Most of rural America has fared better than metros in recession, but rural recovery has its pitfalls

The large concentration of commodity agriculture has helped the rural economy west of the Mississippi River withstand the recession, says a new report from the Federal Reserve Bank of Kansas City. "In regions west of the Mississippi River and in the New England/Middle Atlantic region, rural communities have sustained fewer job losses than neighboring metro communities," writes Jason Henderson, the bank's vice president and Omaha branch executive. "In the West South Central Region (Texas, Oklahoma, Arkansas, and Louisiana), rural communities posted much stronger job gains than in the region’s metro areas since the start of the recession."

In his report, "Prospects for a Rural Recovery," Henderson says the housing crisis was less severe in most rural areas, so housing prices in most rural areas dropped less than in metro areas. Consumer spending has dropped less in rural areas than metros, and processed food products appear to be a relative bright spot for rural economies. However, "Weakness in rural financial markets has intensified," Henderson writes. "Commercial banks have responded by tightening credit standards on a wide variety of household and business loans."

Henderson lists outmigration, industrial consolidation and limited access to capital as risks to a rural recovery. He says it hinges on an increased demand for rural products and services, and to increase demand he says rural businesses need to focus on producing goods and services targeted to rural markets. (Read more)