Friday, October 29, 2010

Blog Release: Choose Pittsburgh!


In Spring 2010, the Huffington Post listed Pittsburgh as their #2 pick on their 'Best Cities for the Newly Graduated' list. “Pittsburgh seems an unlikely place for a renaissance but the city escaped the recession relatively unscathed and is moving forward in many areas," the Huffington Post noted. “Besides having bustling education and health care sectors, the city is also generous with arts initiatives.”

What is it that motivates young people to choose a city? Is it employment opportunity, cultural diversity, cost of living or quality of life? What is it that Pittsburgh does well, and what could we be doing better? How do we become everyone’s #1 pick?

Join cityLIVE! as a panel of local experts discuss why we need to be picked, what criteria young (or old) people use when selecting a city to live in, and how Pittsburgh might become more competitive in attracting and retaining young and talented professionals in our region.

Our panelists include Jim Russell, co-founder and chief strategist of the Pittsburgh Expatriate Network (PEN), Regina Koetters, an urban redevelopment consultant who chose to relocate to Pittsburgh, and Luis von Ahn, a professor in the Computer Science Department at Carnegie Mellon University. Jesse Schell, CEO and founder of Schell Games will moderate the anticipated lively discussion.

Don’t be square. Be there.

Great Recession Recovery Migration

Brain drain is a huge story in this year's election season. I had over 40 articles to choose from this morning. I decided to blog about the only one that provides an honest account of the migration landscape:

Less than two years ago, Pell Duvall was feeling the brunt of the nation's economic slide, laid off from his job in Oregon and left underwater on his mortgage. He and his wife, both graduates of Truman State University in Missouri, decided it was time to return to their Midwestern roots.

Researching prospective cities online, he started reading how Omaha had been largely riding out the Great Recession.

“There were opportunities that required education, not just restaurant jobs,'' said Duvall, 29. “Just to see the variety of jobs and the big corporations in the area, I thought ‘Wow, that's something.' ''

Now he and his wife both have jobs and a happy new life in Omaha — in the process, becoming part of a trend. ...

... Duvall, the former Oregonian, is commuting by bike each day to his downtown job as an assistant production manager for Continuum Worldwide, the Omaha security consulting company. He's excited to see all the new biking lanes around town and additions to the metro trail system.

Duvall and Miller both have tapped into the growing community of young people in Omaha who are bullish on the city's future.

“I think it's great,'' Duvall said. “Omaha has a lot to offer.''

This expatriate return tale is instructive in terms of the expanded sense of homeland. Those who intimately know the Midwest are the ones cashing in on the boom in Omaha. Reports of good fortune in the plains won't resonate with people who don't know anything about flyover country. Instead, they head to Oregon where the economy is in a sorry state.

On the other hand, wayward Midwesterners are deleveraging. They are the few who figure out how to escape bust-towns such as Portland, reversing the talent migration celebrated in the work of Richard Florida. I don't expect this geographic arbitrage opportunity to remain a secret for much longer. Once the economy finds more sure footing, we'll start to see the landscape reshuffle in a more dramatic fashion.

Be careful what you wish for, Omaha.

Thursday, October 28, 2010

More Talent Shortage News

This time in California:

Tom Frantz, a co-owner of Grass Valley's new Huntington Mechanical Labs, has the unreleased energy of a racehorse. He's anxious to see what Huntington's new plant can do once its firing on all cylinders.

Huntington recently moved from its longtime base in Mountain View, Calif., where it manufactured high-tech vacuums for research purposes for 40 years. It creates custom and ready-to-order products. Located off Loma Rica Road near the Nevada County Airport, the new plant has been up and running for a little more than two weeks, though not at full capacity.

“We're running below our desired staffing levels now,” Frantz said. “We're concerned about getting our production numbers up.” ...

... Huntington workers – some new, and some who have been with the firm since its Mountain View days – have been working with Future Farmers of America students from Nevada Union High School to train them, but they are too inexperienced to be ready yet, Frantz said.

Plant personnel are still hoping to hire local workers but are also casting an eye to the Rust Belt to find experienced workers.

Emphasis added. Companies located in the Rust Belt are also hoping to find similarly experienced workers. The war for talent is heating up.

Executive Geographic Mobility

If you own a home, then you devalue your education. That's the lesson in a Real Time Economics post:

“Continued weakness in the housing market is undoubtedly the biggest factor suppressing relocation. Job seekers who own a home — even if they are open to relocating for a new job — are basically stuck where they are if they are unable or unwilling to sell their homes without incurring a significant loss,” said John A. Challenger, chief executive officer of the firm.

“Right now, demand for new workers is not at a level that would force companies to bring in talent from outside their region. However, as the local talent pool starts to become depleted as the economy improves, companies will be compelled to cast a wider recruiting net. Unfortunately, the immobility of the workforce may mean that some employers will have to delay expansion plans, thus slowing the recovery,” he said.

For a variety of reasons, talent shortages loom on the horizon. Regions focused on retention strategies will find that they don't have the network capacity to help the economy grow. There is absolutely no gain in trying to discourage outmigration. If anything, regions should encourage leaving.

Facilitating relocation is a tough sell. That's a result of failing to build the capacity to benefit locally from outmigration. The interests of the individual and community are misaligned. The two are often pulling in different directions. Such a dilemma dramatically under-utilizes human capital. In shrinking cities, that's a fatal oversight. Detroit cannot afford to ignore its expatriates because they live hundreds or even thousands of miles away. Distance is no excuse for incompetence or lack of vision.

Talent is emerging as THE currency in the post-recession economy. In economic development circles, conventional wisdom works against this trend. The goals are place-oriented instead of people-oriented. Grab the brass ring and embrace geographic mobility.

Wednesday, October 27, 2010

Rationale For Plugging The Brain Drain

Slowing brain drain isn't a policy goal. It's a fringe benefit of economic development. Perversely, reducing outmigration is framed as the end game:

“Long before there was any formal economic development effort in the state or in the county, this group made a major difference in diversifying both the local and regional economies,” said Ron Arnold, executive director of the Daviess County Economic Development Corporation. “John’s leadership and commitment helped bring several companies to the area and helped others expand, and all of it done on a volunteer basis.”

Snyder said that the economic development group was formed in part because high school seniors were graduating from local schools and then leaving the area due to a lack of jobs. “The ‘brain drain’ has been a challenge to Indiana communities for many decades in one form or another,” Snyder explained. “The first economic development group was able to attract some new business and change a few things.”

Naively, I assumed attracting new business and job creation was the reason any community would hire economic development professionals. If a bump in employment opportunities fails reduce the rate of graduates leaving the region, are the efforts a failure? Ironically, plugging the brain drain is economic undevelopment. Make sure everyone drops out of high school and reap the political rewards of stifling geographic mobility.

Initiatives designed to retain talent are anti-growth. Encouraging home ownership exacerbates poverty. Even student loan debt works against the benefits of increasing educational attainment.

Migration is a form of economic development. Attracting more immigrants will catalyze regional growth. Yet we won't consider a novel idea such as a mobility bank:

Flint is just one example of the many American communities that have unemployment much higher than the national average. Many obstacles prevent an unemployed worker from moving from one city to another in search of a job. The decision of whether to move for work is not unlike the decision of whether to go to college. An unemployed or underemployed person who is thinking about moving for economic reasons faces a series of front-loaded costs such as moving expenses and leaving familiar surroundings, costs incurred in exchange for what are hoped to be longer-term benefits—ideally, a steady job or a higher-paying job. But, as with paying for college, there is a private-market failure that limits access to credit to fund human capital investments—namely, that people cannot use their future earnings as collateral to borrow money to finance their moves. Many people also may be uncertain about what job opportunities are actually available to them in distant locations, and may have limited information about amenities and quality-of-life issues in areas with stronger job growth.

Encouraging outmigration is the same as encouraging going to college. Discouraging outmigration is the same as discouraging going to college. The latter aim is obviously ridiculous. Policies designed to stop brain drain are just as absurd. Workforce development without a geographic mobility strategy is half-baked and dead set against the prosperity of the people the board purports to serve. It privileges industry over worker. Economic development professionals need to get with the times.

Talent Shortage Report: Ohio

Stories about employers begging for workers keep turning up in daily news searches. If true, then why aren't more incumbents pointing this out during the campaign? In Ohio:

Mark Romanchuk, president of the Richland-Ashland-Crawford Regional Manufacturer's Coalition told commissioners Tuesday training is critical, and missing in the area. ...

... Romanchuk, who owns PR Machine Works Inc. in Ontario, said technological advances and the competitive work environment have left some workers behind. He said in this area there are 130 job openings are for machinists, welders and fabricators and about 100 jobs in the mechanical engineering field.

"We can't find them," he said.

He said he and other manufacturers are part of the problem.

Romanchuk told commissioners they've been a good partner to the manufacturing community and thanked them for providing work force training dollars.

"You've been a good partner," he said. "The manufacturers have not. We have to get together. We have to step up and do our part, that's one role of the (Regional Manufacturer's Coalition)," he said. "We've been bad partners. We've had it too easy too long. We've worked in silos. Then globalization came. We can't work in silos anymore. We want to compete. We've got to work together."

Ohio has been at the forefront of the ironic tale of talent shortages. I'd figure that current state governor Ted Strickland would make political hay out of it given all the heat about jobs leaving his jurisdiction. There are bigger issues to consider.

In the Rust Belt (likely everywhere else), workforce development is dysfunctional as a result of entrenched parochial attitudes. Richard Longworth recently pointed out that this is changing given the challenges. An example of such an initiative is Corridor2020 (Eastern Iowa):

Strategic Position Statement: To harness and leverage corridor resources to achieve our vision as well as to recruit and keep talent in the region.

In December 2009, the CBA hired Mike Langley, former CEO of the Allegheny Conference in Pittsburg [sic] to facilitate a strategic planning session. The result of the session was three strategic imperatives for the region with assigned leaders and a timeline.

Again, I note that Pittsburgh is the model. The focus is on talent. Economic development will happen where the workers are in ample supply. With less geographic mobility, the Midwest has a huge advantage. Great schools and universities in this megaregion continue to crank out world class talent. However, parochial squabbling along with the misinformed brain drain discourse has handicapped most Rust Belt communities.

To digress, concern about brain drain is parochial thinking. It is a big reason why Rust Belt states and rural towns continue to struggle. They are stuck in the industrial era, when a captive labor force necessitated union representation. Geographically mobile workers don't require unions. The unemployed in Southeastern Michigan needn't travel that far to find a job. However, openings in north central Ohio remain unfilled because there isn't an upside for Michigan or Ohio politicians.

Trying to retain talent is the community screwing over its own citizens. It is also a self-destructive practice. Stop wasting time and resources on plugging the brain drain.

Tuesday, October 26, 2010

Rust Belt Reset In Sun Belt

The contention that Sun Belt states crafted better economic policy than Rust Belt states doesn't pass muster. Rust Belt cities in the South also struggled with the same problems plaguing the shrinking cities in the North. This geographic irony also shows up in stories about urban revitalization:

In fall 2000, when the textile industry was crumbling and a new report by consulting giant McKinsey painted a bleak picture of the city's prospects, Greensboro's future looked shaky. A few bold private developers were in the early stages of reviving downtown. But the city's base of corporate leaders was rapidly shrinking. Elected officials, prone to infighting, weren't providing visionary leadership either.

Into this vacuum stepped the heads of six Greensboro foundations, led by the Joseph M. Bryan Foundation, the Cemala Foundation and the Weaver Foundation. Together they formed nonprofit Action Greensboro to revitalize the city's economy. ...

... Flush with more than $50 million from its member foundations, corporations and other partners, Action Greensboro has spearheaded the creation of the city's baseball stadium, park and greenway and accelerated work on the new International Civil Rights Museum.

It supported initiatives that helped improve public school performance, fostered industry and university partnerships and rebuilt the city's approach to business recruitment, luring Honda Jet, Mack Trucks and Elon University's new law school.

Foundations in Pittsburgh and Detroit have experimented similarly, so Action Greensboro's approach isn't unique. Still, it's turning heads.

Springfield, Mass., for example, is using Action Greensboro as a model for reversing its fortunes. Across North Carolina, many communities might benefit from its lessons as they grapple with the demise of the state's textile, tobacco and furniture industries and a severely damaged banking sector.

With Charlotte's corporate base reeling, the Foundation for the Carolinas and its peers could find ways to extend their leadership. In the Triangle, where the universities that help drive growth are suffering from the downturn, Action Greensboro might serve as a model for community development.

That's right, struggling Charlotte and Raleigh-Durham are looking to Rust Belt Greensboro for ideas. Southern migration boomtowns are scrambling to figure out what to do now that the people pipeline is empty. The former industrial powers already know how to operate in the absence of robust inmigration and the current economic climate favors these strategies.

Mayor Joe Jaworski and his election rival Betty Massey have joined forces in a bid to form a new authority to take charge of coordinating the island’s revitalization.

Jaworski has put the idea on the agenda for Thursday’s city council meeting, and both hope it will have the backing of island groups such as Galveston Alliance of Island Neighborhoods. ...

... He could see a positive reaction Thursday, when Murphy speaks at city hall. As a senior resident fellow at the Urban Land Institute, he has been its Gulf Coast liaison officer since 2006 and chairs its urban development committee. With housing a hot issue on the island right now, his words likely are to make a major contribution to the revitalization debate.

The Texas economic miracle did little to help many communities in that state. The variance comes from greenfield versus brownfield economic development. The policy quirks didn't make a difference to regions saddled with crushing legacy costs. If anything, Rust Belt states are leading the way with policy innovations. The Sun Belt states are now the ones looking dysfunctional.

Monday, October 25, 2010

Tracking Talent Migration

If you are interested in global talent flows, then you should check out The World Bank blog, People Move. The latest "Migration and Remittances News Roundup" yields this gem from the Washington Post:

Skilled Chinese workers are helping India expand its infrastructure at a frenetic pace, even as the two Asian giants compete for economic dominance.

Their presence in a nation of more than a billion people with staggering unemployment may appear incongruent. But the government says Indian workers lack the technical skilled needed to transform the country into a 21st-century economic powerhouse.

India might be the center for the key geopolitical issue of the 21st century, the war for talent. Ironically, you can find Indian infrastructure workers in the Middle East (e.g. Dubai). The labor economics would seem to indicate that the export of such workers is efficient thanks to the availability of Chinese immigrants.

Americans seem ignorant of these migration patterns. That an opportunity for an enterprising region looking for edge in the war for talent. In most American universities, geopolitics is still a taboo subject. We are sorely lacking in this kind of understanding (as the absurdity of the Marcellus Shale tax debate indicates).

Where The Talent Is

Mapping the recovery:

At a ULI Fall Meeting 2010 panel on “Regional Economic Drivers,” moderated by Heitman Managing Director Mary K. Ludgin, Richard McLemore of MetLife Real Estate and Craig Thomas of AvalonBay Communities, Inc., attempted to answer the question “where and when will the jobs show up?”

The answers to that question aren't surprising. However, there is a glimpse of a new economic geography:

As for the Midwest, it is becoming a “screaming bargain,” due to the low cost of land and housing, low wage levels, and available human capital.

For all the mindless babbling about brain drain, there is a glut of human capital in the Rust Belt. In Pittsburgh, there is no need to court graduates outside the region. Thus, wages remain relatively low for high skilled positions. If job growth ever took off, then I doubt Pittsburgh could scramble fast enough to attract the talent in demand. Serious worker shortages still loom on the horizon and the competition for workers will be fierce.

The main problem for Midwestern cities is brand. The screaming bargain falls on deaf ears if you are city named Detroit:

Detroit, Oregon is not a crumbling rust-belt city. And it has nothing to do with Mo-town Records. It's a resort community nestled on the shore of a lake in the Cascade foothills. But hotel owner Doug DeGeorge thinks the name is a turn-off to some potential visitors.

Doug DeGeorge: "The name Detroit doesn't bring positive thoughts to anybody's mind."

So he convinced the City Council to put a measure on the ballot that would change the town's name to Detroit Lake. He believes adding that word shifts the mental image. In fact, the lake that borders the town is called Detroit Lake and some highway signs already use the term. Dean O'Donnell runs Mountain High Grocery in Detroit. He says there's support for the change in the business community.

I predict that more and more companies (as well as talent) will come to have a positive association with Rust Belt cities. Bringing together outsiders with employment opportunities moving into the region will be the key challenge for shrinking cities over the next few years. I reckon the talent shortages will be more acute elsewhere before hitting a place such as Pittsburgh. Firms will chase the human capital and the cheap costs that the Midwest has in spades.

Saturday, October 23, 2010

Talent Migration And Educational Attainment

Want to know the #1 cause of brain drain? Outside of an acute economic downturn, the answer isn't lack of jobs. Don't worry about a dearth of urban or recreational amenities. Stop sending your kids to university. Via Free Exchange, nothing says leave your home state like a college diploma:

In crosssectional OLS regressions, we observe that an additional year of higher education is associated with an increase in an individual’s probability of residing outside his birth state at mid-career of three percentage points, or approximately ten percent of the mean of this variable. When we instrument for college with cohort-level induction risk, the causal effect of an additional year of college on geographic mobility is generally larger, but estimates range from 1.9 percentage points to 6.7 percentage points.

The conclusion is a big deal because we already knew that a rise in educational attainment positively correlates with increasing geographic mobility. Now we have proof of a causal relationship. Seeking the talent dividend exacerbates outmigration.

The study also highlights the foolishness of talent retention initiatives. Your hometown needs to be a destination for the college educated. Scholars such as the authors of "Hollowing Out the Middle" are offering bad advice. Politicians running on a platform of stopping brain drain are anti-economic development. Concerning migration push factors, institutions of higher education top the list.

Friday, October 22, 2010

Economic Development Paradigm Shifts

It's a tale of two recessions. Pittsburgh and the State of Pennsylvania has their Great Recession in the early 1980s. Similar to the countries that suffered through Asian Financial Crisis, parts of the Rust Belt were prepared to take advantage of the next global reset:

“There’s a new game, a new playbook,” said Bruce Katz, director of the Metropolitan Policy Program at the Brookings Institution. “If you want to play globally today, you better get very specific very fast.”

As a result, he added, “governors keep getting more and more focused, and more and more deliberate.”

States acting as policy incubators, of course, is not a 21st-century invention. The New Deal and Reaganomics grew from governorships, and in the 1980s, Rust Belt states like Indiana and Pennsylvania pioneered a new approach to economic development with expanded financial incentives and public-private partnerships.

These days, predictable ideology is still part of the mix — more Democrats are pushing investments in infrastructure, and more Republicans want broad tax cuts.

But after years of financial struggle for many states, incoming governors now seem determined to create new models that combine evolving versions of the old with novel ideas — almost anything that might work.

“More than any other time since 1982, you will have governors with a clean slate,” said Timothy P. McNulty, a former economic advisor to Tom Ridge, the Republican governor of Pennsylvania from 1995 to 2001. “I don’t think anyone could tell you they know exactly the recipe of economic policies that make sense for this period. We’re going into a reinvention.” ...

... Experts identify two risks to economic development overhauls. The first is that the changes not go far enough, and instead create jobs for campaign donors.

“The danger is that you fall into an ‘I gotta have a program’ mentality instead of really engaging with people who are trying to start companies and see how they do it,” said Mr. McNulty, the Pennsylvania economic adviser.

I believe the article is quoting this McNulty:

McNulty joined Carnegie Mellon in January 2003 after 8 years in the Administration of Governor’s Tom Ridge and Mark Schweiker-serving in the Department of Community and Economic Development as Executive Deputy Secretary and Acting Secretary and as Deputy Chief of Staff to the Governor for Technology Initiatives. McNulty directed the design and implementation of Governor Tom Ridge’s Digital and Life Sciences Greenhouses, the Governor’s $2 billion investment in biotechnology and participated in Governor Ridge’s success in restoring commercial shipbuilding at the Philadelphia Shipyard. McNulty led the Pittsburgh Regional Revitalization Initiative in 1994 for the Allegheny Conference on Community Development. He is a member of the board of the Commonwealth of Pennsylvania’s Tobacco Settlement Investment Board and the board of Innovation Works. McNulty also volunteers as a board member of a number of technology and education related organizations, including the Pennsylvania Assistive Technology Foundation, the SciTech Spectacular, Asset Incorporated, and the Pennsylvania Learning Network.

McNulty holds a bachelors degree in Political Science from Indiana University and a Masters of Arts in Public Policy from the University of Illinois at Chicago.

Many months ago, I had lunch with McNulty to discuss my diaspora networking ideas. He talked about his experience with the City of Chicago and its renaissance. At that time, I had no clue that Pittsburgh was already a famous economic redevelopment model. Even more recently, I wouldn't have put Pittsburgh's comeback in the same universe as Chicago's. I'm now confident that the next decade will be a lot brighter in Pittsburgh than in Chicago.

At the state level, Pennsylvania appears poised to storm (relatively speaking) out of the recession still evident in the unemployment numbers. As the United States (as well as the rest of the world) finds a new economic baseline, I expect Pennsylvania to be well ahead of the curve. This is a result of all the work that came before the last downturn. In most places, the situation is historically bad. In states such as Oklahoma, the reshuffling of the deck is welcome news.

We will see many more states and metros pick up Pennsylvania's and Pittsburgh's "playbook". If you don't want to wait for the turnaround, then you know where to move. Until then, keep an eye on Dan Onorato:

Can putting new businesses closer to universities — or financing them with public money — help create another Google?

Meg Whitman, the Republican candidate for governor in California and a former chief executive of eBay, is one of at least a dozen candidates with that idea. It is not a radical thought, considering that some of the most successful job creation policies of the last few decades have come from partnerships among government, colleges and businesses, according to experts. Pennsylvania’s Ben Franklin Technology Partners, they say, is a model of how to help fledgling companies grow.

As a result, many incoming governors are looking to tighten the bond between education and entrepreneurship.

They are pushing to apply business concepts to public education, either with new curricula focused on innovation, or by shutting down schools that fail and tying teachers’ pay to student achievement — a proposal from Mr. Snyder in Michigan, among others.

They are pushing in the other direction, too: directing universities to become incubators for new companies, and directing community colleges to give students skills for hard-to-fill jobs.

Ms. Whitman, for one, would create “economic opportunity zones” at the state’s universities, with incentives for companies that take root near campuses. Mr. Snyder wants laid-off auto workers to be taught how to start businesses of their own, while Mr. Branstad, who was governor of Iowa from 1983 to 1999 before becoming the president of Des Moines University, has said he wants to create an “entrepreneurial mindset” in every grade, starting as early as kindergarten.

There is also broad support for continuing or expanding the various public-private venture capital funds that have sprung up across the country to finance start-ups, especially in life sciences.

Dan Onorato, the Democrat running for governor in Pennsylvania, has proposed a new pool of competitive funding for university research, in addition to increased support for the Ben Franklin Partners, and what he calls the Pennsylvania 100, a group of entrepreneurs-in-residence at the state’s most promising research labs.

As is often the case in today's world, the rich get richer.

Burgh Energy Report: More Shale Gas Geopolitics

Just for the record, Kathryn Klaber (Marcellus Shale Coalition) on the geography of shale gas investment capital:

Yet as our production expands in Pennsylvania, the competition for the critical capital needed to produce a Marcellus well — each requires about $4 million — grows stronger and fiercer by the day. Other shale gas-producing states — particularly Texas, Oklahoma, Louisiana and Arkansas — want those investments, and those jobs, just as much as we do.

But we’re not just competing with other states for these opportunities. Poland, China, Canada and other foreign nations are working aggressively to secure the capital needed to expand their energy production, too. There’s a reason officials at the Kremlin read news clips from the Marcellus region every morning — and it’s not because they’re looking for coupons.

It’s no secret that our elected officials in Harrisburg are considering a new tax on shale gas production. Unfortunately, some don’t seem to understand that global competition for capital will react to the magnitude of the tax, evidenced by their consideration of a tax that would be the nation’s highest and least competitive.

Nothing scares away investment like uncertainty. Yet the unresolved tax issue in Pennsylvania hasn't frightened away dollars. No one seems concerned that the senate GOP leadership has pushed deliberations into next year. The outcome doesn't matter.

AB also said that either Russia/Asia could deliver the gas on time, still insisting on the old canard that the EU will force the lights out by 2016 when coal has to close. No mention of US LNG imports, apart from saying "under some circumstance gas could play a major role as a bridge fuel" and "I hope you're right".

All in all, it was uncertainty and risk all round, unless of course the customer dips in and pays any amount of levies for security of supply. Which he still seems to believe that we have!

He seemed concerned that LNG import facilities won't get funded, worried about Turkmenistan can't supply gas, stressed how Nabucco would be insecure, and the sky is generally falling.

Doubts abound over LNG, said it was a forecasting nightmare from Japan and Korea (although the International Energy Agency seems to handle it OK) and said that LNG was more expensive than pipe, which just ain't so.

Shale had the same old issues Gazprom digs up: Lengthy timeframe (15 years!), cost and the environment and technical issues.

Same old, same old and the mainstream media: no where to be found.

The above is via Burrito Bites, which I'll plug again as a must-read blog for SW PA. AB stands for "Alistair Buchanan of Ofgem" and the picture painted is particularly dire for investment in European shale gas. By comparison, the Marcellus Play is a slam dunk. Dollars are not going to run from Pennsylvania to Poland.

At this juncture, I wouldn't trust anything coming from the Marcellus Shale Coalition. It's all deception and misinformation, an army of straw men. The golden goose isn't likely to migrate for another quarter of a century.

Thursday, October 21, 2010

Eastern Rust Belt Financial Employment Picture

An update of sorts on the suggestion that NYC financial talent move to Cleveland and be sure to read the comment from a reader. Dow Jones Newswires has the latest on regional banking:

PNC Financial Services Group Inc. (PNC), a clear winner of the financial crisis, reported a wider quarterly profit but said it is seeing "tepid" loan demand from borrowers. The Pittsburgh-based lender, which is one of the biggest U.S. regional banks, earned $1.1 billion, or $2.07 a share, in the quarter, up from $559 million a year earlier. PNC booked a lump-sum gain of $328 million from selling an investment-servicing business and released $128 million in unneeded reserves for loan losses.

Shares in PNC were recently up 1.1% to $53.34.

I'd call the entire Pittsburgh region a "clear winner of the financial crisis".

TechBelt Tidbit

In yesterday's Wall Street Journal:

More Detroitburgh News

Related to my most recent post about rethinking regional economic geography, WDUQ News reports:

Four European professionals are visiting Pittsburgh this week as part of the Marshall Memorial Fellowship of the German Marshall Fund of the U.S. The program sends the fellows to the U.S. for a month to visit several cities.

Read my post (linked above) to understand the reference.

Wednesday, October 20, 2010

Pittsburgh Expatriate Network On Facebook

Facebook page.

We also have a Twitter feed.

Lastly, help us map the Burgh Diaspora.

Where The Jobs Are: Cleveland

I want you to read (via Rust Wire) why Hamilton, Ontario is cool. It is a "I'd rather live in a Rust Belt Chic urban environment than in Creative Class Toronto" kind of story. I've written the following before, shrinking cities are the new It Girls.

Along comes this humorous paragraph from the Wall Street Journal:

New York Bankers May Want to Move to Cleveland: “A contact in the financial industry notes that employment continues to drift down, as the pace of layoffs appears to have picked up a bit lately; some financial firms are reported to be in the market for lawyers and accountants but are not hiring much in other areas. Moreover, recent weakening in revenues is said to be constraining compensation at these firms, and year-end bonuses (typically paid out in January) are projected to be lower than this past year,” the New York Fed reported. But the Cleveland Fed was more upbeat on the sector, saying “several bankers noted that they have slowly increased their payrolls during the past few months.”

I suspect Real Time Economics has tongue firmly planted in cheek. But the bit of optimism deserves a map.

The blurb from the report concerns the entire Cleveland Fed region. Regardless, finance is up in the Eastern Rust Belt and down in New York. Symbolically, it is a move from Toronto to Hamilton. The Great Rust Belt Reset continues.

Is Pittsburgh Turning Japanese?

If demography is destiny, then Pittsburgh is screwed. Reading the tale of Japan's economic woes in the New York Times had me wondering if Southwestern Pennsylvania was heading down the same path. Mainly, I am concerned about the aging population and lack of immigration. The story of demographic transition:

The connection between a society's wealth and its demographics is cyclical. At first, with fertility declining and the workforce aging, there are proportionately fewer children to raise and educate. This is good: It frees up female labor to join the formal economy and allows for greater investment in the education of each remaining child. All else being equal, both factors stimulate economic development. Japan went through this phase in the 1960s and 1970s, with the other Asian countries following close behind. China is benefiting from it now.

Then, however, the outlook turns bleak. Over time, low birth rates lead not only to fewer children, but also to fewer working-age people just as the percentage of dependent elders explodes. This means that as population aging runs its course, it might well go from stimulating the economy to depressing it. Fewer young adults means fewer people needing to purchase new homes, new furniture, and the like, as well as fewer people likely to take entrepreneurial risks. Aging workers become more interested in protecting existing jobs than in creating new businesses. Last-ditch efforts to prop up consumption and home values may result in more and more capital flowing into expanded consumer credit, creating financial bubbles that inevitably burst (sound familiar?).

The part that stands out to me is the increasing numbers of females in the workforce and less children to educate. That reminds me of Pittsburgh's recent history and the impressive gains in educational attainment. The region is, demographically, akin to China and on the road to becoming Japan (the second paragraph). The analogy isn't perfect, but the stated risks are palpable.

The wildcard is immigration. Japan's xenophobia is infamous. So is Pittsburgh's parochialism. I think either could be overcome. I'm not sure that's a practical solution. From the above article about global demography:

The trick will be restoring what, in the days of family-owned farms and small businesses, was once true: that babies are an asset rather than a burden. Imagine a society in which parents get to keep more of the human capital they form by investing in their children. Imagine a society in which the family is no longer just a consumer unit, but a productive enterprise. The society that figures out how to restore the economic foundation of the family will own the future. The alternative is poor and gray indeed.

Demography Matters is skeptical of the proposed policy avenue. I'm optimistic for reasons likely unintended or unconsidered by the author. The issue is framed as a brain drain from the family. What's the return on investment? This is how communities think. For example, Louisiana:

While other states think of development in terms of research centers and technology, Louisiana approaches it in terms of third-world labor. Sutherlin observed that two recent development projects here include $50 million for a chicken-plucking plant and $40 million to make sweet potatoes into French fries. Governor Jindal's office released a letter last year in which it was argued, astonishingly, that we're over-educating people for the Louisiana workforce, a workforce that should apparently consist of chicken pluckers and fry-chefs. Some legislators think the way to reduce high school dropout rates is to reduce high school math and English requirements. Others think that because college graduates leave the state, we should produce fewer college graduates and not train the ones we do produce to the point that out-of-state employers would want them. TOPS, a state scholarship program for our best students, is in budget-cutters' cross hairs. My university has eliminated programs in chemistry and physics, among others, as its budget has been cut nearly in half over the last three years. Who needs science, anyway? Not chicken pluckers. Mathematics was on the chopping block (math!), excessive numeracy being something we want to avoid.

Polemics aside, metros and states essentially make the argument that we shouldn't invest in education when they talk about brain drain. If sending more educated adults out into the world to succeed had greater returns for the homeland (i.e. family), then we would have more children. We'd invest more in human capital. Convincing people who have no kids in the area to pay more taxes for schools is a tough sell. The typical response is Border Guard Bob. Obviously, Bob isn't a game-changer.

Diaspora networking is a game-changer. We can't afford to ignore the demographic and economic opportunities embodied in expatriates. That doesn't mean giving up on increasing immigration to the region. On the contrary, it means using the diaspora to attract foreign born talent. Appropriately, China has the same potential. Its best and brightest are scattered all over the world. That talent migration is a check against graying of the country. Both China and Pittsburgh are fortunate to have such an asset.

Tuesday, October 19, 2010

Talent Migration And Churn

One of my readers encouraged me to go back and read the Pew Trusts report about Philadelphia migration. He noticed something about Pittsburgh in the section concerning regional churn:

In 1997, for instance, 74,014 people either moved into or out of Philadelphia, according to the data. In 2008, the number was 94,346, a 27 percent increase. Even so, the overall churn rate—defined here as the number of movements in and out divided by the overall population—was still only 6.1 percent, a lower figure than in many other urban jurisdictions.

Figure 6 compares Philadelphia’s churn rate to 14 other large, urban jurisdictions, some of them cities for which IRS data is available (it is not available for most cities), some of them counties containing major cities and some of them combined city/counties. Numbers for New York City were calculated by combining the results of its five counties/boroughs.

Philadelphia’s rate of 6.1 percent ranked 11th among these jurisdictions and was below the median of 8.3 percent. Denver, which is a city/county, had the highest turnover rate at 17 percent. Los Angeles County had the lowest at 4.5 percent.

Cook (Chicago) and Allegheny (Pittsburgh) counties were tied for 13th with a churn rate of 5.2%. The reader who passed along the rink found this surprising. I have the same feeling. I think of Chicago as a high churning global city.

I think turnover of talent is vital for any region's economy. I had the impression that churn is a Chicago asset. I predict that Pittsburgh's churn rate will improve. I'm pessimistic about Chicago, a city struggling to grow its numbers of college educated workers.

Choose Pittsburgh!

From cityLIVE!:


In Spring 2010, Huffington Post listed Pittsburgh as their #2 pick on their Best Cities for the Newly Graduated list. “Pittsburgh seems an unlikely place for a renaissance but the city escaped the recession relatively unscathed and is moving forward in many areas”, Huffington said. “Besides having bustling education and health care sectors, the city is also generous with arts initiatives.”

What is it that motivates young people to choose a city? Is it employment opportunity, cultural diversity, cost of living or quality of life? What is it that Pittsburgh does well, and what could we be doing better? How do we become everyone’s #1 pick?

Join cityLIVE! as a panel of local experts discuss why we need to be picked, what criteria young (or old) people use when selecting a city to live in, and how Pittsburgh might become more competitive in attracting and retaining young and talented professionals in our region.

Our panelists include Jim Russell, co-founder and chief strategist of the Pittsburgh Expatriate Network (PEN), Regina Koetters, an urban redevelopment consultant who chose to relocate to Pittsburgh, and Luis von Ahn, a professor in the Computer Science Department at Carnegie Mellon University. Jessie Schell, CEO and founder of Schell Games will moderate the anticipated lively discussion.

Don’t be square, be there!

Global Brains Pittsburgh

Some Burgh bragging rights from Richard Florida:

Research universities increasingly function as a key hub institution of the knowledge economy – from Stanford University’s role in Silicon Valley to MIT’s role in greater Boston’s Route 128 high-technology complex, from the University of Texas in Austin to the rise of the North Carolina Research Triangle, not to mention Carnegie Mellon’s role in Pittsburgh’s regeneration. But what are the world’s leading centers for university research? ...

... The U.S. is home to four of the top five centers: Boston-Cambridge in first place, followed by Los Angeles, New York City, and San Francisco. Other leading U.S. research centers among the top 25 include: Chicago (6th), Durham-Chapel Hill (11th), Pittsburgh (13th), Trenton-Central New Jersey (14th), New Haven (17th), Ithaca (18th), San Diego (19th), Philadelphia (20th), Seattle (21st), Madison (22nd), and Baltimore (23rd).

But a number of foreign centers rank quite high. London (5th), Paris (7th), and Zurich (8th) all rank ahead of San Jose/Silicon Valley (9th). Cambridge, England is 10th, Munich 12th, Stockholm 15th, Oxford 16th, and Tokyo 24th. Toronto, where I teach, ranks 28th.

I'm a bit surprised (and impressed) that Pittsburgh ranks higher than Philadelphia. Between the East Coast and Chicago, Pittsburgh is THE center for the knowledge economy. It's one of the main reasons I'm so bullish on the region.

Rust Belt Immigrant Networking

For the foreign born, some Rust Belt cities are off the map. Pittsburgh in particular struggles to attract immigrants:

According to preliminary statistics compiled by the U.S. Census Bureau, growth of Hispanic-owned businesses in Pennsylvania followed the national trend of rapid growth among minority-owned businesses between 2002 and 2007. In that time, the state saw the number of Hispanic-owned businesses double.

But Pittsburgh has seen little of that increase.

"This area is a great area, but it takes its time embracing new things and getting things done," Mr. Diaz said. "We have everything here.

"It's amazing how some of these folks, in Jersey in particular and Baltimore, they really don't know about this place."

Increasing immigration to Pittsburgh isn't easy. Policy changes are federal and hotly contested. What can regions do?

To combat regional "brain drain," TiE Ohio is piloting a program for international students to help them connect with the community through internships, jobs and projects. "We are creating "hooks" for them so that eventually they can stay and prosper in northeastern Ohio," she said.

Generating more networking opportunities is a good idea. So is improving tolerance and acceptance among natives. Yet I would critique the focus on retention. The main problem is being off the map. The game is one of attraction:

To London to a British Council workshop on Brazil. The intent is to produce more links between British and Brazilian universities. This event comes hard on the heels of another event with which I was involved: a meeting of the vice-chancellors and rectors of all Latin American universities sponsored by Banco Santander which took place in Guadalajara and to which a number of British vice-chancellors were invited.

The higher education industry is instrumental in bringing immigrant talent to Pittsburgh. But that's not the point I want to make. It's the secondary migration to Eastern Pennsylvanian cities such as Reading. Pittsburgh needs to produce more links with immigrant communities in Baltimore, DC and Philadelphia. Such an initiative would not require reform of current immigration policies. We have to actively promote Pittsburgh in these places.

For the likes of Global Pittsburgh and Global Cleveland, that's the ticket to increasing immigration and worldwide networking opportunities. As a template, I offer the Schenectady Guyanese strategy:

This small city in the Mohawk River valley, where industries built in the early 20th century on the hard labor of immigrants from Italy and Poland crumbled long ago, is in the market for a new ethnic group.

The mayor has found one, and he is doing everything short of packing up their homes in New York City and driving the moving van to get them here.

They are Guyanese immigrants living in Queens, Brooklyn and the Bronx, and since May, Mayor Albert P. Jurczynski has gone to rather unusual lengths to persuade them to move to his struggling city of 62,000 people.

He is their guide on a weekly bus tour that brings dozens of Guyanese immigrants here every Saturday for a three-hour tour of the city. He takes them to Schenectady's own Central Park for ice cream cones. He takes them to his in-laws' house for homemade wine. He promises to build them a cricket stadium one day, to personally review all their r´sum´s, officiate at their weddings and learn to love their spicy soups.

He has given out his cellphone number on a New York radio show that is popular among Guyanese immigrants. He makes regular trips to Richmond Hill, Queens, the city's largest Guyanese neighborhood, where he walks along Liberty Avenue practically demanding that everybody move to Schenectady on the double. He flatters the merchants, buys Guyanese products and dines on braised bass, curried goat and 15-year-old Guyanese rum.

"Let me ask you something," the barrel-chested mayor boomed through a microphone as a bus filled with 43 visiting Guyanese immigrants rolled away from Schenectady City Hall on a Saturday in July. "Bloomberg, down in New York City, would he be doing this? For that reason alone you should move to Schenectady."

His plan is working. From the time last year that Mayor Jurczynski (pronounced jur-ZIN-ski) heard there was a a small Guyanese population in his city, some 2,000 have moved here, according to Schenectady officials, with each weekly bus tour bringing more. They are buying dilapidated or condemned homes — some for as little as $1 — and fixing them up, making plans for restaurants and shops and taking jobs as construction workers and nurses' aides. Most important to the mayor, they are telling their friends and relatives about an obscure and hard-to-pronounce place called Schenectady.

If Mayor Ravenstahl doesn't have the time to drive down to predominately immigrant neighborhoods in DC, then I recommend sending Border Guard Bob. Anything to distract him from spending time (and money) trying to keep the foreign born from leaving Pittsburgh.

Monday, October 18, 2010


That Detroit is looking to Pittsburgh instead of Chicago deserves to be repeated. Also, keep in mind my somewhat cryptic previous post. The Brookings Great Lakes megaregion is being split in two. To the west, there is Greater Chicagoland. To the east, you'll find something half-baked centered around a Detroit-Cleveland-Pittsburgh axis. Think of it as the liminal space between Chicago and New York.

I'm seeing the above urban troika turn up more frequently regarding Rust Belt revitalization. The German Marshall Fund is providing the framework for this emerging megaregion:

In 2010-2011, the Cities in Transition Initiative will focus on the challenges that arise from physical transformations occurring in a built environment that has been left behind by rapidly shifting settlement patterns. In cities in the United States’ Rust Belt and elsewhere, trends of decreasing population and suburbanization have sapped the vibrancy of many core city neighborhoods, leaving them vulnerable to blight and not dense enough to support a healthy civic life. Leipzig, Germany, which faced a similar population shift between ten and twenty years ago following the reunification of Germany, is well known for success of its targeted strategy of “shrinking in order to grow.” Participants in the first year of the Cities in Transition project will examine this strategy, other local practices and successful European policies closely in order to draw out and implement key elements that can contribute to addressing the complex challenges surrounding vacant properties and other land use issues in their own communities.

Participants in Year One programming will be selected from Flint, Detroit, Youngstown, Cleveland, and Pittsburgh with an emphasis on developing a strong, diverse group of political, business, non-profit, and philanthropic leaders with a high potential for effecting change. Additionally, recognizing that pioneering initiatives at the municipal/regional level must be complemented and supported by federal leadership, staff from relevant federal agencies will also be invited to participate.

The initiative will be guided through its three-year implementation period by a group of key stakeholders representing place-based foundations, civic organizations, policy organizations, and project funders with the goal of constructing a sustainable network of leaders from these cities in transition. Project activities will also be guided and coordinated by a senior fellow each year whose deep expertise and regional networks will contribute high-level policy analysis and help ensure that the lessons learned from European cities can be and are translated into innovative new policies in the participating U.S. Cities. In 2010-2011, the Cities in Transition Fellow is Lavea Brachman, Executive Director of the Greater Ohio Policy Center.

I doubt Global Detroit, Global Cleveland, and Global Pittsburgh getting together is a coincidence. Furthermore, the upcoming election hinges on how voters in this megaregion swing:

The latest shift back toward Republicans is part of a 40-year oscillation in the old Rust Belt corridor stretching from West Virginia through western Pennsylvania, and into Ohio and Michigan. It is a region where you see a billboard saying "End the Marxist Occupation of Washington" on I-79 south of Erie, and where you hear embattled Democrat Gov. Ted Strickland of Ohio bragging in radio ads that the National Rifle Association has endorsed him.

This might be America's heartland for brain drain anxiety. Border Guard Bob is patrolling a vast territory lately. I'm surprised at how well the geography hangs together. There seems to be an Eastern Great Lakes sensibility that is distinct from Richard Longworth's Midwest captured in his book, "Caught in the Middle".

Roughly, the Eastern Great Lakes is the area that defines itself as "Not Appalachia", a tension you can find in Michigan (e.g. Ypsitucky). The cities are a bit too far from Chicago, but separate from the East Coast thanks to the mountain range(s). Functionally, Pittsburgh acts as a liaison to America's largest megalopolis.

Keep an eye on this region. I expect to read and hear more about it in the near future. I'm looking forward to deepening connectivity between Pittsburgh and Detroit.

Global Midwest

A new megaregional economic geography is emerging:

Brain Report: Ohio Grants for Grads

Ohio's latest brain drain boondoggle is back in the news. The Grants for Grads program has been a bit of a disappointment. Still, Governor Ted Strickland is tying himself to the initiative in a bid to win reelection:

"Grants for Grads is one creative way to encourage talented young people to call Ohio home, but it's only one way," Gov. Ted Strickland said.

Recent college graduates won't buy a house in a community if they don't have a job, Strickland said. He said other state programs are aimed at encouraging job-creation.

The home-buying program offers a grant worth up to 2.5 percent of the purchase price and a lower interest rate on a 30-year loan. To be eligible, applicants must have earned a college degree within the past 18 months and have graduated from an Ohio high school. The college degree can be anything from an associate to a graduate degree from a school inside or outside the state.

The money can be used toward a down payment or closing costs. It doesn't have to be repaid as long as the buyers live in Ohio for five years. If they don't, the state uses a lien on the house to recoup money.

Since last October, 120 recent college graduates have received assistance through the program. Of those, 90 percent have been between the ages of 20 and 30. The majority - 83 percent - have been white. And more than half had credit scores above 700 points, which is usually considered good enough to get borrowers more financing options and better interest rates, said Cindy Flaherty, director of homeownership for the Ohio Housing Finance Agency, which operates the program.

As of last week, the agency had invested $329,218 in the program, which is paid primarily through the issuance of tax-exempt mortgage-revenue bonds, Flaherty said.

Participants on average received $3,076 in down-payment assistance and paid $120,205 for their homes, she said.

I'm trying to figure out how Ohio can measure success. What if those who used over $300,000 in state money would have stayed regardless? I'm sure real estate agencies are in love with the subsidy. I smell quid pro quo in terms of campaign contributions.

Fighting brain drain is also popular with the voters. Strickland knows this. Neither party is above serving red herring to the public. It's bad policy and Ohio deserves better.

Talent Migration Tidbit

Might be indicative of nothing (I know someone who moved from Pittsburgh to Detroit for employment reasons):

Bernero is talking to students about his plan to revitalize Michigan cities and revive Michigan's sagging manufacturing sector, said his spokesman, Cullen Schwarz.

He noted that Democratic lieutenant governor hopeful Brenda Lawrence, the mayor of Southfield, has a son whose job was recently transferred from Michigan to Pittsburgh.

The brain drain rhetoric is big in the Michigan political campaigns. Also, I've seen a lot of focus on young adults leaving the state in the Wisconsin races. But a job migrating from Michigan to Pittsburgh is a different story.

Saturday, October 16, 2010

Announcing Pittsburgh Expatriate Network

I'm involved in a new diaspora networking project, the Pittsburgh Expatriate Network (PEN). My blog is a catalog of diasporas, both domestic and international. I intend to use what I have learned for the benefit of PEN and Southwestern Pennsylvania. More about PEN soon enough, but I wanted to offer a remark or two about an article that I've noticed making the rounds:

Launch a state marketing campaign — Project Boomerang — to bring back skilled Oklahomans who left to seek out the bright lights of bigger cities.

Oklahomans who departed after college or high school often feel homesick — and open to the sales pitch — as they get older and start thinking about buying a house or starting a family. "Oklahoma is one of those places you have to come from to think it's beautiful," says Jamey Jacob, professor of mechanical and aerospace engineering at Oklahoma State University.

Rod Whitson was lured back three years ago to run an Oklahoma City bank after working in Los Angeles for 10 years. "After a while you kind of burn out on the traffic, you burn out on all the people, you burn out on the cost of everything," he says.

That's from a story concerning Oklahoma's recent economic boom. I covered that about a month ago with a focus on the good times in the state capital. I copied and pasted the above part about returning expatriates as an example of the various initiatives I have been tracking over the last four years. There's a lot of low hanging fruit for places not associated with a rush of inmigration.

The key to seeking any talent dividend is shifting the conversation away from traditional thinking about brain drain:

Some critics of Hollowing out the Middle claim that raising achievers so that they want to stay is condemning them to lives of unfulfilled expectations. To these critics, achievers can only “achieve” if they go to the city. While I disagree with the argument that human talent has to leave its roots in order to achieve its full potential, I don’t want to see talent settle into lives of mediocrity either.

Such thinking is doomed to failure. As Mike Madison recently wrote:

The game plan has to be *attract* people to Pittsburgh. Attract their energy, their enthusiasm, their passion, their ideas, and their money. Let the college grads go away. Some of them will come back. The rest become part of the Pittsburgh Diaspora.

Amen. The same goes for rural communities. Trying to keep achievers from leaving is not only foolish, it is wrong. It is fundamentally anti-economic development. That's why PEN makes so much sense. Don't write off talent that leaves. Work with the flow instead of against it. What benefits the individual can also benefit the community.

Fueling Pittsburgh Prosperity

Acting as the seat for state government or employing a substantial federal workforce is a huge advantage for any regional economy. That's why I cock an eyebrow when cities such as Madison, Austin or even Indianapolis sport robust metrics. Thus, I find the following rankings to be of great interest:

In Thomas' analysis, teachers and other public-school employees are counted as government workers, but not military personnel.

Of all 100 metro areas analyzed by Thomas, Sacramento, California's capital, ranks highest in its percentage of government workers, 28.82 percent, followed by Bakersfield, Calif. (25.21 percent) and Madison, Wis. (24.04 percent). Washington, D.C., ranks 10th (22.51 percent).

At the other extreme are Grand Rapids, Mich. (8.99 percent government jobs), Pittsburgh (10.4 percent) and San Jose, Calif. (10.66 percent).

We'd expect Madison and DC to do well. Pittsburgh is a real surprise. I should note that there are more than a few state capitals in the bottom 20% for percentage of government workers. I mainly bring this up because more than a few people have linked Pittsburgh prosperity with government largess. Considering all the disadvantages, Pittsburgh has done remarkably well.

Burgh Energy Report: Taxing Marcellus

I'll start off with some news about shale gas drilling in the near term and expectations about the Pennsylvania severance tax debate:

Chesapeake is opening a data room for its Niobrara acreage this month and expects a joint venture deal to be in place by the first quarter of 2011. The firm's expected monetization of a portion of its Marcellus acreage appears to have been delayed, however, with timing on resolution uncertain at this point. Additionally, Chesapeake guided to approximately $2 billion and $1 billion in production sales in 2011 and 2012, respectively. The firm noted that it will continue to push hard on drilling activity in its shale gas plays over the next 12-18 months--especially the Barnett, Haynesville, and Marcellus regions--not only to achieve held-by-production status, but also to meet takeaway minimums and partnership obligations. We continue to view Chesapeake's partnerships as an overall negative fundamental factor for U.S. natural gas prices through 2012. Finally, a quick point on Marcellus: based on Chesapeake's recent meeting with Governor Rendell, the firm doesn't expect a resolution on Pennsylvania severance tax issues until the first part of 2011 at the earliest.

Despite looming political uncertainty and continued low natural gas prices, Chesapeake isn't slowing down. Drilling companies don't appear to be too concerned with the outcome of the tax debate. I'm certain that the drillers (and the investment dollars) are in Pennsylvania for the long haul. One reason (via Chris Briem) is the lack of new opportunities (i.e. alternatives to the PA Marcellus):

"If you decided, I'm going to pass on the Barnett, pass on the Haynesville, pass on the Marcellus, and you were going to wait for the next four or five--there won't be any," McClendon said Wednesday during the company's annual meeting with analysts, referring to tight, hydrocarbons-rich rock formations in Texas, Louisiana and the U.S. Northeast, respectively. "By the end of 2011 it will be over. There won't be any basins that have escaped investigation." ...

... McClendon said Chesapeake will continue to court joint venture partners for its interests, including those in the Niobrara shale in northeast Colorado and the Permian Basin in west Texas. And Chesapeake may sell its expertise to other companies considering shale plays overseas. But Chesapeake isn't planning any foreign investments, McClendon said.

"We aren't going to Poland, we aren't going to Canada," he said. "In terms of spending Chesapeake capital overseas, I don't see it."

The are not the words of a CEO worried about being taxed out of Pennsylvania. Geopolitically speaking, there isn't a rush to exploit new plays in developing markets such as Poland:

The most important shift, however, is not on land but at sea. The big worries over European energy security came when the world gas market was tight. But the price of LNG has plunged, chiefly because America, now well supplied with shale gas, has stopped importing it. Nabucco remains important as an insurance policy, and as a sign that the EU’s common energy policy is more than talk. But it also looks like an answer to a problem that technology and the market may already be solving.

The improved gas line infrastructure for Europe is moving forward and LNG demand in the United States looks to be nil for years (decades?) to come. Canada also has a well-established natural gas supply. Which brings me to the other consideration in divining the state of the PA energy economy after the tax is levied, price:

But in just a few years, a number of shale gas fields around the country are suddenly producing gas, including the Barnett field in Texas, the Fayetteville field in Arkansas, the Haynesville field in Louisiana and the massive Marcellus field that stretches from Western New York through Pennsylvania, Eastern Ohio and West Virginia.

While these developments are almost certain to boost U.S. gas production for years to come, they will have little effect on imports of foreign oil, at least in the short term. There are proposals to use more natural gas as a transportation fuel, but it is now used mainly to generate electricity, heat homes, and as an industrial feedstock.

A recent study by the Massachusetts Institute of Technology on the future of natural gas found that 80 years’ worth of global natural gas consumption could be developed profitably with a gas price of $4 or below.

Plans for nuclear plants and wind farms were made under the assumption that gas prices would average $7 to $9. At that level, electricity prices would be high enough to make wind and nuclear power look affordable. Now many of these projects suddenly look too expensive.

If the market tightens up considerably, then nuclear power and wind come back as a serious alternative to coal-fired electricity. The key is the MIT study and how low prices can be with hydrofracking offering a positive margin. We now know that the Marcellus Play is among the cheapest to exploit and the most productive compared to other US plays.

Investment in Pennsylvania is not going to Poland. That's an absurd claim. There's going to be a lot of drilling in the Marcellus. It seems unlikely to blossom in New York State. I'm not sure if other Marcellus states offer enough of an alternative policy geography (not to mention well productivity) to be a chip that industry can use to push PA politicians. The words from the Chesapeake CEO along with the ridiculous claims emanating from the Marcellus Shale Coalition (the barking dog with no teeth) suggest that there is no such leverage forthcoming.

The tax debate is about how much profit companies such as Chesapeake will reap in Pennsylvania. It isn't a matter of whether or not they will drill in the state. The investment will continue to pour in because an unexpected rise in prices will produce major windfalls and the other options (e.g. Poland) are not attractive. Finally, much of the investment is already in place. Pennsylvania is already playing with the dealer's money.

Friday, October 15, 2010

Rust and Roadsides: A Trip Through the American Dream

The Rust Belt Chic aesthetic is becoming more clearly defined. Three articles about the journey two artists (Joseph Paquet and John Cosby) are taking to capture the splendor of the Rust Belt that Levi's hopes will sell jeans. What they hope to find:

Both artists have their niche – Cosby is drawn to roadside Americana, Paquet to industry. By pooling their talents together on road trips to areas of the Rust Belt they hope to catch the remnants of the American Dream.

“There’s something beautiful about the authenticity of things,” Paquet said. Landscapes where people live right next to industry are fading, he said, as cities become more sanitized.

Again, we see the theme of authentic versus sanitized. It's like taking the common critique of suburbia and applying it to the urban boomtowns. The sense of place is wanting. More from the painters:

"You know, it's getting beat up by the weather, trying to find a place to paint where you're not standing in the middle of the road and every place has a character that's very unique," said Joe Paquet, an artist out of St. Paul, MN.

They plan to put together a traveling museum after spending three years creating memories that will last longer than the Rust Belt structures that inspired them.

"In a very short period of time they'll be gone so if I can get a record of this, that would be a pretty wonderful thin," said Paquet.

The Twin Ports is the first of several stops on their way to New York, but their stay has become longer than planned.

"So right here in this one spot we got everything we were really looking for across the rust belt all in one area with the old grain mills, the steel mills and the coal docks and the ships and the tugs and the people and the diners altogether," said John Cosby, an artist from California.

If you haven't guessed, the two are starting out in the Iron Range. A glimpse of a few of the subjects:

Joe Paquet set up his easel facing south, toward the now-defunct Globe Grain Elevator in Superior. He painted using industrial gray colors.

About 30 feet away, across a gravel drive, his partner in paint John Cosby had taken the northern view of this spot on the property that now belongs to Wisconsin Woodchuck, which is salvaging the elevator’s old wood. Cosby, who favors roadside scenes and visually busy spaces, was capturing buildings, a red truck, a crane and the Blatnik Bridge. ...

... They plan to spend a week and a half in the area, getting in about three paintings a day. On Thursday morning, Paquet painted a bar scene on Tower Avenue. He works sitting at a wood easel with the look of an old school desk. Cosby had painted the Winter Street Depot. He has a tripod, with a wooden palate where colors overlap each other. They work with oil paints.

Is this more ruin porn? Are the emotions that these landscapes elicit somehow debased? The more important question: Why are artists interested in these examples of blight and decay?

Thursday, October 14, 2010

Rust Belt Chic Television

More television shows are locating their sets in unexpected locations. The implied cultural shift is from cosmopolitan fantasy to parochial authenticity. The visual landscape is Rust Belt Chic:

[Little-used locales] can also bring the funny, as in Greg Garcia's redneck version of Any Town, U.S.A., made famous in his NBC sitcom, "My Name Is Earl." His new Fox series, "Raising Hope," has a similar scruffy feel, populated by tough-talking, blue-collar characters.

"A show like ' Entourage' is lifestyle porn, and I understand why people get into that world," Garcia said of the Hollywood-centric HBO comedy. "But I like places that feel more real to me. I like quirky."

He wrote the "Raising Hope" pilot while he was in western Michigan and envisioned those small towns as the setting for the story of a young father and his family who unexpectedly find themselves rearing an infant. He doesn't name "Raising Hope's" hometown, but viewers will surely understand that it's not an urban, sophisticated backdrop.

"Real" and "quirky" are attributes Anthony Bourdain admires in a foodie geography. I see shrinking city urbanism everywhere I look. Ironically, Cleveland is in and Miami is out.

Yesterday's "Cool Cities" are today's clichés. The urban amenities we want are not what Richard Florida is still selling. Yet almost every industrial metro has yet to figure this out.

Wednesday, October 13, 2010

New Geography Of American Prosperity

A reader emailed to me a link to this article about personal income growth and asked me to react (i.e. offer my thoughts). looked at data for the time period 1984-2009. Surprisingly (at least to me), the results outline a contiguous region of booming prosperity:

The best markets for income growth, according to the study, lie in a broad swath from the Middle Atlantic region to the Southwest. Right behind El Paso in the national standings are Baton Rouge, Baltimore, Virginia Beach-Norfolk, New Orleans, Pittsburgh, Oklahoma City, Little Rock, and Jackson, Mississippi.

The only exception to this geographic rule is the 10th-place finisher, Honolulu.

These markets have shown remarkable stability during the current recession. Five of the top-10 metros actually managed to boost their per capita incomes between 2008 and 2009. Only five of the study’s other 90 metros could say the same.

I assume Pittsburgh's favorable ranking is why I received the email message. This map obliterates our established sense of economic geography. Reactions to the rankings highlight the paradigmatic challenge:

Make book, folks, the new study from is NOT one that will be touted by the Greater Raleigh Chamber of Commerce, the Research Triangle Regional Partnership or anyone else who touts the capital city metro area as one of the nation’s best.

Raleigh ranks 98th(!!!) out of the top 100 U.S. metro areas over the last 25 years for income growth, says a new study from

Are you shocked? Well, here’s more grim news: Detroit, which is on its way to becoming an urban ghost town in some areas, is 99th.

Dead last is Atlanta at 100.

Charlotte ranks 96th.

Greensboro, meanwhile, is 94th.

Looks as if the “Rust Belt” has spread south.

If the Rust Belt has spread south, then it skipped over Pittsburgh, Baltimore and Virginia Beach-Norfolk. The Rust Belt is dead. As a megaregional geography, it hasn't existed for a few decades. Yet we cling to this abstraction of yesterday's economy.

Robust inmigration has long masked the chronic weaknesses in the US Southeast. The Great Recession pulled back the Green Curtain on the supposed economic miracle. The Southern Growth Policies Board is no guide for the struggling Midwest. Look at Pittsburgh and forget Charlotte.

We've obsessed about migration tales for far too long. "Brain drain" and "voting with your feet" are mythologies that obscure more important economic development factors, reinforcing the false dichotomy of "Rust Belt" and "Sun Belt". These misconceptions handcuff policy efforts. We'd be better off removing them from the discussion.

Tuesday, October 12, 2010

Journalists And Geographic Clichés

Journalists are instrumental in the maintenance of geographic mesofacts. Over the past few years, Pittsburgh has benefited from a deluge of positive press. Some reporters weren't paying attention:

Mr. Biden has been zipping around the country to places like Columbia, S.C., and hard-hit Rust Belt cities like Akron, Ohio, and Pittsburgh, while Mr. Obama has been confining himself largely to friendlier settings like college campuses and big-dollar fund-raisers.

In the world of stereotypes and clichés, "hard-hit Rust Belt" is redundant. The political geography predates the story. We still wonder how the message will play in Peoria. The above New York Times article reads like stock footage.

How much do geographic mesofacts influence political campaign strategies? I would guess that they often trump polling numbers. Thus, Biden instead of Obama visits Pittsburgh.

Cincinnati Does The Pittsburgh

Cincinnati and Pittsburgh are two cities that have a lot in common. Both places are under-appreciated urban gems, sporting dramatic topography and oozing Rust Belt charm. Via Aaron Renn, UrbanOut has noticed Cincinnati "following in Pittsburgh's footsteps":

When you study the economics on how well a region is doing, job growth, net in-migration, and population growth tend to be key indicators that are referenced and drawn upon. While these figures are important in understanding what is happening to your region from the outside-in, I believe they miss a bigger picture of what is occurring from the inside-out. Certainly, for the past 30 years Pittsburgh has been toward the bottom of the pile in terms of job growth, net in-migration, and population growth. And yet, few would disagree that the Pittsburgh of today is poised to become an a lead economic performer for years to come. This success is due to its ‘work with what you have’ and ‘build off existing assets’ attitude. Essentially, this is an inside-out approach to planning and economic development that doesn’t wait on the next big company or thing to come in and save the day. Instead, a city or region pools together existing resources and makes change happen from within. This is what Pittsburgh has done (eds’ and meds’ will be shouted on end from years to come) and in doing so, has provided a great example of how a region can turn itself around from economic collapse.

I emphasized the bit about Pittsburgh's weak indicators of economic health. I argue that the relative success demonstrates the low utility of our metrics. This is the main point I tried to communicate in a guest post at The Urbanophile:

Concerning the 1970 baseline, we would expect Columbus and the Twin Cities to do well over the next four decades. Smart cities tend to get smarter. Pittsburgh bucks the trend, unique among large metros (and not just Rust Belt cities). The result is some of the highest concentrations of college educated young adults in the entire country. As the Boomers leave the workforce, Pittsburgh will emerge on par with Boston, Austin, San Francisco, and Washington, DC In terms of the availability of talent.

The strong performance numbers have been there all along, for anyone who cared to look past the shrinking city title. The fallacy is that population growth indicates economic growth. This is industrial era thinking. New metrics track educational attainment and the migration of the college educated. Pittsburgh does very well on both counts.

Whether or not Pittsburgh offers a unique approach to regional economic development is open to debate. One of the key lessons to be learned from the Great Recession is that our understanding of success needs to change:

Call it the migration bust: Many of the fast-growing U.S. areas during the housing boom are now yielding some of the biggest income drops in the economic downturn. ...

... Whites and blacks have taken big hits since 2007 in once-torrid Sunbelt regions offering warm climates and open spaces, including Florida, Colorado, Arizona and Nevada, according to 2009 census data. Hispanics suffered paycheck losses in many "new immigrant" destinations in the interior U.S., which previously offered construction jobs and affordable housing, such as Tennessee, Georgia and North Carolina.

Substantial inmigration and population gains masked fundamentally weak regional economies. As for Pittsburgh and other Rust Belt cities that have done relatively well during the downtown, decline dominated the headlines. Now, UrbanOut is calling Pittsburgh a "boomtown" and figuring that Cincinnati is next in line.

Pittsburgh. Boomtown. Rust Belt rising.