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The Rust Belt boom that wasn't: Heartland job growth lagged under Trump

[October 27, 2020] By Howard Schneider

(Reuters) - The voters of Monroe County, Michigan, may have expected an economic windfall when they flipped from supporting Democrat Barack Obama to help put Donald Trump in the White House in 2016.

But it went the other way: Through the first three years of the Trump administration the county lost jobs, and brought in slightly less in wages in the first three months of 2020 than in the first three months of 2017 as Trump was taking over.

And that was before the pandemic and the associated recession.

With the U.S. election just a week away, recently released government data and new analysis show just how little progress Trump made in changing the trajectory of the Rust Belt region that propelled his improbable rise to the White House.

While job and wage growth continued nationally under Trump, extending trends that took root under President Obama, the country's economic weight also continued shifting south and west, according to data from the U.S. Quarterly Census of Employment and Wages that was recently updated to include the first three months of 2020.

A recent study from the Economic Innovation Group pointed to the same conclusion. It found relative stagnation in economic and social conditions in the Midwest compared with states like Texas or Tennessee where "superstar" cities such as Dallas and Nashville enjoyed more of the spoils of a decade-long U.S. expansion.

LAGGING THE COUNTRY

Across the industrial belt from Wisconsin to Pennsylvania, private job growth from the first three months of 2017 through the first three months of 2020 lagged the rest of the country - with employment in Michigan, Wisconsin and Ohio growing 2% or less over that time compared to a 4.5% national average, according to QCEW data analyzed by Reuters.

Texas and California saw job growth of more than 6% from 2017 through the start of 2020, by contrast, while Idaho led the nation with employment growing more than 10%.

Perhaps notably for the election, a Reuters analysis of 17 prominent counties in the five battleground states of Florida, Michigan, Ohio, Pennsylvania and Wisconsin showed the limits of Trump's controversial tax and trade policies in generating jobs where he promised them. All 17 of the counties had a voting age population greater than 100,000 people as of 2016, supported Obama in the 2012 election, and voted for Trump in 2016.

In 13 of those counties, all in the Rust Belt region, private job growth lagged the rest of the country. Employment actually shrank in five of them. Of the four with faster job growth than the rest of the country, two were in Florida, one was in Pennsylvania and one was in Wisconsin.

The findings show that under the "greatest economy ever" boasts that Trump made before the pandemic, when job and wage growth were indeed strong, the fundamental contours of regional U.S. prosperity seemed largely unchanged.

Some of that may have stemmed from Trump's own policies. The use of steel tariffs, for example, may have ended up costing Michigan jobs.

"The key battleground areas...have not fared well under President Trump, even prior to the pandemic," said Moody's Analytics Chief Economist Mark Zandi. The swing state counties most supportive of Trump in 2016, he said, were "especially vulnerable" to the president's trade war tactics because of their ties to global markets.

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A worker wearing a Trump 2020 campaign shirt sits among other workers listening to U.S. President Donald Trump as the president speaks at a Whirlpool Corporation washing machine factory in Clyde, Ohio, U.S., August 6, 2020. REUTERS/Joshua Roberts/File Photo

DRAMATIC SHIFT

But Trump was also swimming against a very strong tide, driven by forces bigger than a Tweet or a tariff can likely counter. For decades people, capital and economic output have been shifting from a mid-20th century concentration in the U.S. Northeast and Midwest to the open land, cheaper wages and more temperate climate of the Sun Belt, and the innovation corridor from Silicon Valley to Washington state.

Trump, in his 2016 campaign, put a premium on manufacturing jobs - last century's path to the middle class - and as president used a combination of trade policy, tariffs, and blunt force arm-twisting on companies to try to shore up the prospects of the industrial heartland that formed his electoral base.

It didn't happen. Texas, according to QCEW data, gained more manufacturing jobs from 2017 to the start of 2020 than Ohio, Michigan, Wisconsin and Pennsylvania combined; the smaller but increasingly competitive manufacturing cluster in Tennessee, Georgia, South Carolina and Alabama gained as many factory positions as those legacy manufacturing states.

While Trump may have failed in his efforts to reinvigorate the Rust Belt, the forces acting against the region pre-date his administration.

A longer-term analysis by the EIG, looking at outcomes across an index of social and economic measures, showed little progress from the start of the century through 2018.

According to a Reuters analysis of EIG data, two to three times as many counties in Ohio, Pennsylvania and Wisconsin slipped further down the think tank's Distressed Communities Index as climbed to a more prosperous bracket over those nearly two decades.

In Florida and Washington state, by contrast, five times as many counties moved into a more well-off bracket, and in California three times as many counties prospered.

EIG research director Kenan Fikri said it was "easy to forget" that the Midwest and Great Lakes regions were once the "pinnacle of what the U.S. had to offer" before the economy shifted to a more tech, service-oriented and global footing.

"We have seen the gravity of economic wellbeing take a dramatic shift to the west ... It continued unabated through the first several years of the Trump administration," he said.

(Reporting by Howard Schneider; Editing by Dan Burns and Andrea Ricci)

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