Assessing the Midwest Economy — A Longer View

The Midwest, referred to as the Rust Belt since the wrenching adjustments of the early 1980s, has recently been performing more like a well-tuned machine than a region in decline. Its remarkable turnaround has been widely reported.2 The Midwest economy performed above the national average during the early 1990s recession. This was a remarkable achievement for a region that is dominated by manufacturing and the production of durables, sectors that tend to contract at a faster pace than the national economy during an economic downturn. We see further signs of the region’s comeback in an unemployment rate that has been below the national average in each of the past four years—in each of the region’s states, as well as in the aggregate; a share of national manufacturing employment that has increased to 18.9% from a low of 16.9% in 1983; a faster rate of GDP growth than the nation’s; and a property market that is enjoying a miniboom. What can we point to in explaining these data? And what do these developments tell us about what is in store for the region?