A Suburban Recovery: Job Sprawl

Urban boosters will want to stop reading right now. From the Wall Street Journal: "Sand and Surf Help Spur Real-Estate Revival: Sunny Santa Monica, Calif., Stands Out in Luring the Talent That 'Does Not Like to Work in High-Rise Office Buildings'":

Nationally, the office market began to recover in 2010, with the U.S. vacancy rate dipping to 17.7% in the fourth quarter from the recession's peak of 17.9% in both the first and second quarters, according to Grubb & Ellis. In 2009's fourth quarter, the rate was 17.4%.

The national market has been lifted by a return to job growth, although the nearly one million jobs added in 2010 contrasts with nearly nine million lost in the downturn, said Grubb & Ellis Chief Economist Bob Bach.

A number of other markets outperformed the overall market. In the San Francisco Bay area, Palo Alto's office vacancy rate of 9.9% in the fourth quarter was lower than those of most other cities, including San Francisco's 15.5%, according to CB Richard Ellis. The main reason, brokers say, is that Palo Alto is home to fast-growing tech firms.

Elsewhere, CB Richard Ellis said, the financial-market rebound helped pull New York's vacancy rate to 8.4% in the fourth quarter, while biotechnology growth helped reduce vacancies in the middle area of Cambridge, Mass., to 6%, compared with a Boston metro rate of 13%. In the Pittsburgh suburbs of Beaver and Butler counties, growth in energy and technology reduced vacancies to 4%, compared with a metro rate of 11.2%.

I emphasized the Pittsburgh part of the passage. The news is that office real estate is doing better in the suburbs than in the urban core. The not-so-subtle underlying message is that the Creative Class is choosing sprawl over city working. The analysis is superficial at best.

In some ways, the jobs are moving to where the people live. Suburban counties sport most of the population growth in any region. Much of the residential migration is within the region. I'd expect the same is true for the business migration. In terms of attraction strategies, that pattern is important to remember.

If you want more people and jobs in the urban core, then your target demographic/business is currently located outside of the region. Long-distance movers are more likely to appreciate what your city has to offer. Local perceptions aren't going to change. Trying to convince regional suburbanites to embrace density is a waste of time.

I think separating migration incentives into two categories would be useful. Within the city, you want to encourage the residents (or businesses) you have to stay put. You don't want them bolting for the burbs. Retention makes sense on this scale. However, trying to keep people (or businesses) from leaving the entire region is unlikely to work and undermines economic development.

If you want to attract more talent, then you must look beyond the pale. Forget booming Butler County. I'd bet Pittsburgh could attract people from suburban Detroit to live in the city. The flow can go the other way, too. One model I have in mind is boomerang migration:

1. Suburban brat leaves Rust Belt region for Cool City
2. Cool City hipster feels the tug of home and returns to live in the urban core

Yes, I would bet expatriates could repopulate shrinking cities. I'd guess that this is already happening on a bigger scale than anyone realizes.

Turning back to the original subject of the post, a closer look at firm migration holds a few surprises:

In a study released last year, Jed Kolko of the Public Policy Institute of California examined business relocation and homegrown jobs in the United States between 1992-2006.

Although his primary focus was California, he found that, throughout the nation, business relocation across state borders accounts for a very small portion of job loss or creation for individual states.

“Even the places where relocation accounts for the highest share of job gains or losses, it’s still well under 10 percent. Aside from Washington, D.C., it’s under 5 percent,” Kolko told the Press & Dakotan in a telephone interview. “The vast majority of jobs that are gained come from new businesses being born and existing businesses expanding. On the other hand, the vast majority of jobs lost are because of businesses closing or contracting. It’s not because businesses are moving in or out of the state.”

Interstate firm relocation garners all the press. Hence, all the talk about tax policy and right to work legislation. It doesn't pass the sniff test. Proximity matters much more than policy geography. From the same article:

Thus, Delaware; New Jersey; New Hampshire; Washington, D.C.; and Connecticut make up the top five states for job gains due to business relocation from outside their state borders.

How does Kolko explain these figures? He theorizes that states with the highest percentage of losses and gains have large amounts of economic activity that occur near their borders.

“It makes it easier for businesses to move out but also makes it easier for businesses to move in,” Kolko said.

Like people, businesses are risk averse concerning migration. The apple doesn't fall far from the tree. We go where we know. We eschew the road less traveled. Cities don't attract firms so much as they give birth to them. The game is one of job creation, something the suburbs will struggle to achieve.

Post-Recession Pittsburgh

Pittsburgh didn't bust during the Great Recession because it didn't experience a boom. That's one way to dismiss the economic success of the region. Other cynics and skeptics are waiting for the rest of the country to catch up and surge past this dying city. Eventually, the Rust Belt loser will show its true colors.

Betting against Pittsburgh, selling it short, is a mistake. It was just named the 9th best place to find a job:

Each of the cities on the list boasts an unemployment rate of 8 percent or lower, below the current national average of 8.9 percent. In determining the list, Ajilon also considered a number of factors, including the diversity of industries in the city, cost of living, the range in size of companies offering employment, and level of higher education among its residents.

I emphasized what I think is the most important metric. Keep that in mind while reading the latest MetroMonitor from Brookings, tracking the recovery during the fourth quarter of 2010. You have to boom in order to bust:

Nearly all the metropolitan areas whose economies have suffered the most since the start of the Great Recession are ones that experienced a large house price boom and bust or that depend heavily on auto or auto parts manufacturing. Nearly all those whose economies have suffered the least rely substantially on government (e.g., Washington and several state capitals), health care (e.g., Baltimore and Pittsburgh), education (e.g., Pittsburgh and Austin), or oil and gas (Denver).

Pittsburgh sports two industries that were notably recession resistant. A third, oil and gas, is on the rise thanks to the Marcellus Shale. The diversity of industry in Pittsburgh compares favorably to any US metro. In fact, Pittsburgh may sport the most resilient economy you can find anywhere.

The pessimists cling to one hope, a slow rate of recovery. Traditionally, Pittsburgh is slow out of the recession's nadir. You have to bust in order to boom. If you think of the early 1980s as Pittsburgh's great bust, then imagine today as the resulting boom:

Chris Briem (Null Space) cautions against over-interpretation. I'd invoke Ben Schulman's "Magic of Failure":

Maybe it's time to look towards Pittsburgh, a magnificent failure that now seems to be a wondrous place to do business in, a place to create in, a place to live. Riding the steep funicular incline to rest atop the city's Mt. Washington neighborhood, and taking in the vista of its Golden Triangle, some could even say a place of magic.

The bump in job creation didn't come out of nowhere or even out of the ashes. If you look, then you'll find impressive economic diversity and a strong foundation for the post-recession world. The workforce is smart and talented. The setting is dramatic and beautiful. The Great Reset favors Pittsburgh.

Engineering Talent Migration

There is a exodus of talent from the United States. The commonly cited cause for this brain drain is immigration policy. Sanjay Saigal contends otherwise:

[Vivek] Wadhwa's article jars especially because he has convincingly documented, e.g., here, that immigrants are not being driven home by visa issues or other negative motivations. Instead, his research points to reverse migration as a positive decision. Returnees are being pulled by exciting business environments in their home countries that are getting better all the time, and to the comforts of settling back in a familiar cultural milieu.

There's an easy test to figure out who is right. Pick another policy geography, particularly one held up as a positive example of immigration done right. O Canada:

Asian countries with promising employment opportunities and strong economic growth have replaced Canada's reputation as the "land of opportunity" for many, immigration experts say, pointing to the numbers of young Asian Canadians emigrating to the home of their forebears.

Return migration, the phenomenon of people migrating back to their countries of origin or their families' country of descent, is picking up in popularity. The movement has been steadily increasing in Canada since 2006, said Graham Johnson, a University of British Columbia professor who specializes in immigration and multiculturalism.

"Something is going on with respect to the economic potential which is much greater now in East Asia than in Canada.

More welcoming and tolerant? You betcha. Same brain drain, too.

The boomerang migration from Canada gravely undermines the argument for policy reform in the United States. I think there is a lesson in there for Rust Belt talent attraction, as well. That's not to say that nothing can be done. But hunting for snipe isn't the answer.

Talent Attraction Paradigms

Get ready for another round of Richard Florida versus Joel Kotkin. The Wausau Daily Herald boils it down even further, to cool city versus inexpensive city:

Rebecca Ryan, in her book "Live First, Work Second," put some of Florida's ideas in more specifically generational terms. The book, the subtitle of which is "Getting inside the head of the next generation," discussed specific differences in attitude between baby boomers, Generation Xers and millennials. Ryan identified strongly with Florida (he wrote the foreword of her book) and argued that cities that became "cool" would do a better job of attracting young people. ...

... In July, Kotkin wrote a story for Newsweek called "Why the Great Plains are Great Once Again" that presented Fargo, N.D., as one model of economic growth. Kotkin attributed this growth largely to the low cost of living and the growing energy economy -- not to Fargo's ability to attract Bohemian creatives or appear hip to young professionals.

If you want a cool city, then it is going to cost you. I don't see the two talent attraction paradigms as mutually exclusive. To illustrate, I'll return to the rant posted at Rust Wire I blogged about yesterday:

It’s nearly a certainty that we will have to relocate (or at a minimum expand ) our business out of Michigan if we want to grow. People – particularly affluent and educated people – just don’t want to live here. For example, below are charts of migration patterns based on IRS data Black is inbound, red is outbound. Even though the CA economy is in very bad shape, there is still a mass migration to San Francisco vs. mass outbound migration from Oakland County (most notably to cities like SF, LA, Dallas, Atlanta, NY, DC, Boston, and Philly) San Fran only seems to be losing people to Portland, a place with even more open space and higher quality urban environments.

Talent is moving from San Francisco to Portland because it is similarly "cool" but significantly less expensive. Portland gets to join the spiky club because the world is flat. In other words, talent is seeking geographic arbitrage opportunity. Interestingly, California serves as a muse for both Kotkin and Florida. That state's migration history makes both public intellectuals look smart.

Neither critic has much good to say about uncool, but definitely inexpensive Rust Belt cities. Both worry about the declining population numbers. Both subscribe to the metaphor that people vote with their feet. So, how could St. Louis be winning the place election? Let me count the ways:

The deals include a decision by Unisys to locate a new software center in a century-old building a block from the riverfront and the expansion of several large data-center operations by other companies. The Unisys project in particular is seen by city officials and developers as a coup because St. Louis edged out the Minneapolis-St. Paul area and Salt Lake City to win the project.

Ted Davies, the president of Unisys’s federal systems business, said two factors were important in the choice of St. Louis. The first is proximity to the Rural Development agency at the Agriculture Department, which has a sizable office in the city and is expected by Unisys to be one of the new center’s main customers.

The second concern was the cost comparison between St. Louis and Reston, Va., where Unisys’s federal systems division has its headquarters. “We looked at labor and real estate and found the arbitrage to be about 25 percent,” Mr. Davies said.

The new center opened in November and occupies about 10,000 square feet at 555 Washington Avenue, a five-story former department store building with an elaborate ornamented facade. The center will eventually have about 300 employees.

“We wanted a ‘cool’ building,” Mr. Davies said. “We are hiring a lot of younger folks, and they like the look and feel of being downtown.”

St. Louis is cool and inexpensive. Reston isn't cool and is very expensive. Companies are beginning to understand the value of dying cities. Edging out Salt Lake City and Minneapolis is more surprising. Those two regions have already sucked up thousands of real estate refugees and are still relatively affordable.

On the balance, I think Kotkin is more right than Florida. Like most urbanists, Florida extends the economic geography prior to the Great Reset into the future:

The Rust Belt in particular looks likely to shed vast numbers of jobs, and some of its cities and towns, from Cleveland to St. Louis to Buffalo to Detroit, will have a hard time recovering. Since 1950, the manufacturing sector has shrunk from 32 percent of nonfarm employment to just 10 percent. This decline is the result of long-term trends—increasing foreign competition and, especially, the relentless replacement of people with machines—that look unlikely to abate. But the job losses themselves have proceeded not steadily, but rather in sharp bursts, as recessions have killed off older plants and resulted in mass layoffs that are never fully reversed during subsequent upswings.

I think we are ushering in a period of new long-term trends and cities such as Pittsburgh are emblematic of the new normal. There is an emerging urban aesthetic among Millennials that neither Richard Florida nor Rebecca Ryan appreciates. Who knew that Detroit is full of cool buildings and authentic culture that would attract the Creative Class? And you don't have to pay San Francisco-like rents to live there.

Rust Belt Population Fetish

The Rust Belt is shrinking. The hysteria in the wake of the US Census release is the result of misinformation and misunderstanding. An exodus isn't necessarily to blame for population decline. And net outmigration doesn't necessarily mean brain drain. Finally, today's negative publicity says more about shocks a generation ago than it does policy over the last decade.

Migration myths abound and inform bad policy. A good example of the confusion can be found over at Rust Wire:

Our problem is access to talent. We have high-paying positions open for patent attorneys in the software and semiconductor space. Even though it is one of the best hiring environments for IP firms in 40 years, we cannot fill these positions. Most qualified candidates live out of state and simply will not move here, even though they are willing to relocate to other cities. Our recruiters are very blunt. They say it is almost impossible to recruit to Michigan without paying big premiums above competitive salaries on the coasts. ...

... There’s a simple reason why many people don’t want to live here: it’s an unpleasant place because most of it is visually unattractive and because it is lacking in quality living options other than tract suburbia. Some might call this poor “quality of life.” A better term might be poor “quality of place.” In Metro Detroit, we have built a very bad physical place. We don’t have charming, vibrant cities and we don’t have open space.

Talent attraction is front and center. Michigan cannot draw the workers companies need. As far as Rust Belt struggles are concerned, that's progressive thinking. However, the explanation as to why Michigan fails to attract talent is wrong.

The gist is that if Detroit were more like San Francisco, all the brains would be moving there. In particular, suburban sprawl is spotlighted as the culprit. Towards the end of the letter, the dreaded brain drain is invoked:

The people who put together that website must live in a different cultural universe from the high income/high education people streaming out of Michigan for New York, Chicago, and California. Not only is there no plan to address these issues, I fear that the public and their elected leaders in Michigan don’t even recognize the problem or want change.

Why people leave isn't necessarily the same as why people don't come to Michigan. Lumping talent attraction in with talent retention is a mistake. I'd start there, disaggregating the migration numbers, before seeking a solution. Cities such as New York, Chicago, and San Francisco are domestic migration losers. What's wrong with them?

Regarding the Michigan talent attraction issue, I've posted frequently on the subject. As Aaron Renn (The Urbanophile) argued, Detroit has a powerful brand. But the region doesn't leverage this advantage. Instead, it tries to undo what it perceives as a negative stereotype. If you don't believe Renn, then perhaps you might consider what Patti Smith said last year:

When she was done answering Lethem's questions, she picked up her guitar and sang a song about William Blake. Then she answered questions from the audience. One woman asked if it was still possible for a young artist to come to New York City and do what young artists did when Smith was starting out.

Patti recalled coming to New York without money, when it was "down and out," and you could get a cheap apartment and "build a whole community of transvestites," artists or writers, or whatever.

Today, she said, "New York has closed itself off to the young and the struggling. But there are other cities. Detroit. Poughkeepsie... New York City has been taken away from you... So my advice is: Find a new city."

While doing some research for cityLAB Pittsburgh, I became aware of anxiety in Brooklyn about retaining creative talent. Stoking those fears was an article in the Wall Street Journal:

Last month, artists Michael Di Liberto and Sunia Boneham moved into a two-story, three-bedroom house in Cleveland's Collinwood neighborhood, where about 220 homes out of 5,000 sit vacant and boarded up. They lined their walls with Ms. Boneham's large, neon-hued canvases, turned a spare bedroom into a graphic-design studio and made the attic a rehearsal space for their band, Arte Povera.

The couple used to live in New York, but they were drawn to Cleveland by cheap rent and the creative possibilities of a city in transition. "It seemed real alive and cool," said Mr. Di Liberto.

Given what I know about Rust Belt cities, I figured that either (both) Di Liberto or Boneham was familiar with Cleveland and what it has to offer. Di Liberto is from Northeast Ohio and is one of the thousands of Rust Belt refugees who repatriate every year. This is an established pathway of talent migration and Detroit could do a much better job of enhancing this trend.

I'm not the only one evangelizing this idea. A new dawn for St. Louis:

So are there currently any coordinated efforts to engage the St. Louis diaspora in ways that are intended to bring them back to the region? There probably are, but I'm not aware of them, and there is surely room for more. Outreach along these lines does not seem that difficult to implement, and would probably pay some dividends over the long haul (for example, between now and the next census). It is just one of many "low investment, high yield" efforts that, if sustained over a long period of time, could end up making a big difference in perceptions of (and hopefully the population of) St. Louis.

There are variety of applications for such an initiative. Tell me about your talent needs and I'll engineer the migration. The best part is that Rust Belt Chic is in right now. Both Detroit and St. Louis has what young talent wants. It's much more than an inexpensive cost of living and dirt cheap real estate. The primary impediment to more inmigration is perception. Get to work selling your city's unique brand.

And remember ... People develop, not places.

Rust Belt Reset: Manufacturing

Hot off the presses of The Economist:

For the first time in many years, American manufacturing is doing better than the rest of the economy. Manufacturing output tumbled 15% over the course of the recession, from December 2007 to the end of June 2009. Since then it has recovered two-thirds of that drop; production is now just 5% below its peak level (see chart 1).

Factory employment has been slower to recover than output, since productivity has risen. Nonetheless, that too is growing. In February factory payrolls rose by 33,000 from January. In the past year manufacturing employment has gone up by 189,000, or 1.6%, the biggest gain since the late 1990s. Total employment rose just 1% in that period. Unemployment has fallen more sharply than the national average in Illinois, Ohio and Michigan, which are relatively dependent on manufacturing.

America still makes things, even for export. But number of people required to make those things continues to drop. A reinvestment in manufacturing will not fuel a job recovery.

That lesson seems to be tough for Rust Belt states to learn. Those waiting for the return of manufacturing aren't paying attention. The output never went away. On the other hand, the jobs most certainly did.

Rust Belt Baltimore

More than most shrinking cities, Baltimore has worked hard to shed the Rust Belt label. With the US Census dumping data daily, the population vigilantes are out in force. Baltimore is seeking solace in schadenfreude:

Holy cow. Cleveland lost 17 percent of its population in the last decade. About 82,000 people. Since Baltimore was one of the first rust-belt cities to have its 2010 Census results announced, I've been waiting to see how our peers fared.

That's the Baltimore Sun defining the urban peer group, not I. The Charm City's soul is rust colored. Misery loves company.

Rust Belt Crisis

America's decline is a hot topic these days. I've heard it all before, back in the early 1990s. The End-is-Nigh crowd, it seems, peaks at some point in every decade. Joseph Nye takes issue with the naysayers in Foreign Policy and his last paragraph (if not the entire piece) applies equally well to the Rust Belt:

The greatest danger to America is not debt, political paralysis, or China; it is parochialism, turning away from the openness that is the source of its strength and resting on its laurels. As Zakaria says, in the past, worrying about decline has helped avert it. Let us hope that his intelligent though darkly drawn picture will yet again start that healthy process.

Relative to the entire United States, the Rust Belt is closed. That is the source of its weakness. The concern about decline results in greater withdrawal. Power is more tightly concentrated among fewer people. As Sean Safford observes, the community is strangled by too much social capital:

In Chapter 4 of Why the Garden Club Couldn’t Save Youngstown, I talk about the differences between how immigrant workers were treated in Bethlehem and Youngstown. In both places, local elites saw the arrival of new immigrants as a threat. But they defined the threat differently. In Bethlehem, the threat was seen as the break down of community. And so business and civic leaders took action to create bridges to immigrant groups (largely through religious outreach: that is, through organizations like the Young Men’s Christian Association). This had the effect of forging ties both between the elites and the working classes and among the various ethnic immigrant communities that made up the working class.

Elites in Youngstown interpreted the threat, not in terms of community, but in terms of elite’s interests.

The response of the elites served to make the neighborhoods of Youngstown more parochial, more isolated. The city was Balkanized. I see the same thing happening in the Rust Belt today. The reaction to fiscal and economic crisis is all too familiar. Does that mean another lost decade for the band of shrinking cities?

Burnt By The Sun

As the US Census numbers trickle in, we see that the Rust Belt is still shrinking (i.e. dying). The Sun Belt is still booming. Business as usual, right? Wrong:

"There's an extraordinary potential for 'sunburnt' cities to embrace the idea of smart decline" — doing more with less, whether it's fewer people, fewer home buyers or fewer jobs, says Justin Hollander, urban planning professor at Tufts University and author of Sunburnt Cities, which was published March 1.

Boomtowns that have been scorched by the housing crisis could learn from struggling Rust Belt communities, Hollander says.

Sunburnt cities have a chance to limit growth for growth's sake by allowing dense development and reducing parking requirements to encourage walking, public transportation and more green space, Hollander says.

"In each place there are a lot of opportunities to think smaller," he says. "It hasn't happened yet. Largely, these cities are in denial."

There is ample room for a debate about whether or not the Sun Belt will regain its swagger as the US economy rebounds. I'm in Hollander's camp. I view the latest recession as informing a "new normal". I foresee the slump in Florida lasting decades.

One reason the deck is stacked against the Sunshine State is ironic, to say the least. The lack of affordable housing:

Given its high volume of housing vacancies, Orlando seems an unlikely backdrop for any discussion about more housing. The same could be said for any of the economic boom's high-growth areas now experiencing unprecedented home foreclosures and sharply depressed home prices.

However, the issue of work-force housing is not about a shortage of housing in urban areas. It's about a shortage of affordable housing where it's needed in urban areas, including those hardest hit by the housing crisis.

At ULI, we learn from development mistakes as well as successes. And this is a lesson learned from the past two decades: The ever-expanding urban edge — driven by workers seeking housing they could afford — wound up being a costly location choice, in terms of living expenses.

The recent spike in gasoline prices should make the issue clear. Pay is not keeping up with the journey to work costs in sprawling Orlando. The residential geography is out of step with the emerging economic geography.

More ironically, it is the Rust Belt cities of the Sun Belt benefiting from the new normal. I think these places are the best example of how the landscape has been tilting in a different direction for a few years. Consider talent attraction Birmingham (apparently still the Pittsburgh of the South):

Birmingham was ranked the sixth best "brain magnet" in the country, according to a recent report by Joel Kotkin, a fellow in urban futures at Chapman University in California and executive editor of NewGeography.com. The report ranked the 52 metro areas with more than 1 million people based on gains in people with college educations between 2007 and 2009 compared to the overall population older than 25. During that time, the Birmingham-Hoover metropolitan area gained 21,111 college graduates, almost 3 percent of the people older than 25.

Birmingham trailed only New Orleans, fueled by people moving there after Hurricane Katrina; Raleigh, N.C.; Austin, Texas; Nashville, Tenn.; and Kansas City, Mo., in the greatest percentage gain of graduates.

"Birmingham's strong showing on this list is likely due to the rapid growth in its surrounding suburban counties," the report said. "One big development sure to lure brains: the rapid expansion of the University of Alabama's medical center and surrounding private medical industry."

Birmingham is a steel bust-town with a crushing municipal debt. Yet the college-educated are flocking there. The growth in Birmingham should be cause for grave concern in Orlando. Migration patterns are slow to change. Even if Sunburnt cities do recover, Birmingham will still look relatively more attractive in terms of opportunity. As the economy improves, the exodus often picks up speed. People are less risk averse and more willing to move. For Florida, the darkest days are still ahead.

Talent Retention Pittsburgh

Over the past few years, I've noted a trend in policies designed to plug the brain drain. Internships appear to be an effective tool for retaining college graduates that a region attracts. This is a great way to match the talent needs of industry with people studying at local institutions of higher education.

Internships would seem to explain Pittsburgh's impressive ability to retain talent, a trend I discussed last week. From today's sweep of the news:

The U.S. News internship survey showed that, of the 692 schools that responded, 36.8 percent of 2009 graduates had received an internship.

That tells us a few things. One is that most students do not get internships, even among universities that are happy to fill out surveys about such things. Looked at another way, you’d have to say that getting an internship is not a huge advantage if only more than a third of students at these 692 universities had one. No one going after a job is content to be in just the top third. The University of Pennsylvania, at the top of the U.S. News list, reports that 90 percent of its 2009 graduates had worked internships.

While ahead of all the other universities, Penn students are tied with each other — unless they get multiple internships. The Penn system obviously works well in getting students work experience, but even there, the student who hustles will rise above the rest.

Tuition and fees at Penn, a private university, are $40,514 this school year, according to U.S. News. And that is the $ factor.

Eight of U.S. News’ top 10 internship-producing universities are private. By definition, that makes them more expensive than public universities. The top internship-producing public universities on the U.S. News list are the Colorado School of Mines and the University of Pittsburgh.

Pennsylvania colleges and universities do a great job of attracting students from other states. Philadelphia (see the tidbit about Penn) has made a concerted effort to keep this talent around after graduation. Everything I've read recently indicates that the initiative is working. As for Pittsburgh, I'm not surprised to discover that Pitt excels at placing students in internships. The region struggles with anemic inmigration and a declining population. Most workers must be locally trained or educated in order to fill the demand for talent.

Bottom line: If you want to move to or back to Pittsburgh, then enroll in one of the region's great colleges or universities. That's the best way to find a job in Southwestern Pennsylvania.

Pittsburgh's Unconventional Economic Boom

Pittsburgh is the next Calgary. What does that mean? Expect more inmigration than you ever thought possible for a Rust Belt city supposedly dying. The main attraction will be the energy industry, namely the Marcellus Shale and its wealth of natural gas reserves.

Hydrofracking is literally an economic earthquake. The unconventional gas and oil revolution has plenty of boosters and skeptics. The truth is that no one is sure what is going on and what will happen next. What we do know is that the world of energy is morphing faster than we can make sense of the new terrain. From Der Spiegel:

In addition to changing worldwide energy markets, the emergence of new gas sources is leading to shifts in the global balance of power. Indeed, the dominant position of classic production countries, especially Russia, could soon erode strongly. Poland, on the other hand, could become a relevant player in the global market. Polish Foreign Minister Radoslav Sikorski already envisions transforming his country into the "next Norway" -- rich, important and independent -- particularly of its giant neighbor Russia.

Poland is the next Norway. Pittsburgh is the next Calgary. The above passage is innocuous enough. It is just speculation. In the context of the entire article, it seems more like a foregone conclusion. If you are living above the Marcellus, I encourage you to read it.

Rural/Urban Brain Drain

Motown to Tree Town weaves together Aaron Renn's (The Urbanophile) discussion of the Brookings mobility bank idea and a review (from Rust Wire) of Edward Glaeser's new book, "Triumph of the City". What drew me to the blog post is a quote from Glaeser used as an introduction:

(P)ublic policy should help poor people, not poor places.–Ed Glaeser, Triumph of the City

I first came across this policy paradigm back in 2007 in this Glaeser authored article, "Can Buffalo Ever Come Back?":

Probably not—and government should stop bribing people to stay there.

That provocative tagline sparked outrage in Buffalo. I doubt any civic booster bothered to digest Glaeser's analysis. For me, his thinking was (still is) a revelation. I had Glaeser on my mind when I blogged about Richard Longworth's review of "Hollowing Out the Middle" and Matthew Kahn's reflections on Appalachian talent outmigration:

The focus is on retention. Longworth isn't suggesting this policy approach. But if you read Kahn's research, then you'll see something similar to the conclusions drawn in "Hollowing Out The Middle." Kahn's point is that these towns and cities in Appalachia are unlikely to attract the kind of talent that most typically leaves the region. The same is true for the rural Midwest. At least, that's the perception.

The popular and most common reaction to "Hollowing Out the Middle" concerned what Longworth termed "civic suicide". That is, rural communities were encouraging young adults to leave. One of the authors, Maria Kefalas, recently attempted to clarify the conclusions drawn in the book:

"We don't want young people to abort their dreams to stay in rural America," she said. Later adding, "What we're saying is you have to stop assuming that the best kids are going to leave and the kids who aren't so good are going to stay and that [the towns] will somehow be OK."

Small towns are facing many more issues outside of the brain drain, like the loss of manufacturing jobs, outdated infrastructure, staggering unemployment, and the inability of small businesses to receive bank loans. But looking at the rural brain drain, Kefalas said it starts with college students.

"Of course kids are going to leave, we don't want them to stop leaving," she said. "But we need to invest in the kids who stay, and make it more tempting for the kids who are thinking of leaving."

That brings me back to Glaeser as his advice for Buffalo:

No mayor ever got reelected by making it easy for his citizens to move to Atlanta, of course, even when that might be a pretty good outcome for the movers themselves. But just because local pols will eagerly seek federal place-based spending doesn’t mean that the feds should comply. A sensible federal approach for upstate New York would invest in people-based policies that improve the economic futures of the children growing up there. Education is the best tool we have to fight poverty. If the children of upstate cities were better educated, then they would earn more as adults—whether they stayed in their hometowns or moved to Las Vegas. And people-based policies may actually motivate states and cities to spend more wisely, in order to retain their newly educated and mobile residents.

I still bristle at the mention of policies designed to retain talent. But the main point is important. Invest in people, not places. If a place is good at developing people, then it will be a desirable residence. That's how I view suburbs. A great school district is a powerful attraction, the long commute and high real estate prices be damned.

For some, the climate or the built environment is more important. Both variables influence migration. However, most people will tolerate bad weather, a high cost of living, and an ugly built environment if it translates into personal or familial development. Migration is still primarily a matter of economics.

What Glaeser doesn't mention is that leaving Buffalo is more advantageous for the individual than staying, controlling for educational attainment. Increasing geographic mobility promotes economic development. Rural communities committing civic suicide understand this. Policymakers need to catch up.

Rust Belt War Within

Ronald Reagan's first term as US President coincided with my middle school years in Upstate New York (near Schenectady). I remember my father reacting in anger to the local news when the issue of taxes were discussed. He framed the problem as Upstate subsidizing the Big Apple. Talk of secession was in the air. A revolt was at hand.

Cities are often at odds with their host states. Within metros are parochial fractures. And once again, the Rust Belt is not at war with the Sun Belt, but itself:

Gov. John Kasich painted a grim economic picture of Ohio on Wednesday night, saying a brain drain and a lack of investments are contributing to the state’s financial woes.

“I’ve come to realize Ohio is under siege. Not from India, but from Indiana,” he told more than 200 people during the Greater Springfield Chamber Annual Meeting and Business Expo at Kuss Auditorium.

Kasich said a third of college graduates are leaving Ohio to go to states such as Indiana, Texas and Illinois.

Indiana is the megaregional bad guy, particularly when it comes to poaching business:

“Feeling Squeezed by Taxes?” is the tagline on a Northwest Indiana campaign launching Monday in Chicago print and electronic media, and it dovetails with a broader Indiana push rolled out late last month, using the tagline, “Illinnoyed by Higher Taxes?”

The tougher the times, the uglier the rhetoric. Much of this hot air is similar to scapegoating immigrants for economic woes. Ultimately, it is self-defeating. The Rust Belt GOP governors are in a race to the bottom, looking for a bigger piece of a shrinking pie.

International Mobility Of Students

Ryan Avent (Economist) revisits the geographic mobility issue, this time considering the folly of subsidizing the film industry. I know such policy is near and dear to many in Pittsburgh. I'm not a fan of the tax credit. I'd rather the region export talent to Los Angeles. Pittsburgh isn't going to compete with that innovation cluster and almost every state seems to be fighting for the crumbs that fall off of the Southern Californian table.

I see a bigger (moving) picture. There is much to be gained by sending Pittsburgh talent to cut its teeth in LA. The benefits are more obvious if you consider study abroad programs. From The Chronicle of Higher Education:

Another important challenge in student mobility is that it benefits mostly only better-off students. For instance, most participants in study-abroad programs are students enrolled at four-year colleges. This is a point of concern if we consider that almost half of those enrolled in the nation’s higher-education systems are attending a community college. It is also disheartening that low-income and minority students remain highly underrepresented among those who study abroad.

Perhaps you don't think studying abroad has any value. If that's the case, then I'm not going to change your mind. But if you do, then you can appreciate how I understand brain drain and why I would promote the export of talent.

The people who least need geographic mobility benefit the most from it. International migration is a good indicator of an entrepreneurial disposition. This is the kind of talent that could create a job anywhere, including in her struggling hometown. Relocation, particularly to a dense global city, greatly enhances the economic benefits of a given skill. You'll do more in LA with your talent than you could ever do in Pittsburgh. That's not to say you wouldn't be successful in Southwestern Pennsylvania, tax credit or no tax credit. You'll be more successful in LA.

And you will be more successful if you speak another language and are intimately familiar with a foreign culture. Your prosperity is tied to your world view, which is tough to expand if you never the leave the confines of your parochial existence.

Site Selection Follow Up

Economic development policy is usually a game of cherry-picking the data. The view from Florida:

We’ve heard Gov. Rick Scott on several occasions talk about how he’s like Florida to be more like Texas, which is led by Gov. Rick Perry.

Today Site Selection magazine came out with its “Governor’s Cup” rankings and Perry won. The list measures how many new companies and jobs expanded in each state last year. There are a lot of different rankings out there and they all come with their own merits and criticism. This one is no different, but it does give some insight into what people who scout locations for companies — the site selectors — are thinking about.

Texas winning the Governor's Cup is convenient. Ohio, second place for 2010, sat on top in 2006, 2007, 2008, and 2009. A commenter at the Orlando Sentinel blog makes the obvious connection:

This story is confusing. Ohio was number 2. OHIO? The same Rust-belt, high tax, high union membership, Ohio, that used to be the industrial engine of the US? It;s not even a Right-to-Work state AND it still that antiquated notion called “welfare.”

So if Perry is correct in that article how in the heck did Ohio do so well?

The reigning champion before Ohio's run was, you guessed it, Texas. The political rhetoric frames Texas and Ohio as polar opposites in terms of policy geography. And Ohio policy is supposed to kill economic development. That's why John Kasich is now governor.

The story, THE Rust Belt story, is confusing. Ohio isn't supposed to win the Governor's Cup until the Republicans come to the rescue. The Texas playbook is rubbish. Florida would be better off being more like Ohio, Ted Strickland's Ohio.

Site Selection Magazine Rankings

Speaking of place-based development:

Cities Without People

What is development? You might imagine investment in infrastructure, an Army Corps of Engineers project. You could point to a new apartment complex or a skyscraper. Others will cite a litany of statics covering job creation and GDP growth. All these things are indicators of the development of people.

Economist blogger Ryan Avent takes aim at plans to revitalize Detroit and Michigan:

The question is: to what end are we resurrecting Michigan? If the goal is to help the residents of Michigan, it would be much cheaper and easier to do so by investing in those individuals, in order to help them move to more successful local economies. Indeed, without investments in the people of Michigan, it's not clear how much a turnaround in the state's fortunes will benefit existing residents. Many have stayed in the state because they love the place, no doubt, but many others have not left because they're unprepared to find success in growth industries elsewhere. Moving the growth industries to their backyard won't change that fact.

Economic development discourse fetishizes place. It is an act of dehumanization, politicians in service to a territory instead of a polity. There is no chicken-or-egg problem. The development of people comes first. At least, they should come first.

Lately, I've been thinking about the tension between amassing social capital and increasing geographic mobility. The two aren't necessarily mutually exclusive, but that's the dominant framework. The zero-sum game:

For a sending country, migration and the resulting remittances lead to increased incomes and poverty reduction, improve health and educational outcomes, and promote productivity and access to finance. Although individual variation exists, the economic impact is primarily and substantially positive. Yet, these gains come at a substantial social cost to the migrants and their families as migration may lead to eroded family structures, children losing parental care, and weaker safety nets.

Individual economic gains paid for with social costs. That's at the international scale and there are benefits for the places that export talent. At the national or local scale, we are missing a big part (half) of the equation:

Young people have and always will leave our communities. In fact, we want them to. We want them to go off and acquire new experiences. We want them to stretch the boundaries of their education.

But we also want them to stay connected. Sometimes that means returning to raise their families. At other times, it means living elsewhere but still giving back in ways like Tom does.

When I think of Tom and his connection to Miner County, I think of him as being “rooted in place.” Those roots took hold while growing up in Miner County. They’ve enabled him to lead an incredibly productive life outside of Miner County. And they are the same roots that keep bringing him back.

How we stem the tide of youth outmigration is worthy of discussion in rural places. But a more important question for rural community leaders to ask might be, “How do we help our young people grow the roots that enable them to live a life filled with accomplishments (wherever that may be) AND remain connected to the place of their birth?”

It seems to me that rural communities are pretty good at the former. And it is time that we get better at the latter.

Because we don't know how to foster deeper connectivity, we hinder geographic mobility. We stand in the way of development. The trick is to amass social capital while increasing geographic mobility. The two can work in concert. Only conventional paradigms of economic developing are holding us back.

TechBelt Brain Gain

I don't think brain drain is a "problem". Anywhere. However, some places do face greater challenges considering the educational attainment rate of the workforce. A little digging into the numbers can put the issue in proper perspective. But the myth persists:

High atop the Encore on 7th Downtown, Jamie Seabrook, 25, shares a 1,137-square-foot, two-bedroom apartment with Olivia Benson, 25, a longtime college friend she met during minority pre-orientation at Carnegie Mellon University, and her two attention-loving cats, Abi and Min.

Ms. Seabrook, originally from Westchester, N.Y., and Ms. Benson of Aliquippa, are exceptions to the Pittsburgh "brain drain" -- the city's reputation for attracting students to its 11 colleges and universities, but losing them four years later to a stagnant area job market.

Ms. Seabrook and Ms. Benson are the rule, not the exception. Pittsburgh does a "remarkable" job retaining regional college graduates. There is no other way to explain the following analysis from the Federal Reserve Bank of Cleveland:

Columbus has the most educated cohorts generally. Across the country, state capitals often have unusually high educational attainment. This is especially true if they are home to a large state university, as is Columbus. The Pittsburgh trend is remarkable. Among older Pittsburgh residents, education levels are below the national average, like those of Cincinnati and Cleveland. For residents younger than 40, however, degree attainment jumps up to the levels of Columbus. If the highly educated cohorts in Pittsburgh continue to phase in, the city will eventually have a workforce like a university town rather than a former industrial center. Cincinnati, Cleveland, and Toledo can also anticipate modestly rising education levels based on cohort replacement. The education levels in the Dayton and Youngstown areas are essentially the same across the age cohorts, so these areas may not experience any rise due to the phasing in of more educated young people.

Perhaps the Pittsburgh trend is due to attracting college graduates. That's not the case:

Click on the image to make the graph larger and more legible. What you will see is a big increase in native graduates. In other words, significant talent retention. The narrative associated with the graph:

Next, I looked at the six largest metro areas in the Fourth District in terms of whether their graduates and nongraduates were native to the state (“natives”) or whether they had moved in from another U.S. state (“migrants”) or outside the country (“immigrants”). Across the board, every metro area has more native college graduates in 2008 than it had in 2000. Cincinnati and Columbus have 29 percent and 27 percent more native graduates, respectively. Pittsburgh added 17 percent and Cleveland added 15 percent to their native graduate counts over the period. Gains among the immigrant graduate populations were also substantial. Cleveland-Akron and Columbus both had over 13,000 more immigrant graduates in 2008 than they had in 2000. Pittsburgh added approximately 9,600 immigrant graduates. However, in terms of attracting interstate migrant college graduates, all of the large Fourth District metro areas lag the national average, with the exception of Columbus. The national average in this category is 11.9 percent of the workforce. In Cleveland, the figure is 7.7 percent and in Pittsburgh, it is 6.8 percent.

In fact, the dominant trend for the Fourth District is strong retention and lagging domestic attraction of college graduates. (Ohio Governor John Kasich scapegoating brain drain for the the state's woes is an unfounded assertion.) The outlier is, of course, Columbus. Pittsburgh is catching up to Columbus without the benefit of strong inmigration and being the state capital (not to mention the absence of a flagship state university). Furthermore, as Bill Testa has offered, Columbus started off in a much better position than Pittsburgh.

If you think Pittsburgh is receiving good press now, then just wait a few years. The accolades will be as nauseating as another Steelers Super Bowl victory. The boom will benefit the entire TechBelt. That's the proximity dividend that you see in Northeastern PA thanks to nearby New York and Philadelphia. The Fourth District has long lacked a metro engine for economic growth. Pittsburgh is on the cusp of taking on that role for the region.

Eventually, the concentration of college graduates attracts graduates from other places. This positive feedback loop is partly why the world is spiky and a handful of cities are perennial winners in the war for talent. Town and gown Pittsburgh will start looking like the next Boston, dominating a region about the size of New England. The sphere of influence will stretch to Detroit and up against the gravity of Chicagoland.

I anticipate that no one else out there thinks the above will happen. The rise in Pittsburgh's educational attainment and per capita income are no less fantastic. I would submit that the numbers are unbelievable, incredible. Pittsburgh is the Marcellus Shale of talent. Eventually, businesses will figure that out.

The Pittsburgh Connection

Whenever I read a story about talent moving to Pittsburgh, I immediately start searching for the regional connection. People don't move to Southwestern PA without knowing the region. From the great Pittsburgh foodie story in the New York Times:

Trevett and Sarah Hooper, husband and wife restaurateurs, were pioneers in 2007 when they opened Legume (1113 South Braddock Avenue; 412-371-1815; legumebistro.com), one of the city’s first independently owned restaurants with a focus on local food. This spring, the popular 34-seat bistro, where Mr. Hooper is chef, will move to a larger space in Pittsburgh’s Oakland neighborhood. In addition to buying from area farmers, he said he hopes to do more whole-animal cooking in the new space.

Chefs like Mr. Hooper, who moved to Pittsburgh from San Diego, do face challenges. Compared with a decade ago, the local foods infrastructure has improved, he said. But unlike farms in Southern California, those in western Pennsylvania geared toward working directly with restaurants are still rare. “It’s much easier to be a local chef-purist in a temperate climate with a critical mass of wealthy patrons willing to pay top dollar for high quality,” Mr. Hooper said. “That’s not the reality in Pittsburgh.”

How did a chef in San Diego end up in Pittsburgh?

I immediately guess that Hooper's wife is from the area. That turns out to be the case:

After cooking in California for five years, Chef Trevett Hooper and his wife Sarah returned to Pittsburgh to launch Legume. The East Enders love running a restaurant near a movie theater, coffee shop and like-minded businesses. “We wanted to be in a pedestrian friendly area with lots of independent businesses. The community is very active in keeping it like that. It’s four diverse communities coming together,” says Sarah Hooper, who hopes to draw patrons from Edgewood, Swissvale and Wilkinsburg. “We were able to find enough investors--it all came together quickly.”

Working with Joy Robison, the Hoopers oversaw a complete renovation of the space. The brown and orange bistro features tile floors, tin ceilings and 19th-century lithographs. For illumination, the Hoopers turned to Construction Junction, where they found vintage schoolhouse lighting. “It has the feel of an intimate European bistro,” says Hooper, a Pittsburgh native who works for the Rand Corporation.

From what I can gather via Google, Trevett and Sarah met at Oberlin. He decided to be a chef instead of a musician. He followed Sarah to Pittsburgh, where he got his start in the restaurant industry. Why the couple left would be a useful tale. Regardless, they did the boomerang and opened Legume.

The NYT article indicates that the Hoopers took what they learned in Southern California and applied it in Pittsburgh, trying their hand at playing entrepreneur. Long-distant migrants tend to be risk-takers. And talented women in particular tend to be highly motivated to return home. This kind of migration can help Obama's recent praise of Cleveland ring more true:

"You've been working to reinvent the Rust Belt as the Tech Belt," he said. "Your universities, your hospitals, entrepreneurs, businesses have all teamed up to get biotechnology and clean energy from imagination to reality, and as a consequence, you've made Cleveland an emerging global leader in both fields."

Rebecca Bagley, president and CEO of NorTech, which focuses on technology and economic development in the region, said the administration understood "the story of Northeast Ohio, an economy in transition, with a great base, but with particular challenges."

"They're taking the stories of Northeast Ohio all over the country and they're using it to help form and drive policies in Washington D.C.," Bagley said, adding that she's been in regular contact with the White House to raise awareness of the assets of the region, whose economy has been hit hard since the recession.

One of those stories that the White House will soon be telling is one of boomerang migration and how it can catalyze an innovation economy.

Cleveland Real Estate Speculation

Relocation decisions hinge on knowledge of place. We decide to move to another region primarily for economic reasons. Where we reside in that region is a matter of mesofacts. Because our perceptions of certain geographies are slow to change (if they change at all), there is a glut of arbitrage opportunities. You can find a quality residence in a quality neighborhood on the cheap.

All of the above is of little use for the real estate investor:

Hi guys,

I was just speaking to my brother via skype a few minutes ago.

He's in Australia.

I tell him Im planning on doing a road trip to Cleveland to check out some properties.

I explain to him that there are properties there going from 35K and up. He's going to be a RE agent in OZ and he just freaked out when I told him. He just could not believe how low the prices were.

So then he asks me: "Why do you want to buy there? Who's gonna rent from you if everyone can buy?"

My only answer was that I assumed people in the area had bad credit?

Then I realized how bad that generalization was.

But can someone explain this to me? I guess he had a valid point. I guess vacancies are higher in those areas but since you can purchase at such a low price, its still worth it.

Who is renting these properties?

thanks

That message board poster is from Seattle. Rust Belt markets such as Cleveland are opaque places. People know very little about the neighborhoods there. The entire megaregion is a black box. Investment just about anyplace is a tremendous risk.

Now think about this from the perspective of talent. Even if you knew there were jobs available in Shittsburgh, would you move there? You would more likely go to Portland despite the high unemployment. That's the problem with Rust Belt cities marketing themselves as inexpensive places with lost-cost housing. Talent already understands this and continues to head elsewhere.

Detroit's Brand And Talent Attraction

I guess I'm not done with the Chrysler's Super Bowl ad featuring Rust Belt Chic Detroit. I blame Ezra Klein, blogger for the Washington Post, for today's preoccupation. Klein, unwittingly, considers my riddle about investing in education (i.e. developing people):

Glaeser concludes that Detroit has spent too much upgrading its infrastructure -- note the beautiful, but empty, people mover -- and not enough on its people. But there might be a reason for that. If you build a train in Detroit, you can be pretty sure it'll stay in Detroit. You can't say the same for its residents. Consider this study examining the way one state's investment in education can end up benefiting a more desirable neighbor. "Massachusetts, California, or New Jersey may benefit more from an investment in Mississippi’s research universities than Mississippi does," the authors concluded. Education, in other words, gives people the option to leave. And they take it.

The question for Detroit, then, isn't just about making investments in human capital, but about keeping the humans around long enough to see some returns on those investments. So what does Detroit have over New York or Washington or Portland? It's not weather, potential income, safety, or school quality -- the normal markers of comfort and opportunity. Perhaps it's the pride of place, and the emotional appeal of a resurrection narrative, that we saw in the ad Chrysler ran during the Super Bowl. Or perhaps I'm just grasping at straws.

No, Klein isn't grasping at straws. It is pride of place that informs Talent Glut Pittsburgh. It's also Rust Belt Chic that is luring human capital to Detroit without a job in hand.

The emotional response to the Chrysler ad seems to have ignited an understanding of the revaluation of Rust Belt cities, or what I like to call America's urban frontier. That brand can do a lot more than sell jeans and automobiles. It can repopulate a region.

Talent Glut Portland

I think of Pittsburgh as the anti-Portland. The cities are surprisingly similar. How each metro got to the point of commonality is strikingly different. For example, the glut of talent:

Oregon economist Christian Kaylor says he can think of only one explanation for the migration into Portland: the quality of life.

Kaylor says wages there are sometimes 20 percent lower than in Seattle or San Francisco. But people keep coming. In fact, Portland's appeal is part of why the city's unemployment rate tends to be about a point higher than the national average.

Portland keeps pulling in the brains while Pittsburgh doesn't let them get away. The point of commonality is that both regions have an oversupply of what firms want, skilled workers. That's why I'm bullish on Portland and Pittsburgh.

I stumbled upon the above NPR story via a blog post at the Oregon Business Report. The blogger remarks about all the talent available in Portland. The depressed wages and high unemployment are positive indicators, not negative ones. The last paragraph, unrelated to the talent migration, is what inspired my own post:

Anyway, when thinking about the path that led us to the Portland that is now the media darling. I always think about the downtrodden, blue-collar city of my youth that specialized in cheap, home-grown diversions. It was a great place to be a college student or aimless twenty-something even then, as rents were incredibly cheap, you could go to the Mission Theatre for free and then spend your few dollars on local beer. What more could you want? I think that these trends start slowly and then gain feedback momentum and this is where my consciousness begins – Portland in the early 80s. Looking back we look for big answers, but often the roots are humble.

I see a lot of Pittsburgh in that narrative and the reason why I am much more bullish on the Steel City than on the City of Roses. Pittsburgh can and will attract talent in droves, sooner than you think. As for Portland, it has a long way to go in developing talent. As Edward Glaeser recently remarked, talent can leave just as quickly as it arrived. That's something for a tech business to mull over when weighing relocation options.

Reading Migration Tea Leaves

Thanks to Aaron Renn's Twitter feed, I'm aware that the US Bureau of Economic Analysis has released its latest metropolitan area GDP report. You can click on the map below to get a better look at how your city did.

I note a swath of relatively good news stretching from Columbus, Ohio to Washington, DC. This is the exception to the Rust Belt rule that the Bureau mentions as "particularly hard" hit. Looking more closely at the Pittsburgh GDP numbers (Millions of Dollars):

2006: 103,504

2007: 108,386

2008: 111,738

2009: 111,597

Pittsburgh's metro economy contracted slightly from 2008 to 2009. I expect 2010 will be a return to growth and surpass the 2008 peak. I'll be interested to see how Pittsburgh compares in terms of recovery. We already know that Pittsburgh fared well during the recession. But the speed with which the region leaves its nadir will have a lot to say about the ability to attract migrants searching for opportunity.

Startup Pittsburgh

Good news for Boulder extends all the way to Pittsburgh:

The White House and U.S. Small Business Administration confirmed Tuesday that Boulder will be one of eight cities where senior administration officials will meet with entrepreneurs as part of the Startup America initiative. ...

... The first “Startup America: Reducing Barriers” roundtable will be held in Durham, N.C., on March 3. Another will be held in Austin, Texas, March 12 to coincide with the annual South by Southwest festival.

Other roundtables will be held in Boston, Silicon Valley, Atlanta, Pittsburgh and Minneapolis.

Perhaps you didn't get the G-20 memo about Pittsburgh. The region, which includes Cleveland, will play a key role in America's innovation economy.

Detroit Talent

I'll start this Detroit talent story in Las Vegas, a city now confronted with a serious brain drain problem. I was quoted in that article and the journalist who wrote the piece, J. Patrick Coolican, circled back to my comments today:

To begin with, if we’re to rebuild our city, we need these kids to succeed. I recently wrote an article that examined whether we have a brain-drain problem — losing our best and brightest to out-of-state schools and other cities such as New York and San Francisco.

The short answer is that, yes, this is happening, but geographer and economic development expert Jim Russell delivered an important insight: Sure, the elite kids will leave, but you should be proud that you’ve given them the education and skills to find success elsewhere and let them go, because they’re going to go anyway.

Where you should focus your attention, Russell said, is on the diamonds-in-the-rough, the first-in-the-family to go college, who will be grateful for the opportunity you’ve given them and stay home and help build a new Las Vegas.

Coolican is taking the long-view of developing talent. This is the Pittsburgh Way. It is a reasonable response to exodus. But the return on that investment will take decades. Recently, Edward Glaeser spoke specifically about Detroit and his analysis applies equally well to Las Vegas:

Education levels can change far more quickly at the city level than at the nation level because of migration. A city can attract skilled, entrepreneurial people in much less time than it can produce them and, unfortunately, a city can also lose important parts of its human capital base with astonishing rapidity.

I referenced that passage last week. Las Vegas can set about producing skilled, entrepreneurial people. That's a dividend worth seeking. It's also a tough sell politically. Voters from 40-years in the future aren't going to keep you in office. Naturally, regions turn to talent retention. That will get you reelected.

Glaeser doesn't suggest plugging the brain drain as a way for Detroit to move forward. It's all about attraction, the quick fix. Both Detroit and Las Vegas can benefit from this policy wisdom. Develop the diamonds-in-the-rough. Design a city that entices people to move there.

There is a third prescription that no one discusses. What to do about the "elite" kids who leave? If not retention, then what? Detroit may be on the cusp of solving my riddle:

UM Senior Research Specialist Don Grimes presented his study of the migration patterns of the college-aged population — 17-21 years old. From 2001 to 2004, Michigan lost 72,000 young people in that demographic, according to the research. Illinois, on the other hand, gained 13,354 during that same time period. Washington had the greatest increase: nearly 57,000 people.

But Grimes' realization during the conference that some of the audience members felt an inclination to leave the state, explore and then come back gave the economist food for thought.

"Maybe they do need to leave and come back," Grimes said. "I'm interested to do research now on the rebounding of 27- to 31-year-olds."

A lot of young talent can develop via relocation. Geographic mobility is a form of economic development. It seems crazy because we are place-centric. We care more about the city than the residents. The terroir is what matters. We should be thinking about how the city helps to develop people, not how the people can develop the city.

Las Vegas is beginning the process of growing its diaspora. Detroit Nation already exists. Use that network to help develop the people of Southeastern Michigan. Strategically channel the return flow to enable the most distressed neighbors, not neighborhoods. Ready these folks for export. Detroit will rebuild the entire country.

Burgh Energy Report: Talent Shortage

I'm seeing some indication that workers are moving to Pennsylvania for energy jobs. I'm not referring to a job-in-hand migration. More like a "let's go to Pittsburgh and see what happens":

At Penn College, students can take a three-week training course and become certified "roustabouts" -- laborers who work near drilling sites. They often work 14 days in a row and then have seven days off. They start out making between $15 and $20 an hour.

Almost all of the students in that program come from Pennsylvania, but there are exceptions.

"I had two graduates in one of the three-week courses that we did, they were from Las Vegas," said Penn College instructor John Harper. "They had lost their jobs. ... And they heard about this and came in here. They went to work the day they graduated."

I'd like to know how the course graduates from Las Vegas heard about the program. I'd call it a pioneer migration, a pathway once forged that will act as a pipeline of talent desperate for work. That's a watershed moment for the energy industry in Pennsylvania and Greater Pittsburgh, a metro that more closely resembles Calgary with each passing week:

Among the Cranberry-area Marcellus Shale players are Exco-North Coast Energy, a division of Texas-based Exco Resources. In 2009, Exco-North Coast Energy signed a seven-year lease on space in an RIDC Thorn Hill Industrial Park building that formerly housed Fore Systems Inc. and Marconi Corp.

Canadian-based Talisman Energy recently established a regional office in the Pennwood Commons development and announced plans to employ 125 people.

Shell also has a local presence, thanks to its 2010 acquisition of Warrendale-based East Resources.

“This area is the heart of the Marcellus Shale,” said Susan Balla, executive director of The Chamber, which serves the northern Pittsburgh, northern Allegheny County and Cranberry business corridors. “That’s why we’re seeing these companies establishing a presence here.”

Pittsburgh is strategically located to serve business center for the interstate energy boom, which also concerns nuclear and coal. There are going to be a lot more employment opportunities than the local universities and community colleges can staff. Eventually, the unconventional gas supply is going to gain access to the global market. The quest for talent will also scale up, going worldwide:

The ability to source skilled labour, wherever it may be, is crucial in the oil and gas industry, which has faced intermittent labour shortages in recent years.

However, with a widespread requirement for specialist skills, sometimes difficult to source within the [European Economic Area (EEA)], it is vital to the health of the sector and the wider UK economy that immigration law take these challenges into account.

Part of this challenge is to ensure employers have sufficient flexibility to engage skilled non-EEA personnel when the need arises and without undue cost or delay. But in what some observers see as an attempt to appease the tabloid media, the Government has been accused of being more concerned about cutting net migration than safeguarding access to specialist skills.

Energy markets are volatile and difficult to predict. In response to the unexpected swings, talent most be geographically mobile. There will be times when labor must leave Pennsylvania, perhaps fueling the shale gas boom in Poland. Pittsburgh will be a major player in that talent market, which in turn will result in new talent pathways to Southwestern Pennsylvania.

Building Up Urban Core Pittsburgh

If you know one thing about Pittsburgh's economy, it should be the excellent job density in the urban core. The bane of the region's existence is the declining population of people living in the city. Aaron Renn (The Urbanophile) does a nice job of weighing the bad news about shrinking Chicago against the still strong central business district (CBD). My own take is that if you fetishize the population numbers, then you'll miss the more important economic story in Chicago.

The could be said of Pittsburgh. A declining number of people is a problem. Just take a look at the City's dire pension situation. The ballooning legacy costs hurt the region. Yet the economic picture continues to get brighter:

Apartments have been one of the highlights of the city's favorable standing with national developers and investors.

"I get calls from developers and investors in areas outside the region interested in either building or buying apartments here," said Cynthia Kamin, CBRE senior vice president.

Occupancy has been in the 96 percent range, though she expects it may drop to 95.2 percent this year. Those numbers are welcome news to apartment owners, who don't provide the concessions in rent or other items as they had in the past, she said.

Rentals average between $886 and $894 per month, and Kamin believes it will increase to $899 per month this year.

Pittsburgh survived the national recession in better shape than most metropolitan areas, said Arthur F. Jones Jr., a senior economist at CBRE Econometric Advisors.

"The region's transition from an industrial economy to one of health care and office occupancy enabled the region to have a good year in 2010 with the promise of continued growth in 2011," he said.

In the city, both office space and apartments are doing well. I doubt it will ever be well enough to address public pensions. But I don't think saying that Pittsburgh is thriving is stretching the truth. The urban core is better off than most and that's in spite of the debt.

In this time of fiscal restraint, the playing field is much more level. For many cities, the problem is relatively new and acute. For Pittsburgh, it is the same crisis that has been around years (if not decades). Perhaps the region is running out of road to kick the can. The end is nigh. My guess is that city government played the shell game long enough for things to turn around. After a half-century of dramatic decline, the urban core is growing.

Pittsburgh A Hot Moving Destination

Update: You can read the press release here.

------End Update------

So says U-Haul:

Austin was ranked fifth fastest-growing city in the U.S., according to U-Haul International Inc. ...

... Others in the top 10 included Queens, N.Y.; San Francisco; Pittsburgh, Penn.; Brooklyn, N.Y.; and Chicago.

Not bad for a dying city.

Rust Belt Chic Pittsburgh

Thanks to this article in Governing, the Rust Belt Chic trend is enjoying increased visibility. That's not necessarily good news. Mike Madison explores the downside:

What holds the Rust Belt back, perhaps necessarily and inevitably, isn’t really the challenge of clearing brownfields and attracting new firms and residents. It is the challenge of history and culture that frames how one can imagine the future. Rust Belt chic is hip, to be sure, but it’s also all we’ve got, for now. Can you imagine a broadcast of Monday Night Football in Pittsburgh that does not feature video of steelmaking? Yet no steel is made in the City of Pittsburgh today, and only a modest amount of steel comes out of the region as a whole — nearly all of it specialty steel, not the giant pieces that framed bridges and skyscrapers. Who knows what Pittsburgh might become, even if it might become anything more than it is right now. But Pittsburgh has to find a way to put steel in its place, metaphorically speaking. To deal with places like Braddock without their becoming simply Steel Valley comeback stories.

Mike's concern applies equally well to the Chrysler ad I obsessed over last week. That is Detroit's "comeback story". How the ad resonated is the Rust Belt's comeback story. We pin our hopes on the revival of manufacturing. That America will, once again, make things.

I don't understand Rust Belt Chic in those terms. Nostalgia is part of it. It's also a matter of pride. Mostly, Rust Belt Chic is the possibility of the urban frontier. We are reinventing cities and developing a new economic paradigm. The future of American cosmopolitanism is in the parochial Rust Belt. It's more blank canvass than tired cliché.

Rust Belt Chic reminds me of grunge music and the emergence of Seattle as a hipster destination. The cauldron for that angst was the collapse of airplane manufacturing and the struggles of the timber industry. A commenter over at The Urbanophile touched on the subject in a critique of my characterization of Portland:

Rust-belters in many ways should view the Rose City (and the Beaver State) as a beacon of hope–Oregon had one of its dominant industry (timber) utterly demolished two-and-a-half decades ago, and has (somewhat) successfully reinvented itself.

Both Seattle and Portland provide examples of how Rust Belt Chic doesn't have to drag down Pittsburgh's future. I lived in Olympia, Washington during the early 1990s. The natives were not thrilled with the influx of outsiders. Grunge was considered local music. I associated it with lumber towns such as Hoquiam. Kurt Cobain is from neighboring Aberdeen. You might have called his look "Lumberjack Chic". All of the above was neither here nor there concerning Seattle's boom or most livable Bremerton (1990).

There is even a Seahawks Nation, which ties together a large region with a certain blue-collar ethos:

The obvious joke here is that Alaskans traditionally have been behind a pair of dog teams—the ones in the Iditarod and the Seahawks.

Matt Hasselbeck has the facts. And he sounds eager to clue in the rest of the United States that there really is, believe it or not, a Seahawks Nation. And to let you know how much territory this covers, above and beyond our 48 contiguous states.

He wants you to appreciate, for example, that the Seahawks also own the state of Oregon. That they traditionally have a big scrimmage in Portland for all of those lumberjacks and Nike employees there whose only contact with pro football is a John Madden video game.

Seattle is a great foil for Rust Belt Chic Pittsburgh. Today's post actually concerns cuisine and the culinary backwater in Southwestern PA:

Sushi.

Sushi and Pittsburgh.

Really, based on everything else, the two make for strange bedfellows. Spend enough Internet search time tracking the connection of those terms, and you'll find the story from 1997, when then-Steelers linebacker Chad Brown fled in free agency to Seattle. His wife complained shortly thereafter to the media that Pittsburgh lacked the high-end culinary distinctions they looked for in a city. Like -- wait for it ... wait for it -- sushi.

Pittsburgh doesn't pass the sushi test. Pittsburgh doesn't pass the Zagats test. But Pittsburgh has something better. Something Rust Belt Chic:

Making prosciutto is the very old art of transforming a fresh leg of pork, well rubbed with salt, then hung in the air for many months to lose moisture, ferment a bit and gain flavor, into a revered ham with the texture of a silk tie and a complex aroma. It is a skill perfected in Italy's midsection, in the city of Parma.

The art also is a source of pride in Pittsburgh at Parma Sausage. Company founder Luigi Spinabella, 83, who was born near Parma, learned from his father to cure pork in this time-intensive way.

Two decades ago he got seriously into prosciutto-making.

Adding prosciutto to the store's popular lineup of sausages and cured pork products was a daring move in Western Pennsylvania in the 1990s. High-quality domestic prosciutto was almost unheard of. Few besides Italians and foodies had learned to savor the funky fragrance of the paper-thin sliced ham.

Chad Brown and his wife were too unsophisticated to appreciate such cuisine. Local delicacies are found in unorthodox (or, perhaps I should write "Orthodox") places such as churches or garages:

Pittsburgh Italians take this mystical rite in stride. This may be because so many have a “garage prosciutto” hanging in their suburban homes.

One such is Giuseppe DiBattista, 78, father of Vivo chef/owner Sam DiBattista.

“My parents’ generation arrived with what I call ‘World War II thrift,’ Sam says. They knew how to keep food without refrigeration by canning, drying, pickling, fermenting.” They were closer to their meat sources too. Sam remembers classmates coming home after school, “appalled to discover a bunch of dead rabbits hanging in the garage, the ones they’d been playing with the afternoon before.”

Note the history, the sense of pride. That's Rust Belt Chic and I don't see how it would hold the region back as outsiders learn to appreciate the same world Anthony Bourdain is making famous on his show "No Reservations". Go ahead and move to Seattle for the sushi. That city could use a few more people looking to buy a home. But come to Pittsburgh for the prosciutto. Wash it down with a Duquesne Pilsener, a fine example of looking forward through the past.

Pittsburgh Hotels

Any impressive rise in Pittsburgh metrics comes with a caveat. The gains were only possible after dramatic losses. At least, that's how I imagine the critics and cranks reacting to this news tidbit:

Honolulu posted the second-highest hotel rate increases among North American cities in the February Hotwire Hotel Rate Report.

The city's ranking, which came in behind Pittsburgh, was a step down from the top spot that it occupied in the January report.

I wouldn't take the Hotwire report to the bank. However, I would consider all the stories of hotel building going on in Pittsburgh over the last few years. I recall reading that the region is under-served in terms of capacity. I conclude that the supply isn't keeping up with the demand.

Why are so many people looking to spend the night in Pittsburgh?