The economic performance of the industrial heartland is related to the trend decline in manufacturing employment, says Cleveland Fed researcher

Since 2000, metro areas with greater manufacturing employment losses also experienced substantially weaker nonmanufacturing employment growth, according to a study by Federal Reserve Bank of Cleveland senior vice president Mark Schweitzer. And Schweitzer says that metro areas in the industrial heartland experienced sharper nonmanufacturing employment effects for a given loss in manufacturing jobs than MSAs outside the industrial heartland.

In his study, Schweitzer examines the economic performance of the industrial Midwest –– sometimes referred to as the “Rust Belt” –– during and following two periods of decline in manufacturing employment, one dating from the late 1970s to the early 1980s, and the other from 2000 to 2010. He finds that the region’s economic performance is related to two periods of substantial decline in manufacturing employment.

“In terms of getting the population back to work after the two major shocks to manufacturing employment, the industrial heartland has performed well,“ says Schweitzer. “But on other measures, such as per capita income, the region has fared less well than other manufacturing–intensive areas,” says the researcher. He notes that real per capita income, which is largely derived from wages and salary income, grew much more slowly in the industrial heartland than in other parts of the United States in the 2000s, and the gap between incomes in the region and in other parts of the country remained historically large through 2015.

Schweitzer says his analysis shows that MSAs with larger losses in manufacturing employment had significantly weaker per capita income growth, and MSAs with smaller losses experienced stronger per capita income growth. “This result suggests that manufacturing employment losses were likely a factor in relative income growth in the different sets of MSAs,” he says.

Read: What’s Gone Wrong (and Right) in the Industrial Heartland?

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Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892