The U.S. economy moved into a recession in late 2007, led by declines in housing construction and related industries, including financial services; high energy costs also played a role. Initially, recessionary effects were mitigated in nonmetro areas by high commodity prices throughout much of 2008, which boosted incomes in farming and mining. Nonmetro areas were also less vulnerable than metro areas to a tightening financial sector.

In late 2008 and early 2009, the recession deepened, with national gross domestic product falling at an annual rate of 6.2 percent. Commodity prices also fell. Nonmetro unemployment rose from 5.2 percent in mid-2008 to 9.2 percent in mid-2009, while metro unemployment rose from 5.3 percent to 9.1 percent over the same period. Both metro and nonmetro areas suffered from the contraction of manufacturing, retail, and other sectors. The overall pace of employment decline, however, was greater in metro areas (-3.8 percent) than in nonmetro areas (-3.0 percent).

Declining housing prices, combined with a sharp rise in high-cost loans, were important factors in the recent mortgage and foreclosure crisis that has affected metro and nonmetro housing markets alike. The most recent data show that nonmetro residents were slightly more likely than metro residents to have obtained high-cost loans just prior to the recession. Foreclosure rates in 2007 and the first half of 2008 were similar in metro and nonmetro areas.

Even before the current recession, nonmetro poverty rates had risen slightly in the growth years following the 2001 recession, in contrast to the typical trend during a time of economic expansion. The nonmetro poverty rate, 15.4 percent in 2007 vs. the national rate of 12.5 percent, has exceeded the national poverty rate since 2001. Poverty rates were even higher in 2007 for nonmetro children under age 18, at 22.5 percent.

The nonmetro population continued to grow in 2007 and 2008, but at less than half the rate of the metro population. Recent nonmetro population growth was driven by a rise in births, offsetting a decline in net migration from metro to nonmetro areas.

Source: ERS/USDA