Abstract: Rural America will remember 2005 as a year of drought, hurricanes, and surging gas prices. To be sure, some regions of the country faced devastating natural catastrophes. Yet, these catastrophes did not stop the farm sector from posting another banner income year-nor did they stop the nonfarm sectors from enjoying solid gains in employment and income. Overall, the rural economy was quite resilient in 2005.Heading into 2006, the rural economy appears poised for another year of robust activity, especially if private sector forecasts hold true. Energy prices are the risk to the forecast. The higher oil and natural gas prices translate into higher production costs for factories, farms, and households. Yet, higher prices are also underpinning a new wave of investments and market opportunities in rural America's emerging biobased energy sector.This article reviews the rural economy in 2005 and discusses the prospects for the year ahead. The first section discusses the continued recovery in the nonfarm rural economy. The second section focuses on the continued prosperity in the farm economy in the past year. The third section examines the outlook for 2006, including the potential impacts of high energy prices on the rural economy.I. THE RURAL RECOVERY CONTINUES IN 2005The economic recovery on rural Main Streets continued in 2005. Rural communities posted solid employment and income gains during the year. Strong growth in rural service, construction, and mining firms, along with stabilizing job rolls in rural factories, overcame weakness in the government sector. Rural firms continued to restructure their Main Street economies with high-skill business activity leading the way.Main Street businesses continued to make solid job and income gains. Rural payrolls rose 1.2 percent during the first three quarters of the year, matching the growth posted in metro areas.1 Rising employment rolls pushed the rural unemployment rate down from 6.0 percent to 5.7 percent.2 While the rural unemployment rate remained higher than the metro rate, the rural unemployed tended to spend less time without a job than the metro unemployed.3Sustained growth in 2005 translated into stronger income growth. In rural areas, weekly earnings growth averaged a solid 2.4 percent during the first ten months of the year, slightly below the 2.6 percent growth posted in metro areas.4 Rural growth strengthened in the summer and fall months, though, outpacing metro growth in the second half of the year.The economic strength on Main Street emerged from private sector firms, with both services and goods-producing sectors posting stronger job growth (Chart 1). Rural service firms continued to lead rural job growth, posting 1.6 percent annual growth in November. Professional and business service firms continued to grow the strongest, adding jobs at a 3.7 percent clip. Professional and business service firms, which tend to employ people with higher skill levels, reflect the continuing transformation of the rural economy toward high-skill activity. Wholesale, transportation, and utility sectors grew solidly at above 2.5 percent. Recreation service growth remained strong, despite easing in the summer and fall due to higher gasoline prices. In fact, employment growth in recreation-destination counties grew 3.5 percent in 2005/The rural goods-producing sector strengthened in 2005, thanks to strong construction and mining activity and stable rural factories. The sector continued to add jobs as the year progressed. By the third quarter, annual job growth in these sectors crested at 1.5 percent. Strong housing markets underpinned robust activity and rising job rolls in construction. Residential construction continued to expand as housing permits rose 3.8 percent during the first 10 months. Surging oil prices underpinned strength in mining as oil companies expanded rig activity. Together, rural construction and mining job growth jumped 3. …
Publication Year: 2006
Publication Date: 2006-01-01
Language: en
Type: article
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Cited By Count: 1
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