Thursday, April 23, 2009

Geography of Recovery

The above map can be found here. Such projections are useful for anticipating the latent economic migration that will inevitably occur once the recovery begins in earnest. Right now, Americans are staying put, as evident in the Central Ohio region. While not the worst, the forecast for Pittsburgh's future is cloudy.

Before discussing the Rust Belt picture, I want to visit the concept of latent migration. Increasing geographic mobility will lag behind the economic recovery. As news of metros returning to "peak employment" diffuses, workers will start thinking about relocation. These early migrations will continue long after the job the market cools, as evident in Charlotte, NC:

Two years ago, James and Cynthia Kwolyk put their Connecticut home on the market. Their goal: Move to Charlotte with its milder weather and nearby relatives.

Then their house sat, waiting for a buyer. The family still moved – even though the house didn't sell for 11/2 years, and they had to drop the price $100,000.

Charlotte owes much of its prosperity to newcomers willing to pull up stakes and gamble on opportunity here. ...

... In Charlotte, UNCC economist John Connaughton said, it's difficult to estimate what the city's unemployment level would be if newcomers weren't moving here. But, he said, the state's March unemployment rate of 10.8 would be at least a percentage point lower if North Carolina weren't growing so fast.

In Austin, some residents worried about the stream of newcomers when the dot-com bubble burst in 2000. The city's population had leapt from 800,000 to 1.2 million during the 1990s, fueled by the city's mild climate and abundant technology jobs. When the tech jobs dried up, residents complained about increasing home prices and worsening traffic as people continued to move in.

Even as other labor markets heat up after the Great Recession, people will still risk everything to move to the initial hot spots. Much of the late-arriving talent must be very resourceful in order to make their gamble pay off. Thus are born, folks determined to stick, the next round of job creators for Austin.

The regions that return to peak employment the earliest, such as Indianapolis, have a chance to become the next big talent magnet. As for Pittsburgh, we might see a strong out-flow to DC and Columbus, OH. Pittsburgh's recovery is expected to be as late as can be without being indefinite. That might have something to do with the late start of the downturn. I expect it has more to do with the still-substantial manufacturing sector. Also, job creation has been sluggish at best, even in good times.

Did the recovery projection take into account demographics? I ask because Western Europe is looking at an acute talent shortage thanks to an aging population. Pittsburgh looks a lot more like Europe than the rest of the United States. I'm anticipating more jobs opening up thanks to attrition. Labor demand, particular in the highly-skilled trades, should be quite strong sooner rather than later:

My wife works for The Bank Formerly Known As National City, whose white-collar Cleveland workforce mostly faces the prospect of either finding other work or moving to Pittsburgh (PNC). I like my job, but we can't afford to get caught without options.

The word is getting out about Pittsburgh. Once the will to move returns, I bet Pittsburgh will be on the radar. But that's no reason to ease up on the PR campaign.


Mark Arsenal said...

Considering we've yet to hit bottom I'm curious where they get the data with which to make growth projections/assumptions?

I'm curious how they anticipate economic growth will really return without an oil surplus (or how we'll manufacture alternatives when they all require fossil fuel inputs)? Or how growth at all will be possible in the US with 2 billion Chinese and Indians competing for copper and iron when there are no fossil fuels with which to extract them anymore?

Unknown said...

That plot looks like it's based on MSAs. How important is the metro region to the city proper and vice versa?

Does the unemployment rate of NE W Va impact (for instance) Dozen cupcakes? Even marginally?

Jim Russell said...

Looks like MSAs to me, too. Mark, the commenter before you, noticed an important pattern on another blog:

Pittsburgh has one of the strongest job densities in the country. So, variation of unemployment within the region could make a huge difference.

All of the above brings into question the predictive value of the map for migration. Just the same, Indy and Texas would be a good bet for popular recovery destinations.

Stephen Gross said...

Your analysis of aging-population-as-possible-benefit is quite interesting. I haven't run into it in other public policy circles. However, as a former Cleveland resident, I can certainly testify that growing labor shortages at the top of the economic scale have translated into interesting openings down the economic ladder. The tricky thing is that you don't want a population to age too fast, because the younger generation won't migrate in fast enough to replace those workers.

It's striking how much midwestern cities' economic development policies are shaped by the perceived need for in-migration of talented individuals. I suppose it's a reasonable perspective, but I think it's over-emphasized. What about encouraging higher birth rates? Or funding schools better so the existing population becomes more productive?