An interesting new paper by Enrico Moretti and Per Thulin estimates the employment multiplier on job growth in different industries and finds that in America, a new job in the manufacturing sector of a city corresponds to an addition of 1.6 jobs in its non-tradable industries (things like eateries, education and health services, salons, landscaping, and so on). For high-tech employment the multiplier is much higher, however; 5 jobs in non-tradable industries are generally created for each job in high tech. That seems a plausible relationship. Yet when we look at individual cities and regions, we see substantial variation. And what is particularly striking is just how limited the immediate employment impact of Silicon Valley's boom appears to be. From 2009 to 2010, the San Jose metropolitan area economy grew some 13% but employment in the metro area rose about 2%. The Houston metro area enjoyed job creation equally fast on much slower economic growth, of just 1.6%.
Emphasis added. There is something to be said for similar job growth with substantially less economic growth. Take a look at the most recent Brookings MetroMonitor report for Pittsburgh. The region ranks well in terms of job growth. The change in gross metropolitan product (GMP) is noticeably weaker. That would make more sense given the anemic population numbers.
The big picture still looks good. But if you consider the relationship between employment and GMP, then the image takes on a rosier hue. I see pressure for investment dollars to move from over-saturated Silicon Valley to under-appreciated Pittsburgh. Even in the glow of Facebook's IPO honeymoon, the Bay Area is dying.
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