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Three Small Cities That Are Thriving Despite the Pandemic

Growth remains a bigger worry than unemployment in at least a few cities. They're scattered around the country, but their economies have a few qualities in common that have made them pandemic-proof.

Utah State University, located in Logan, Utah, which has the country's lowest unemployment rate of 3.5 percent. (Shutterstock)
Greg Strahan made a tough call. He’s the president and CEO of Owensboro Health, a hospital and medical group in western Kentucky that saw its revenues plunge by 65 percent in April and May. Despite the hard economic hit, Strahan decided not to lay off any of his 4,300 employees.

“We have a lot of people who depend on their income on our institutions,” Strahan says. Keeping them on wasn’t pure altruism, though. “I made the decision early on that if we could keep our employees together, our ability to ramp up into a recovery would be significantly faster,” he says.

Strahan’s gamble paid off. Volume picked back up and Owensboro Health ended up having the best June and July, financially, that it’s enjoyed in many years. “We were very fortunate,” he says.

That good fortune extended out to the community at large. Owensboro Health is by far the largest employer in its area, but other local companies weathered the recession in good shape. In fact, many prospered. Unilever makes Ragu spaghetti sauce and P.F. Chang’s frozen meals in Owensboro, US Bank processes mortgages there and Kimberly-Clark makes paper products. “All those things that people do more because they’re staying at home have been good for our economy,” says Candance Brake, president of the Greater Owensboro Chamber of Commerce.

The result is that Owensboro, which has about 60,000 residents, has the distinction of being the only metropolitan area in the entire country where the unemployment rate is lower than it was a year ago. Unemployment is up in every one of the other 388 metros. 

"Unemployment in this area surged to about 17 percent," says Tim Bubb, a county commissioner in Licking County, Ohio. "It's come down to about 10 percent, but that's a tough 10 percent. They're jobless and their prospects are not too good until we get to that vaccination stage."

While Owensboro had the luck of being home to pandemic-resistant businesses and a benevolent lead employer, a few other small cities have prospered as the national economy plummeted and then started its long climb back up. Logan, Utah, has the nation’s lowest unemployment rate, at 3.5 percent, with Idaho Falls just behind at 3.6 percent.

“Certainly there have been many people in the community who have felt negative effects from the pandemic, but overall it could have been much, much worse,” says Logan Mayor Holly Daines. “One of the challenges lately has been the low unemployment numbers and finding people to fill jobs in a wide variety of fields.”

These three cities have some qualities in common. Each is home to hospitals. Each has food processors. They’ve largely been spared the most dire health effects of the novel coronavirus and they don’t rely heavily on the industries that have taken the worst hits, such as tourism and energy production. “The truth is that to some extent they got lucky because of their underlying industry structure,” says Ross DeVol, president of Heartland Forward, a think tank in Bentonville, Ark., focused on improving the economy in the center of the country.

But, as the old saying goes, the harder they worked, the luckier they got. Each of the three cities boasts anchor institutions that have spun off other businesses. All three learned from the last recession, sprucing up their downtowns and building a collaborative culture on the ground. Most importantly, they all have worked to diversify their economies, making themselves more resilient when economic winds shift due to outside forces beyond their control.

“The making our luck thing was investing in ourselves when that wasn’t popular to do,” says Brake, the Owensboro chamber president. “We never seek booms. We seek incremental growth. I think that incremental growth protects us from the bottom falling out.”

More Than One Attraction

Idaho Falls is a city of just over 60,000 residents in southeastern Idaho. The total population might have changed by the time you read this. Californians have come lining up at the visitors center, asking where they can go to buy a home.

That might require some patience. Houses are cheap by coastal standards but with so few of them available, buyers are paying more than the asking price. The city’s vacancy rate for rentals is actually negative; people are signing leases on units that haven’t been built yet. “Obviously, our real estate market is incredible,” says Renee Spurgeon, president of the Greater Idaho Falls Association of Realtors.

Idaho Falls is less than two hours from the western entrance of Yellowstone National Park and is similarly proximate to other beauty spots of the Rockies including Jackson Hole, Wyo., Sun Valley, Idaho, and Craters of the Moon National Monument. Those attractions help draw people in, but what makes some of them want to stay – those who aren’t bringing remote work with them – are jobs.

Idaho Falls is home to the Idaho National Laboratory, the nation’s leading nuclear research center, which employs nearly 4,000 people. The lab has just built a new cybersecurity facility. Its presence has helped generate a cluster of private technology manufacturing companies. 

“The small communities that are doing well all have some major sector that provided some economic stability,” DeVol says.

Idaho Falls also boasts several food processors and Melaleuca, an online wellness shopping club that attracts a million shoppers per month. “We’re so diverse that it’s crazy,” brags Chip Schwarze, president of the Greater Idaho Falls Chamber of Commerce.

Good Problems to Have

Idaho Falls is now having to contend with the problems of growth. The national lab is working on a big project involving advanced small modular reactors – mini nuclear power plants – that will bring in 1,200 to 1.500 workers for the next three to five years. Given the housing crunch – and the increasing local costs of construction and labor – it’s not clear how easily they’ll find room.

Logan, which has a population of about 52,000, is also experiencing the challenges that come with growth. The city has been working on a downtown revitalization and a new business park. Among other tenants, the business park is offering space to local retailers that now have warehousing and distribution needs, thanks to successful expansions into online sales.

Like Idaho Falls and Owensboro, Logan has hospitals, food processors and some manufacturing. Its largest employer is Utah State University, which has spun off a number of businesses, particularly in life sciences – including Lab Test Diagnostics, which has been busy during the pandemic.

Around the country, a number of smaller cities have tried to provide help to local businesses, including direct grants and loans, as well as help figuring out the paperwork for federal assistance. The city of Logan offered incentives to businesses to fix up their storefronts, while widening sidewalks to create more opportunities for outdoor dining.

Local restaurateurs, sensing trouble ahead, banded together early to launch a joint marketing campaign to encourage pickup and delivery. “They had a central delivery service,” says Mayor Daines. “It wasn’t everybody, but it was a big group that was willing to work together.”

No City Is Immune

In all of these cities, the hotels are emptier than they were last summer. Retailers have laid workers off or reduced their hours. None of them has a secret sauce that can be easily bottled and imported to communities that are struggling.

Employers and employees alike have had to adapt, in many instances, to changing circumstances. Many of the workers kept on at Owensboro Health, for instance, were given new tasks, such as driving patients around in golf carts or performing COVID screenings at businesses around town. 

The current success of these cities is partially due to luck, but it’s also the result of patient planning and longer-term strategies. “We’ve been lucky enough over the past 30 to 40 years to really diversify our economy,” says Brake, the Owensboro chamber president.

Schwarze, her counterpart in Idaho Falls, notes that the pandemic remains a concern. COVID-19 caseloads and deaths have increased in the state over the last several weeks. Bonneville County, which includes Idaho Falls, has had a mask mandate in place for about a month, with several of its neighbors requiring masks or banning large gatherings more recently.

“If they do a shutdown, one of two things will happen,” Schwarze says. “Forty percent of the businesses will shut down permanently, or they’ll ignore the shutdown. They just can’t take another hit right now.”

The larger employers – for now – are sailing through. As noted earlier, some Logan retailers have done well enough online to expand their businesses. One is opening its first out-of-state location, which happens to be in Idaho Falls. Al’s Sporting Goods will open its doors next month, at a former Toys”R”Us location. The store is expected to create 75 to 95 new jobs.

“Our economic outlook for the next 24 months in southeast Idaho is really strong,” says Spurgeon, the Realtor.

Alan Greenblatt is the editor of Governing. He can be found on Twitter at @AlanGreenblatt.
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