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Image: Rural Economy & Population

Business & Industry



Rural businesses and industries often specialize in resource-based activities such as agriculture, forestry, mining, or natural amenity-based recreation. In addition, manufacturing establishments—some involved in processing food, wood and mining products, but most in "footloose" activities unrelated to local natural resources—have been a key part of many rural economies. Rural areas tend to have significantly fewer financial, professional, scientific and information services activities that concentrate in urban economies. The public sector has been a major source of earned income in rural areas. Trends in these activities shape the job opportunities available to the rural labor force. 

During the 2000s, especially during the recession, rural areas lost about a quarter of their manufacturing jobs due both to overseas competition and increases in productivity. Despite subsequent gains, the number of manufacturing jobs in 2014 remained 20 percent below the 2000 level. This has been a major challenge for rural areas dependent on manufacturing, especially since rural production jobs in this sector have tended to pay better than available local alternatives.

ERS research on business and industry focuses on the competitiveness of rural industries and businesses in the increasingly global economy, as well as their impacts on local communities.

  • The ERS Rural Establishment Innovation Survey (REIS), collected during the 2014 calendar year, provides the first nationally representative sample of innovation processes in rural businesses. Innovation is the introduction of new goods, services, or ways of doing business that are valued by consumers. Traditional measures from secondary data sources, such as patents or research and development (R&D) expenditures, focus on science and engineering-based innovation, which usually depict rural innovation as rare or idiosyncratic. By focusing instead on a broader definition of innovation, the REIS provides a much fuller assessment of rural innovative capacity.

Examples of ERS research findings include:

  • The 2000s were characterized by the rapid growth of new or unconventional sources of energy, mostly located in rural areas. The implications of corn-based ethanol production, wind power, and unconventional natural gas extraction for rural employment growth were generally positive but varied across industries (see Emerging Energy Industries and Rural Growth, ERR-159, November 2013). Natural gas development demonstrated the largest employment impacts, while the impacts of corn-based ethanol production tended to occur in places with limited employment growth opportunities. The employment impacts from wind power were generally small.
  • Rural manufacturers generally do not lag urban manufacturers in the adoption of new technologies or management practices (see Rural Competitiveness: Results of the 1996 Rural Manufacturing Survey, AER-776, March 1999) although there has been some lag where local work force education levels are low. Smaller plants are more likely to adopt new methods and practices in industrially diverse rural counties where there are more people in creative occupations (see the ERS data product on Creative Class County Codes), an indication that community context is important for innovation.
  • While recreation is often cited as a source of low-paying jobs, counties specializing in recreation fare well (see Recreation, Tourism, and Rural Well-Being, ERR-7, August 2005) on many measures of well-being, including wage levels and income. A central problem facing residents in these counties is the high cost of housing. Manufacturing is particularly important in rural areas that are not favored by mountains, lakes, and climates attractive for recreation and retirement.

Last updated: Monday, June 13, 2016

For more information contact: Tim Wojan and David McGranahan