013 -35.1%
Ravalli (4) 12,134 12,058 -34.9%
Rosebud (3) 12,171 12,196 -34.1%
Lake (3) 11,382 12,422 -32.9%
Deerlodge (3) 12,202 12,570 -32.2%
Powell (2) 12,040 12,722 -31.4%
Big Horn (3) 12,319 12,831 -30.8%
* Counties in Montana with per capita incomes more than 30
percent below national per capita income in 1989.
Source: Bureau of Economic Analysis, U.S. Dept. of Commerce.

Montana's three poorest counties in 1989 were Sanders County, with a per capita income of $10,900--41 percent below the nationwide average; Mineral County ($11,321--39 percent below); and Lincoln County ($11,407--38 percent below). These three rural counties in Montana's northwest corner are among the state's most dependent on logging and wood products manufacturing. The state's next three poorest counties are Roosevelt (37 percent below) and Blaine (35 percent below), both with reservations, and Ravalli (35 percent below), which is also heavily dependent on the wood products industry.

Within the ten-state region, Colorado's Pitkin County (the Aspen resort area) is the single most affluent, with a per capita income of about $35,000. Montana's most affluent is Treasure County where 1989 per capita incomes averaged $18,535, still half a percent below the nationwide figure.


Urban-rural differences noted at the national level are readily observable as well in this region's population and economic trends. Most urban areas are gaining population while many rural area populations decline or grow very slowly. As is the case nationally, the region's services sector is growing rapidly, but unevenly, with metropolitan growth rates two to four times higher than more rural areas. These patterns, combined with losses in other economic sectors, have resulted in a shrinking labor income base for many rural areas. As a result, the per capita income gap between rural and urban residents is growing.

These trends should largely continue during the 1990s, although their magnitudes are difficult to project. Many rural areas will continue to lose population, although some rural areas with high amenities and recreational opportunities will be among the region's fastest growing. Most urban areas will continue to gain population, especially intermediate-size urban centers of 100,000 to 300,000 people. Once largely rural areas of the region, such as Montana, will become increasingly urban in character, with population growth concentrated in the state's western and southcentral portions. In these growing regions, large trade centers will continue to expand their geographic range. And as trade area populations grow, these centers will become increasingly diversified suppliers of services and traded goods.

Employment will continue to decline in agriculture and the extractive industries as a whole. Moreover, rural, resource-industry dependent counties will suffer the most impact, although employment losses in this decade may be less than in the past. Although the pace may slow in this decade, service industry employment and labor income will continue to expand, with the greatest gains in large and intermediate-size urban areas.


1 Plunkert, Lois, "The 1980s: a decade of job growth and industry shifts," Monthly Labor Review, U.S. Dept. of Labor, Washington, D.C., Sept. 1990.

2 Deavers, Kenneth, "1980's: A Decade of Broad Rural Stress," Rural Development Perspectives, Vol. 7, Issue 3, Economic Research Service, U.S. Dept. of Agriculture, Washington, D.C., June-Sept. 1991 (Note: Metro areas or MSA's include core counties containing a city of 50,000 or more people or containing several smaller cities totaling 50,000 or more people and a total area population of at least 100,000).

3 Economic Research Service, Rural Conditions and Trends, U.S. Dept. of Agriculture, Washington, D.C., Spring 1992.

4 Reid, J. Norman and Martha Frederick, Rural America: Economic Performance, 1989, Economic Research Service, U.S. Dept. of Agriculture, Washington, D.C., August 1990.

5 Swanson, Larry, "The Shifting Place of Economic Activity within the Regional Trade Center Hierarchy," paper presentation, Pacific Northwest Regional Economic Conference, Victoria, B.C., May 1992.

Larry Swanson is director of economic analysis, Bureau of Business and Economic Research, The University of Montana, Missoula.
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Title Annotation:Montana
Author:Swanson, Larry D.
Publication:Montana Business Quarterly
Date:Sep 22, 1992
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