Sunday, August 01, 2010

Rust Belt Reset

The era of Rust Belt decline is over. Ironically, the Great Recession is responsible for arresting the slide. Regardless of job prospects, most Americans are stuck in place:

Many Sun Belt cities, long magnets for job seekers from economically depressed areas, have joined long-suffering Rust Belt areas as places with the highest unemployment rates. The Las Vegas metropolitan area has a 14.5 percent unemployment rate, higher than the rate in Flint, Mich. In Riverside, Calif., the jobless rate is 14.4 percent, higher than the rate in the Detroit area. And in Charlotte, unemployment is 10.9 percent, the same as Lima, Ohio.

"There are not a lot of opportunities to move. That is a huge factor in terms of less mobility," said Fernando Ferreira, a professor at the University of Pennsylvania's Wharton School who has written about the effect of the housing meltdown on mobility. "And the lack of mobility definitely hurts the efficiency of the labor market."

The surprising inertness of talent is a boon to the Rust Belt, where much of the skilled labor force is still educated. On the other hand, most of the Sun Belt has become overly reliant on inmigration and metros are scrambling to figure out how to diversify their economies and better cultivate homegrown workers. What to do with a glut of unemployed construction workers?

More to the point, the dominant domestic migration pattern of the last 60-years is no longer. Truth be told, Rust Belt-to-Sun Belt has been waning for awhile. The precipitous drops in population are from 1950s benchmarks. That narrative is complicated by natural decline and sprawl (see this opinion piece about Syracuse). The numbers have stabilized and communities are at different stages of revitalization. Whereas the Sun Belt is in the early stages of exogenous shock.

The Great Recession has killed the migration economy and greenfield boomtowns now have their own legacy costs to manage. I see a new era of companies moving to where the talent is produced. From Brian Kelsey, an example:

State leaders have a negotiated a deal with the Sematech computer chip consortium in Austin, Texas, to move its remaining operations to the Albany NanoTech complex in a $100 million deal -- most of it private funding.

Sematech already has a significant presence at the University at Albany's College of Nanoscale Science and Engineering, and it has been rumored for months that the research consortium would move its remaining programs here early next year after a contract with the state of Texas expires.

Any state can dangle carrots in front of Sematech. But only New York offers the established relationship with a university. In terms of this kind of economic partnership, the Rust Belt maintains a considerable advantage. Via CEOs for Cities, The Power of SUNY:

Enter “The Power of SUNY,” the result of Dr. Zimpher’s Hillary Clinton-style listening tour of all 64 campuses, an exhaustive series of meetings across the state and a 200-member task force.

To be honest, the strategic plan is more broad statements of intent than nuts and bolts. But the plan, and the legislation meant to help put it into effect, reflect both the problems of the moment and SUNY’s historical challenges. To address the former, Dr. Zimpher’s plan, to the chagrin of many of SUNY’s professors, is more about building the state’s economy than it is about the traditional educational missions of higher education. “There is a growing and welcome recognition that in a knowledge economy, institutions of higher education can — and must — be pivotal in generating growth and revitalizing communities,” it begins.

There is talk of research but research translated into tangible, measurable results — more patents issued, more grants won, more jobs created. SUNY StartUP is a program to invite entrepreneurs onto campuses to act as mentors. SUNY-INC (Incent New Companies) is supposed to link researchers at different campuses and companies in a development chain designed to speed up the process from concept to commercialization. SUNY is supposed to bring doctors, nurses and teachers to underserved urban and rural neighborhoods, and create a wellness network to establish statewide health goals and programs in areas like obesity, smoking cessation and the prevention of chronic disease. It is supposed to do groundbreaking research in renewable energy and work with the state’s Smart Grid Consortium to drive down energy costs.

The above is a classic case of turning a liability (the dysfunctional public system of New York State higher education) into an asset. SUNY quirkiness brings a host of neglected cities and towns to the economic development table. No other state has anything like it. Of course, The Power of SUNY is far from a done deal and parochial squabbling threatens to kill the idea. Rust Belt states tend to be their own worst enemies.

Suburbanization and economic turmoil slashed the city's population to just 330,000 by 2000. Steel has given way to robotics, health care and artificial intelligence, but Pittsburgh retains the vestiges of its industrial past. Generations of family-owned businesses continue to evolve in response to Pittsburgh's metamorphosis. Officials are redeveloping abandoned industrial sites into housing, retail and office space, typified by the Waterfront and SouthSide Works projects.

All the Sun Belt boomtowns can do is build more homes that no one will buy. Which is why Governor Jan Brewer is busy scapegoating illegal immigrants instead of pursuing meaningful economic policy. Arizona is at the end of the rope. The state's policies are cementing cities there as places to avoid. Once established, those pathways are difficult to change.


rootvg said...

Jim, if Sunbelt migration is at an end why are Volkswagen and Hyundai expanding there?

Why are Austin and Dallas building toll roads like there's no tomorrow? I understand the 114 freeway corridor around DFW Airport will be dug up soon to widen it one hundred percent below grade. It'll look very much like North Central freeway when it's done. That project was in the billions but they have it to spend. Rust Belt cities generally don't and that's what this discussion is really about.

And as far as the creative class is concerned, San Francisco (as bloody expensive at this place is and as dysfunctional as California state government has become) is still a hot spot for young kids from the right schools and with the right bank accounts to mingle with the hoi polloi and start careers. I couldn't start here but a lot of them do. The restaurants are full of them, every weekend.

Jim Russell said...

The Bay Area is a domestic migration loser. It has been (along with the entire state of California) for about two decades. People are leaving in droves. Where are they going? These days, many are moving to Texas. Businesses are exiting as well.

You live in the new Rust Belt. The glory days are in the past.

rootvg said...

Jim, I live in one of the most gorgeous places in the world with some of the best weather on the planet...and even so there's incredible human capital here that's been tapped in the past and will be again. The New England states are the same way.

We don't have the chronic ignorance and blue collar class hatred thing holding us back. We never have and we never will.

Tom Lauwers said...

This graph of employment change since February really underscores the extent of the reset. Baltimore and Cleveland lead the pack, with Phoenix and Miami in last place.

DanT said...


"We don't have the chronic ignorance and blue collar class hatred thing holding us back. We never have and we never will."

On the other hand you exhibit chronic arrogance and white collar hatred on top of an unwillingness to face the facts.