Rust Belt Deorai

The concept of economic refugee is controversial. To relocate for financial gain is a rational choice. Yet seeking opportunity via relocation doesn't mean the migrant wanted to leave. He or she might feel forced to go elsewhere. Subjectively, they are refugees. Objectively, they are run-of-the-mill economic migrants.

Refugee or not, many migrants maintain a deep attachment to the homeland. I see that in the Rust Belt Diaspora, exceptionally so for Pittsburgh natives. That's why when I see a good international diaspora story, I take notes. From Ireland:

The visitors came at the invitation of Ireland Reaching Out, an organization that just put on its first Week of Welcomes after a year spent tracking down the descendants of Galway exiles and preparing for their return.

“The project is based on a very simple idea: Instead of waiting for people of Irish heritage to trace their roots, we go the other way,” said Mike Feerick, who has been leading the charge to rekindle ties between the Irish and their diaspora.

“The people who left Ireland were in some sense the best part of us,” said Stephen Kinsella, an economist at the University of Limerick. “They were the most dynamic, the most ambitious, the most willing to succeed, and we did not give them the conditions where they could succeed.” ...

... “I want Ireland to start thinking of itself not as a physical place, but as a people,” Mr. Feerick said, and he wants it to start acting like it, too, through local projects like the one in Galway.

The last two comments form the crux of my post. The people who left the Rust Belt were the best part of those struggling communities. That's the brain drain problem. The brightest are the most able and willing to leave. Hence, calling myself a "Rust Belt Refugee" is disingenuous. My father's move to improve was a strategic decision.

The second comment is the solution to the brain drain problem. Fixing the Rust Belt on a map is a debate, not a fact. Beyond reproach is someone who identifies with the Rust Belt. You don't have to be born there in order to feel a deep connection to Pittsburgh.

That connection is a pathway for economic development. That's diaspora economics. The Rust Belt is the most prodigious producer of talent the world has ever seen. Why that matters is the way forward for shrinking communities.

Building A Global Talent Pool

Regions tend to think small scale, locally. While serving on the Planning and Zoning Commission for the City of Longmont, I tried to advance a global perspective. Could my community plan and zone for globalization? What does globalization zoning look like? I didn't find many examples I could draw upon for guidance.

A reorientation of economic development is necessary. Via Burgh Diaspora, I advocate for serving workforce interests that can benefit the entire region. Again, actionable models are sparse. The opposite is true on the international scale. From The Chronicle of Higher Education:

Corporations are trying to find out what affects students’ employment choices in different countries. Airbus, the aircraft manufacturer with headquarters in Toulouse, France, has found in its surveys that “training and development opportunities” are particularly important to students in Spain, while “work-life balance” is important to German students, and job security is important to students in India.

That's the mirror image of what I observe going on in Pittsburgh and other Rust Belt cities. Workforce development is finding out regional talent needs and delivering employees to local companies. When workers are dear, as they are in demographically challenged communities and countries, this is the wrong policy.

The goal should be to push students towards global talent shortages. Education professionals must be aware of global labor market conditions. I don't see the value in framing the problem in regional terms.

Increasingly, a workforce with the right kind of skills attracts major employers. But the only way to deepen the talent pool is to export graduates to the established economic cluster. That's the Rust Belt advantage and Pittsburgh is cashing in on it.

Pittsburgh Versus Portland

Portland is cool. Pittsburgh is not. That's the tale of the tape. Migrants love Portland. Pittsburgh is shrinking. Via Aaron Renn's (The Urbanophile) Twitter, how the Creative Class is failing to spur economic development:

I can’t help but think that Portland’s struggling economy calls into question Richard Florida’s theory of the creative class city. I read his book years ago, so admittedly it’s not fresh in my mind, but one of his central arguments was that cities that focus on livability would be those to attract the creative class workforce, and consequently be the economic engines of 21st century America. While Portland’s reputation for livability and its creative class ethos has fulfilled the first part of that equation, it hasn’t done much in the way of invigorating our economy. One could assume that it may even be hindering it – noting that the overabundance of overeducated, underemployed, socially-minded citizens here creates a great deal of competition for few jobs and therefore also depresses salaries. (Or, as Portlandia puts it, our city is where young people come to retire.)

Portland is the poster child for indicators run amok. Amassing talent is the game and the goal. What comes next after your city goes viral?

Understanding relocation choices for a niche demographic doesn't make you an economic development guru. Modelling migration isn't difficult. The patterns of moving still follow some basic rules articulated over a century ago. Fetish destinations come and go. What will become of Portland?

About a month ago, I was still bullish on Portland. Now, I'm not so sure. Starting with the glass-half-full perspective, a story about Denver and the upside of a big company leaving town:

Doug Dwyre, president of Denver- based Mocapay, is a former First Data employee who chose not to relocate to Atlanta. He eventually joined Mocapay, which integrates mobile transaction software and marketing into merchants' long-term business strategies. In May, it launched a mobile-payment system with Denver-based coffee merchant Dazbog.

Dwyre said there was a direct correlation between First Data leaving and the upswing in mobile-payment companies in the state. Mocapay had 14 employees last year; it has 20 this year.

"It's unfortunate that First Data left Colorado, but it's good as far as fostering the entrepreneurial spirit of the folks who ended up staying in Denver," he said.

If you wanted to stay in Denver, then you had to think like an immigrant. I'll get back to the Colorado dividend in a bit. A glut of talent, for whatever reason, should spark more entrepreneurial activity. I figured that a major economic spillover from all that in-migration was just a matter of time in Portland.

I based that conclusion on my Boulder experience. Smart people flocked there en masse. Graduates from the University of Colorado hung around a few years to ski and rock climb in Eldorado Canyon. Boulder was (still is) rich in natural and human made amenities that make the community sticky.

I failed to appreciate that the regional economy was ready to absorb all that talent. Boulder is blessed with a major research university and a bunch of federal government laboratories. By comparison, the Portland boom is unsustainable. What is Portland going to do with all this excess Creative Class?

No doubt that Denver has benefited from a quality of place. Instead of moving to Atlanta, ex-employees ran through brick walls to stay. In theory, that's how catering to the Creative Class should help your city or rural community.

Then there is Pittsburgh ...

Pittsburgh (and the entire state of Pennsylvania) was economically sound before it was cool:

These days, "Pennsylvania is no longer part of the Rust Belt. Pennsylvania has diversified away from that manufacturing belt," said James Diffley, chief regional economist with IHS Global Insight in Eddystone.

"The diversification of Pennsylvania kept it from being another Ohio and Michigan," he said. Michigan's unemployment rate peaked at 14.1 percent.

"Diversification" has been the name of the Pittsburgh revitalization game. As for the good news in PA, it is more Pittsburgh than Philadelphia:

Forty-six of 50 metros experienced declines in job openings in June, 14 more than the previous month. The four metro areas that did not lose job openings saw insubstantial growth: Louisville (1.7 percent), Birmingham (1.4 percent), Detroit and Pittsburgh (less than one percent).

Pittsburgh is an island in a sea of economic gloom and doom, despite disregarding Richard Florida's advice. Yes, Pittsburgh is the anti-Portland. Pittsburgh is the antithesis of the Creative Class migration. Yet the Great Reset has favored Pittsburgh over Portland.

Rust Belt Chic > Keep Portland Weird

Rust Belt Chic Weirton

Below, Johnny Cash shows you the location of Weirton, West Virginia. (Please excuse the missing Eastern Panhandle)

I share with you that piece of trivia (and lovely hand map) because of an article in the Wall Street Journal that makes another interesting geographic abstraction of Rust Belt culture:

Seeing Weirton captured in a film was unusual because West Virginia's rust belt is just not a place that is often visited by the arbiters of popular culture. It doesn't have a distinctive accent like South Boston. It can't claim a spot in food history, which even Buffalo can do. And it's not as bad off as Detroit, so living there can't be gritty and cool.

So it was doubly unusual that on the same weekend that I saw my hometown on film, I caught a singer-songwriter from West Virginia, Logan Venderlic, who performs with a Tom Petty-meets-Appalachia vibe. (He's also dating my cousin. Insert your joke here.)

Young Mr. Venderlic, a senior at West Virginia University, is one of the few musicians I've encountered who has written songs about the reality of the state. In one, he captures the experience of being from a "jerkwater" town: a village so small that steam-train crews had to "jerk" water up from streams or from people holding buckets along the tracks because there was no water tower from which to refill the engine.

While Weirton does have its aforementioned water tower, any visit there pierces you with the awareness of economic struggle and dwindling population: "Almost as many churches as people," as Mr. Venderlic sings it.

I mean to highlight the first paragraph, which gets at the variance within the Rust Belt. But the rest of the passage is too rich to omit. Born in Erie, PA, I consider myself to be from the Northern Appalachian Rust Belt. Weirton is part of a region that is, arguably, the most distinctive in the entire United States.

Allow me to demonstrate:

Lodge 183 holding Christmas party

WEIRTON - The Italian Sons and Daughters of America Lodge 183 will hold their annual Christmas party at 6 p.m. Nov. 30 at the Knights of Columbus Hall.

The event will include a holiday buffet, a special cookie table and music.

The cookie table, and Weirton, deserves a spot in food history along side of Buffalo. The city is at least as gritty and cool as Detroit. As for the accent, Southie doesn't have anything on full-blown Pittsburghese. In Weirton's case, culture is not elsewhere.

In the case of the WSJ journalist, derogatory remarks inform self-deprecation:

But living on the East Coast with the grime of a West Virginia steel mill in your lungs has a way of keeping you humble. I've had to smile and roll my eyes at more than enough jokes about cousins, moonshine and literacy. I suppose I could have become an unrepentant snob as a means of distancing myself from all that, but instead, those roots shaped my world view and made me (though some would argue otherwise) a rather open, normal person who also happens to like fancy performing arts—and one who wants to share their values with others.

Culture is elsewhere. There is nothing about your hometown worth celebrating. Get out now and move on up in the world.

That's why Pittsburgh denies its location and position as the "Paris of Appalachia":

Rust Wire: “What’s right and what’s wrong about Pittsburgh?”

Brian O’Neill: “I would say that’s what right about it is – as I say in the book – the legacy of all this incredible stuff that we’ve been left: the churches, the institutions, like the museums, the foundations, all this old money that’s still here, the architecture, the fact that we have three sports teams and probably wouldn’t if we were trying to get one now, the universities, all the stuff we’ve inherited, essentially.

And what’s wrong with it is, one- I don’t think we don’t place a high enough value on what we’ve inherited. And that’s recently been shown again by the idea of shutting down our branch libraries in this city. If we want these neighborhoods to come back, we can’t take out resources, we’ve got to figure out a way to keep them around.

And sometimes we don’t value the best things. I mean, everybody appreciates the Steelers, but you know we don’t so much appreciate the fact that we have this incredible architecture. I mean, in my neighborhood, in the book I mention this one bridge, this foot bridge that is incredible, but the city can’t even afford to knock it down…We don’t have the population to support all that’s worth keeping. And that’s a constant struggle.”

Emphasis added. Rust Belt Chic is a celebration of "the legacy of all this incredible stuff that we’ve been left". Like me, O’Neill is an outsider agog at the gobs of cultural treasure to behold. If you grew up with a cookie table, then you probably don't realize how special the tradition is. That worm is beginning to turn:

City Chicken is a dish that dates back at least to the Depression days of the 1930s. My experience goes back only to the late 1980s. I'd just moved here to work at The Pittsburgh Press, where, with many of my colleagues, I used to lunch at a tiny tavern tucked away on nearby Market Street called Zeuger's. There, working my way through the daily specials recommended by a waitress straight out of Pixsburgh Central Casting, I was referred to as "Hon" and first experienced local favorite dishes such as Virginia Spots, which turned out to be fish.

City Chicken turned out to be ... not chicken.

Rather, it was -- it is -- chunks of meat on a stick. I believe Zeuger's served the classic combination of pork and veal, but just pork and even beef can be City Chicken, too.

The idea and the name went back to a time when chicken was more expensive than other meats, especially in the city, and so these other meats were substituted. Sometimes the skewers were referred to as Mock Chicken Drumsticks. That chicken would be scarce and expensive is hard to imagine now, but plenty of people of a certain age remember when chicken was an only-on-Sunday special dinner.

City Chicken is known in other cities, including Detroit and Cleveland, but Pittsburgh passionately claims it (the recipe on epicurious.com is titled "Pittsburgh City Chicken"). Especially many of the many who've moved to other places (everything but their hearts) wax nostalgic over it in the same breath as they miss Chipped-Chopped Ham and Wedding Soup.

Click on the link to read the entire Post-Gazette article and get a few recipes for City Chicken to try. The Generation X game becomes finding where one to can still get authentic City Chicken. That means the entire Zeuger's experience, not just a faithful version of the dish.

I claim that the pursuit of the culturally anachronistic is the "in" thing to do and is driving migration to Rust Belt cities. Hipsters love cookie tables. Pittsburgh is cooler than Austin. Richard Florida is jumping on the Rust Belt Chic bandwagon.

That still leaves Weirton as an undiscovered gem. Urban pioneers take note. Freegans, Ho!

China Poaches Detroit Talent

Talent is the new oil. All of the resources in the world don't mean much if your country (or metro) lacks the brains to add value. China values this commodity more than anyplace on earth. The need for talent:

It is all part of Beijing’s much-touted plan to transform China into a country that designs and creates global brands – rather than merely assembling global products.

But for that the local car industry needs talent: engineers and especially managers trained overseas and experienced in the global car industry. Zhang Junyi, automotive consultant at Roland Berger in Shanghai, says China especially lacks engineers with the experience to manage other engineers.

"Experience" is the key variable. Producing more graduates doesn't address the shortage (not to mention takes too long to fill the pipeline). I'm seeing the same dynamic play out in the shale gas and oil revolution:

Another barrier to widespread exploitation of oil shale is that few companies have the expertise and experience to do the work. Chinese and Indian oil companies are investing in joint shale ventures in the United States and other countries in part so they can learn the new exploration and drilling techniques.

And there is China, again, at the front of the line seeking talent. Rust Belt metros would be wise to follow its lead. I've mused before about Chinese talent geopolitics serving as a model for better leveraging inevitable outmigration. Creative policy innovation is increasingly clustered in developing countries. To paraphrase Vivek Wadhwa, the teacher must become the student.

Banana Republic Of Pennsylvania

I picked up on two Marcellus Shale stories (here and here) thanks to Chris Briem's (Null Space) Twitter. The first linked article concerns pipeline infrastructure and getting the gas to market. The second linked piece reviews the possibility of a petrochemical manufacturing boom in Westsylvania. Both converge at Fuel Fix:

Asian and European chemical manufacturers rely largely on oil-based raw materials, with prices tied to crude.

As a result, many petrochemical companies are modifying their existing Gulf Coast plants to take better advantage of the natural gas supply in both Texas and the Northeast.

A partnership of oil and gas transporters is preparing a network of pipelines and storage facilities to ship Marcellus ethane to the Gulf Coast. MarkWest Liberty Midstream & Resources and Sunoco Logistics Partners say their system will be able to ship up to 50,000 barrels of ethane a day to the Gulf Coast at its launch, expected by mid-2013.

“That’s what makes the most sense, build a pipeline from Pennsylvania to Texas and build your new capacity down here,” said Giacobbe, a Houston-based consultant.

Production in West Virginia makes sense in terms of domestic markets. But the global markets are the real prize. The demand growth is in developing countries (e.g. BRIC).

In the latest issue of Planning (American Planning Association magazine), Jeffery Spivak explores possible ramifications of a deeper and wider Panama Canal:

In just a few years, though, those household and business products may journey from China to the stores in a different way, on a new generation of supersized ocean vessels that bypass the West Coast. These freighters will cut across a newly widened Panama Canal before docking at a port along the East Coast or Gulf Coast. This prospect is setting off a competition among eastern and southern ports, all eager to become the go-to destination for Asian imports.

The economic geography of trade is about to undergo a major transformation. The smart money is on shipping the gas out of Pennsylvania to the Gulf Coast. This would gouge the job benefit for the Marcellus region. Texas and Louisiana should send a gift basket to the Marcellus Shale Coalition and PA Governor Tom Corbett.

Job Sprawl And Cocktail Napkin Startups

Why does residential density matter? If a suburban enclave (like you would find in Northern Virginia) packs people in on par with with an urban living environment, is that as good as more people moving into cities? I'm not the least bit concerned about the geography of home. I'm only interested in where the jobs are located.

If you want to talk about the journey to work, then I'll listen. Few can afford to drive long distances for employment. There is a ton of captive labor out there, which explains the massive income discrepancies found in the wealthiest counties. Co-locating job and residence is a boon for those struggling to make ends meet. Bring geographic arbitrage to the people stuck in place.

As for job density, there isn't much difference between San Francisco and Silicon Valley. You can find tremendous benefits of talent proximity in either area. But moving Twitter from tech park to downtown isn't necessarily a win for urbanists:

That was an important lesson learned in the 1960s and ’70s, after urban renewal advocates like Robert Moses in New York bulldozed neighborhoods in hopes of starting afresh. Buildings with no space for shops rose on the scraped earth, and it took years for people to return to the sidewalks.

All of this comes to mind because San Francisco is offering tax breaks to tech companies that relocate their offices to the city’s blighted neighborhoods. Twitter will be the first recipient of this largess when it moves into new offices in the Furniture Mart on a particularly desolate section of Market Street next year.

Twitter, which is competing for talent with Google and Facebook, gives its employees free food. The question is whether those urban employees will leave the building often enough to dramatically improve the neighborhood.

Gabriel Metcalf, the executive director of the San Francisco Planning and Urban Research Association, or SPUR, an urban policy research group, says the impact of corporate cafeterias in an urban setting has not been rigorously studied. But, Mr. Metcalf says, “You certainly get more life on the street if everyone is going out to lunch.”

University of Pennsylvania. Yale. There are a bunch of urban campuses that, until recently, remained hermetically sealed off from the surrounding neighborhoods. Providing incentives for businesses and people alike to move into the city are not enough to spark revitalization.

That's a shot across the bow for those adhering too religiously to rational choice migration. Not all moving in is a win. San Francisco is chasing smokestacks. Bad policy all around.

What about encouraging more people to go out to lunch? Only now am I beginning to appreciate the wisdom of Aaron Renn's (The Urbanophile) recommendation:

My idea for today is a very simple one: change the local business culture so that it is not just tacitly tolerated but actively accepted to drink alcohol at lunch again.

The drive to work and to lunch have done a grave disservice to deals over cocktails. Golfing has filled the void admirably. One still has to get to and from the links. I'd bet drunk driving is more prevalent than anyone will admit. It's about time that boozing for biz and transit oriented development become (formally) acquainted.

There should be value in locating your company near a popular watering hole or exceptional dining. That is to say, the proximity to urban (or town) amenities matters to the development of your workforce. So Penn's or Yale's inner city location is an asset instead of a liability. Planning and zoning could be a lot more creative in addressing short-term fixes to regional problems.

Shale Gas Ponzi Scheme? EPA Says No

For much of the past week, the US shale gas industry has been on the defensive because of two stories in the New York Times. Michael Giberson of Knowledge Problem offers a good summary of the reaction. The "Enron Moment" piece is ridiculous and does more to stifle discussion than to advance better policy/regulation. Leave the hyperbole to us bloggers, thank you very much.

If you are keeping score and trying to figure "which side are you on", the EPA tips the Federal Government hand:

"What we are seeing now, with the change in the market that inexpensive natural gas has brought to the table, is a change in the marketability of those [coal] units and the electricity they generate," said Gina McCarthy, the Environmental Protection Agency's assistant administrator for air and radiation.

"So many retirements are expected just simply as a result of inexpensive natural gas."

Here is where the story gets complicated. You see, shale gas is seen to be both "friend and foe" to the US power grid:

As a foe, natural gas is a leading alternative to electricity for cooking, heating homes and water, drying clothes, and even in transportation.

In this case, gas competes with the generation of electricity (as opposed to fueling it). So, some big, bad energy companies might be looking to pop the alleged Marcellus bubble. You can count Big Coal among those enemies, marching side-by-side with environmentalists. Ahem!

There is quite a bit of hype surrounding the natural gas rush. I'm still confident that the boom is real. The overall policy narrative, industry and opposition (and folks between the two), points in that direction. As for the New York Times, I have lost a lot of respect for the newspaper. Churning out conspiracy theories isn't investigative journalism.

Geography Of The Next American Economy

I'll start today's post in the heart of the TechBelt, Warren, Ohio:

Ted Theofrastous of NorTech, a regional nonprofit organization involved [Tech Belt Energy Innovation Center] development, said laboratory equipment offered at the facility will be unique and will help emerging energy technologies develop across the region.

Pogue hopes to have six or more businesses located in the center by this time next year, and he said the center could be a driving force in attracting a new, highly educated work force to the region.

[U.S. Rep Timothy J. Ryan, D-Niles,] agreed, saying the region from Cleveland to Akron to Pittsburgh could benefit from the facility.

Ryan has his economic geography inside out. The facility will allow Warren to benefit from innovation clusters in Cleveland, Akron, and Pittsburgh.

Greater Youngstown tying its fortunes to Cleveland and Pittsburgh is critical. That's what William J. Holstein might argue:

The Next American Economy: Blueprint for a Real Recovery includes nine case studies of Boston, Pittsburgh, Orlando, San Diego, Corning, N.Y., Austin, the state of North Carolina, Atlanta and Cleveland. Holstein uses those case studies to offer pragmatic insights to governments, businesses, universities and community colleges and others on how to overcome America's economic difficulties and launch a new wave of innovation.

A review of the book in the Financial Times indicates Silicon Valley is the model. That sparked a thought about all the criticism concerning the attempt to be the next Silicon Valley. Might we be too impatient?

I have in mind, of course, Pittsburgh. The shift in media coverage is dramatic. The change has been slow and hard, even painful. As for the positive press, Pittsburgh is no Silicon Valley. Not even close.

So what? The city is still a blueprint for not only America's recovery, but Russia's. Coming up far short of Silicon Valley (or Austin, or the Research Triangle) doesn't mean failure. It doesn't mean that Pittsburgh should stop trying, either.

I've tracked a number of initiative purporting to develop a tech or innovation corridor. None has the potential of Cleveland-Pittsburgh. Ironically, Congressman Tim Ryan and Greater Youngstown are driving the integration. The Mahoning Valley is a hotbed of policy innovation. (See Phil Kidd) This is the birthplace of the TechBelt vision.

The development can't happen fast enough. Cynics continue to poo-poo the lack of progress and spotlight the persistent economic distress. To most, nothing has changed.

That's the world of mesofacts. (Via Chris Briem's Twitter feed) Pittsburgh is still Shittsburgh in places such as Wichita:

But there was one remaining question from [Sedgwick County Commissioner Karl Peterjohn]: Why is Visioneering Wichita headed to Pittsburgh Sept. 14 to 16 for this year’s city-to-city visit?

The idea of the visits generally is to learn what’s working elsewhere and whether it can work in Wichita. Peterjohn says he doesn’t necessarily see Pittsburgh as the best model.

“Pittsburgh is in decline,” Peterjohn said. “I’m wondering why Visioneering would be looking as a model to a community in decline, as opposed to going to places where the economy is stronger.”

Pittsburgh is not in decline. But if you are interested in a population boom, then look elsewhere. Good luck with that. Little wonder why Wichita hired Next Generation Consulting. As for Peterjohn, he is a devotee of the tax regime migration school. People vote with their feet. Taxes are too high. Pennsylvania is anti-business. Pittsburgh is a loser, circa 1983.

On the flip side is Holstein. Seeing Pittsburgh and Cleveland lumped in with San Diego and Boston must surprise most people, none more so than residents of Cleveland. I've noticed in both TechBelt poles a tendency of outsiders and newcomers to sing the praises of each city. Natives, too, are stuck in the past.

Pittsburgh has already served as a positive role model for many American cities. People are beginning to catch onto the doings in Cleveland (e.g. land bank program). Don't laugh:

In his new book, The Next American Economy: Blueprint For a Real Recovery, author William J. Holstein shows that MADE IN AMERICA is still very much alive. Caterpillar (No. 13 on the list) and Beoing (its 747 is No. 29), have done a remarkable job navigating through, and succeeding in, the new global economy. He cites cities like San Diego for genomics, Pittsburgh for robotics, and Cleveland for electronics as hubs of world-class innovation.

World-class innovation. Cleveland. Pittsburgh. Surely Warren, Ohio would benefit from tapping into that.

Small Market Migration

Bigger is not always better. Every year, people flee from alpha global cities in droves. I'm fascinated with this talent migration. Where do they go? Why? The Martin Prosperity Institute looks at the case of musicians in Toronto (big market) and Halifax (small market):

Traditional investigation emphasizes the influential roles that natural endowments, geographic location and access to markets play in shaping growth trajectories, but this research underscores how the social dynamics of city-regions may influence migration outcomes. In so doing, the research identifies the growing challenge that Canada’s largest city has in retaining creative workers who are increasingly attracted to smaller, more affordable and more inclusive scenes such as Halifax. Further, the research highlights the central role of civic capital in explanations that musicians give for the choices that they make. As a result, at a time when independent musicians are adopting new strategies to pursue their avocation, socially cohesive communities may gain an advantage in attracting and retaining talent.

Toronto's loss is Halifax's gain. This relocation tale reminds me of the talent flow from San Francisco to Portland:

Recently, Sun Microsystems was trying to decide whether to close a plant in Portland or in California's Silicon Valley. The company asked employees from both places if they would relocate.

"And the responses were night and day," Kaylor says. "The skilled California workers they wanted to keep were enthusiastic about relocating their families to the Portland area. The Portland employees who were skilled indicated that they would quit rather than relocate in the Bay Area."

The quality of life is better. The cost of living is less expensive. Not mentioned is the Big Fish, Small Pond dividend. MPI's research gets at that oversight. (See the graphic associated with the article summary.) The world is flat.

The point (i.e. spike) is that Halifax can offer something to musicians that Toronto can't. The MPI helps to explain why artists would leave New York City for Cleveland:

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.

There are a gut of places that are significantly cheaper than New York. Few offer the "creative possibilities" you can find in Halifax or, dare I write it, Cleveland. The competitive advantage concerns the development of people. That, not better public transit or some other urban/rural amenity, is the attraction. Placemaking strategies will not save the Rust Belt.

Urban Rentals Rising

Relevant to today's post about aging suburbia, the Urban Land Institute (ULI) speculates about the future for renting:

“As jobs come back Gen Y people will be forming households -- there is a huge pent-up demand in household formation,” [John McIlwain] told the Business Times. “The anticipation is they are not going to buy, they are going to rent.”

I doubt Gen Y will be renting en masse in the suburbs. As for home ownership, that's expected to drop. You can see early signs of the trend in downtown Pittsburgh:

Apartments are in, condos are out, in Downtown.

After a condominium building splurge five to six years ago, developers are now bullish on apartments, in large part because of financing and market realities.

If it makes more sense to rent than to buy in Pittsburgh, then households with mortgages are in serious trouble. The suburbs continue to get clobbered by the Great Recession.

Suburbia Is Dying

Update: U.S. News puts a different spin on the Brookings report and highlights the change in the the Under 45 population. Rust Belt suburbs are the clear loser. Might this accelerate urbanization in this megaregion? It doesn't bode well for political consolidation and regional cooperation.

<----------End Update---------->

Boomtowns are aging much faster than Rust Belt bust-towns. The Washington Post takes a good look at the latest from Brookings demographer William Fry, “The Uneven Aging and ‘Younging’ of America.” The sidebar graphic makes my first point:

The likes of Pittsburgh are among the slowest aging communities in the United States. In fact, those bottom-5 metros are all getting younger. The Post article teases out the shifting politics resulting from such demographic trends, particularly in rapidly graying suburbia:

“When people think of suburban voters, it’s going to be different than it was years ago,” Frey said. “They used to be people worried about schools and kids. Now they’re more concerned about their own well-being.”

My take is that this will make the suburbs less attractive to families. I'd extend that to the fastest aging boomtown metros. Rust Belt cities as a hot destination make a lot of sense for younger cohorts.

To put it another way, legacy costs are shifting from traditional brownfields (urban centers) to greenfields (suburbs). How will the outlying communities pay for the senior infrastructure? Public transportation will be a nightmare. Services are diffuse. The geographically isolated tend to be poor.

Suburbs will have to shrink with ballooning dependency ratios (the other way). Schools will close. The fiscal crisis will extend decades into the future with high energy prices serving to exacerbate the problem.

Metros drunk on decades of in-migration and sprawl will be the worst hit. More from The Post:

“AARP research shows that most communities are behind in planning for their aging populations, but those that are adapting have come up with common-sense solutions to improve home design and make transportation easier,” said Nancy LeaMond, the AARP vice president, in a written statement.

What a mess. Given all the constraints on federal, state, and municipal budgets, I don't see how we will pay for the adaptations. Stay ahead of the curve. Move to Pittsburgh.

Fact Or Fiction? New Jersey Brain Drain

Turn over enough rocks, you can find both brain drain and brain gain in any region. Such ambiguity sets the stage for data wars. Politicians squeeze the most out of the numbers. Occasionally, the press digs into claims:

"Republicans have been clear: we will not raise taxes on the most highly taxed people in America to pay for another wrongheaded decision by the Supreme Court," [State Senate Minority Leader Tom Kean Jr. ] said in a news release on May 24. "The state’s tax burden has, according to census figures released today, cost our state another 190,000 residents in 2009."

Is it true the state's famously high taxes are driving people away? PolitiFact New Jersey decided to check.

Linking taxes to outmigration is a common gambit. I associate this ideological thinking with Ronald Reagan taking aim at bloated government as the cause of economic crisis. Government is the problem.

PolitiFact New Jersey doesn't have any problem debunking Kean's salvo. It does find some kernels of truth in the statement. I won't be so kind. Kean is lying. The defense from the Senate Republicans is pathetic:

Adam Bauer, a spokesman for the Senate Republicans, said Kean’s statement was partly based on a May 23 article in the Asbury Park Press. The story, citing new data from the U.S. Census Bureau, stated that nearly 190,000 New Jersey residents left the state in 2009. ...

... Bauer said Kean’s assertion about the tax burden "certainly wasn’t intended as a monolithic statement," and that any attempt to construe it as such "is just splitting hairs."

He provided no other evidence to prove taxes drove tens of thousands of New Jerseyans out of the state. "The senator has known people" that left the state because of taxes, Bauer said. "Everyone has anecdotal evidence."

"If you take issue with the [statement’s] wording," he said, "I apologize."

About 190,000 people did leave New Jersey in 2009. Kean asserts that all of them left because of the "tax burden". That's absurd and Bauer knows it. But Bauer's job is to polish the turd.

Unfortunately, most discussion about brain drain engages in similar hyperbole. The sky is falling everywhere. Anecdotes trump statistics. Thus, the following from Michigan's State Demographer (Kenneth Darga) is surprising:

Six Lowest Rates of Out-Migration in the U.S. for 2004-05

1.8% Texas

1.8% Wisconsin

1.8% Pennsylvania

1.9% Michigan

2.0% Ohio

2.1% California

See the positive correlation between state tax regime and outmigration? I don't, either.

Irish Brain Drain

Ireland is suffering from a skills shortage. The problem is framed in terms of attraction, not retention. The policy prescription is to provide incentives for talent to work in Ireland. I think we have an outdated notion about what motivates migration. (Via Aaron Renn's Twitter feed) The same force that is behind great work also informs relocation:

In his latest book, Drive, author Daniel Pink debunks the power of external motivators, and expands on the intrinsic motivators that inspire us to do great work. Using research from a study out of MIT, Pink argues that traditional rewards – external motivators like a year-end bonus – only elicit better performance from people doing rote tasks. But once the barest amount of brainpower is required, higher financial rewards fail to produce better work. In fact, they actually inspire worse performance.

The idea that urban amenities will attract the Creative Class is wrong-headed. Regions(and Ireland) need to figure out how to tap into the intrinsic motivations of knowledge-workers in order to attract them. A city should be a place where talent can achieve goals, not experience world class public transit.

Daniel Pink's book should excite Rust Belt communities. The urban frontier is full of opportunity, the kind that speaks to the intrinsically motivated. City attraction is about possibility and personal reinvention, not a cheaper cost of living in the UK. People develop, not places.

Talent And Cities

When looking to attract or retain talent, regions strive to make life in the community more appealing and/or tolerant. This strategy doesn't make any sense. Making a go of it in New York isn't easy. I'd bet most newcomers lived in a shithole and found, at best, people to be indifferent. You put up with a lot to stay in Big City.

The same goes for would-be entrepreneurs. Policymakers take the same approach to address perceived shortcomings in the local startup culture. Flood the market with venture capital. Mitigate risk. Seek diversity.

I think this paradigm generates expectations that inform policy failure. When the going gets rough, blame the Good Ole Boys network. That assumes that in Boomtown, there are no backroom deals. In Austin, there is meritocracy. Hogwash.

Yet we continue to believe that we can legislate an environment that will bring out anyone's inner Michael Jordan. The United States already prolifically produces entrepreneurs. That's not the result of tolerance or a cool image.

Imagine my smirk while reading about the next wave of college drop-out billionaires:

“They want to see that you believe your story enough to risk everything for it,” said Julia Hu, who left MIT when she got funding to build her sleeping device company, Lark. “They don’t like to fund non-committed entrepreneurs. In that sense, it’s in their interest not to deter you when you say you are dropping out of school.”

Harj Taggar, a partner with Y Combinator, an incubator founded in 2005 that funds young entrepreneurs, said applications from students were rising. He noted that there was strong interest from angel investors who were “willing to fund these 18 and 19-year-old kids”.

Part of the reason, he said, was that it was a lot cheaper to start an internet business today than during the internet bubble of the late 1990s. Laptop computers have become less expensive and web-based companies do not have manufacturing costs. Young people without families or mortgages were also willing to live in cheap apartments, eat noodles and work long hours, he said.

Reads like a branding campaign for the next Indianapolis. Let's add high-speed rail to the mix and get out of the way. Risk it all and stay ... Indiana.

Starting your internet business is easier than ever. The same constraints still apply. You have to endure a lousy quality of life. The same goes for migration.

Government Jobs Recovery Update

Update: I just received permission from Howard Wial to post the entire text of his email response ...

There was a computer programming error in the calculation of the overall and recovery rankings. (All the individual indicators that go into those summary rankings were correct as originally reported.) Because of the error, which affected the rankings of a large number of metropolitan areas, Pittsburgh wasn't originally given sufficient credit for the relatively large decline in its unemployment rate during the recovery or the relatively small increase in the unemployment rate since the beginning of the recession. Pittsburgh's rankings, both overall and recovery, improved when the error was corrected.

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

A commenter here alerted me to significant changes to the Brookings MetroMonitor report I blogged about yesterday. Pittsburgh's recovery received a boost, from bottom of the barrel to merely average. Upon a reread, I noticed a major shift in the tenor of the overall report. Chunks of narrative were removed or added. Things look a lot different today than they did yesterday.

I emailed Howard Wial about the revisions and he replied promptly, "There was a computer programming error in the calculation of the overall and recovery rankings." The recalculation boosted Pittsburgh in both rankings, not just recovery. In the new version, I'd quote the following:

Employment rebounded from its low point in 88 of the 100 largest metropolitan areas by the first quarter of 2011, but only 12 gained back more than half the jobs they lost between their employment peak and their post-recession employment low point, and only two made a complete jobs recovery. Only Austin, Dallas, El Paso, Hartford, Houston, Madison, McAllen, New Orleans, Pittsburgh, San Antonio, Springfield, and Washington regained more than half of the jobs they had lost between their pre-recession high and their post-recession low, while only 18 additional large metropolitan areas regained as much as a quarter of the jobs they lost in the recession.

Regarding jobs, Pittsburgh is experiencing a relatively strong recovery. If I understand Wial's message correctly, then the metro is doing well despite a decline in government jobs since the post-recession employment low. That would make the Pittsburgh recovery even more exceptional.

Every regional economy has warts. Likewise, I can find something good to say about any metro. Pessimist or optimist, something dramatically different is going on in Pittsburgh.

Government Jobs Recovery

As I am prone to do, I was just noodling over the latest "MetroMonitor" report (1st quarter of 2011) from Brookings. The findings reveal a Pittsburgh paradox. The region is in the top-20 for overall performance in recession and recovery. However, the metro is in the bottom-20 for recovery performance. What gives?

Apparently, government jobs:

Nearly all the metropolitan areas whose economies suffered the least since the start of the Great Recession had increases in government employment, while most of those that suffered the most lost government jobs. Nineteen of the 20 metropolitan areas that have had the strongest overall economic performance since the start of the recession (all except Augusta) gained government jobs since their periods of peak total employment.

Pittsburgh is one of the places that gained since the start of the recession. Now the puzzler:

Twelve of the 20 that have had the weakest economic recoveries (Allentown, Buffalo, Chicago, Dayton, Detroit, Greensboro, Harrisburg, Las Vegas, Pittsburgh, Portland (OR), Providence, and Scranton) lost government jobs since total employment bottomed out.

So, Pittsburgh's recovery (as anemic as it is) hasn't benefited from more government jobs. The kicker:

Twenty large metropolitan areas gained jobs in all of the last four quarters. Austin, Charleston, Cleveland, Columbus, Dallas, Grand Rapids, Greenville, Hartford, Houston, Milwaukee, New Haven, Oklahoma City, Orlando, Pittsburgh, Provo, Raleigh, Salt Lake City, Toledo, Washington, and Youngstown gained jobs in every quarter from the second quarter of 2010 through the first quarter of 2011.

Of those metros, which ones also saw growth in government jobs during the recovery? Austin, Dallas, Hartford, Houston, and Washington. Perhaps that's neither here nor there for Pittsburgh. I still feel good about the recovery in Southwestern Pennsylvania.

Going All 1099 On Your Shale Gas

Does drilling in the Marcellus Shale benefit Pennsylvania at all? I ask that question because the pro-industry camp, according to David Passmore, has "puffed" up the employment numbers. On the other side of the debate, environmentalists are waging their own propaganda war. In the middle are state residents who aren't getting enough (if any) information useful for deliberation.

I have no doubt that the job creation numbers floated via the press are dubious, at best. That suggests that the Marcellus Shale Coalition (MSC) doesn't have a case to make. Obfuscation is the public relations strategy of choice.

No one should be excited about the core jobs associated with extraction. A recent NPR story about the nascent tourist industry in South Sudan reminded me of the perils of a resource economy:

South Sudan could certainly use the tourists: The economy is based entirely on oil, which doesn't create lots of jobs.

"As much as we are fortunate to have the oil wealth, the oil wealth may not be there for life. But these animals will be there for life if we manage them well," says Daniel Wani, an undersecretary in South Sudan's Ministry of Wildlife Conservation.

Look no further than revenue rich, jobs poor Nigeria. How a government invests that cash flow is critical to the prosperity of a country awash in high-demand resources. The golden egg the goose is laying concerns money, not employment.

The MSC is puffing up the job creation numbers to scare off a tax, the main means for Pennsylvania to benefit from the Marcellus. The workforce here today, such as it is, could (likely will) be gone tomorrow. That's the nature of the boom of 1099 workers that Passmore discusses in this report:

From these observations and the workforce data we analyzed, we conclude provisionally that the number of Pennsylvania residents in “1099” employment is increasing in Marcellus Shale core industries. More decisive information could be available soon, however. In December 2010, the Center for Workforce Information and Analysis indicated that reporting information about “1099” employment and place of residence of Pennsylvania workers in Marcellus Shale core industries is part of its research priorities.

Remember the EMSI report I blogged about almost two weeks ago? 1099 employment is mushrooming in energy states such as Texas and Oklahoma. Skilled workers in core industries go wherever the rush is. That's part of the job description. All the current workforce development going on Pennsylvania in response to shale gas extraction will benefit the global labor force. That's a positive development, but one that won't steer voters away from a higher tax on the industry.

Opportunity Migration

In the latest issue of Next American City, author Benjamin de la Peña sums up the urban attraction:

Cities don't impoverish people; rather, as Edward Glaeser puts it, cities "attract the poor" because they generate economic opportunity.

That makes sense when describing the emptying of the rural hinterlands. But how would one model an escape from the Big Apple? The New York Times looks at the black exodus:

Ms. Brown, who spent 35 years investigating welfare fraud for New York State, may have seemed the embodiment of the black American dream in New York City.

In the 1950s, her parents moved to Harlem, and then to Queens, from Atlanta. Her grandmother was a maid; her grandfather was a brick mason. One generation later, her parents were prospering. Her father became a senior tax official for the state; her mother was an executive assistant to the state corrections commissioner.

But Ms. Brown says New York is now less inviting. She plans to join her 26-year-old son, Rashid, who moved to Atlanta from Queens last year after he graduated with a degree in criminology but could not find a job in New York.

In Atlanta, he became a deputy sheriff within weeks. She is hoping to open a restaurant.

“In the South, I can buy a big house with a garden compared with the shoe box my retirement savings will buy me in New York,” she said.

Less-than-New York City now looks like much more, a big fish in a small (less expensive) pond. Opportunity as a destination is recast. That's how I would define the Rust Belt value proposition, particularly for Rust Belt Refugees. There's no place like home, where the ceiling of success is so much higher. Your trip up the ladder is so much faster.

Migrants to Big City end up with the same realization as Odysseus. You travel a long way to end up in the same place. Which isn't to say that the journey wasn't worth it.

Secondary migration, which includes return, is less discussed because it is more difficult to track. I expect the trend of heading "home" to deepen if only for the reason we will be more aware of it. Talent is looking for big city advantages without all the costs.

Überburgh

Pittsburgh is taking over the Rust Belt (and the Sun Belt). Next up? Chicago:

In its quest to become a leading world city, Chicago may have relinquished power within its region. The City of Big Shoulders could continue to shrink if the Steel City successfully rebuilds its job market and reverses its population decline.

Before you dismiss this as a joke, do check out the referenced post. It is full of interesting data. What sticks out to me:

Metropolitan area	GMP in US$ billions (2010)
Chicago	531.4
Detroit	196.3
St. Louis	128.7
Pittsburgh	115.6
Cleveland	105.1
Cincinnati	100.9
Milwaukee	85.3

Chicago's economy is almost 5 times bigger than Pittsburgh's. Chicago is on a different planet. The slowing horse egging Pittsburgh on is Detroit. The Eastern Rust Belt is in need of an anchor.

Whatever was beyond the pale of Chicagoland used to belong to Detroit, the Rust Belt's Second City. In many ways (particularly in terms of migration) Detroit was Chicago's equal. Detroit was a great and global city.

Detroit remains an economic power, perhaps in spite of itself. Most telling is the decline (i.e. transformation) of immigration:

Metro Detroit is no longer the immigration gateway it once was, according to a report released last week by the nonprofit Brookings Institution, but the region remains home to one of the nation's highest concentrations of high-skilled immigrants.

Regarding immigration, Detroit is looking a lot more like Pittsburgh. That is to say, it is following instead of leading. Detroit is trying to catch up to Pittsburgh. The larger economy in terms of GMP is largely symbolic. Pittsburgh is already the center of gravity for the Eastern Rust Belt.

PNC Über Alles

Who is king of downtown Pittsburgh? UPMC has practically and metaphorically taken over the regional economy with its new crown sitting atop the U.S. Steel Tower. Last month, PNC announced a new skyscraper. Golden Triangle gains might come at the expense of Raleigh and Rocky Mount, North Carolina. PNC Financial is buying RBC Bank:

Such a deal likely would trigger significant job cuts and would be another blow to Raleigh and its economy. Raleigh already is poised to lose Progress Energy's downtown headquarters when the Fortune 500 utility completes its pending merger with Charlotte-based Duke Energy.

In October 2008, RBC moved its U.S. headquarters to RBC Plaza at Fayetteville and Martin streets. The move signaled Raleigh's shift to something more than a government town. ...

... "This is a north-of-the-Mason-Dixon-line bank combining with a south-of-the-Mason-Dixon-line bank," said Tony Plath, a finance professor at UNC-Charlotte. "It's a combination that takes PNC out of its current existing footprint, and that's going to preserve more jobs.

"But let's face reality: There are going to be job losses."

Plath predicted that, in the Triangle, PNC would eliminate 150 to 200 administrative jobs - including all the senior executives and the people who answer to them.

"What I'm really concerned about is the operations center in Rocky Mount," Plath said. "Will they keep that or will they let that go? That's a wild card."

RBC has more than 1,000 employees in Rocky Mount, a holdover from when the bank was headquartered there.

The majority of those employees are involved in functions such as information technology and mortgage processing.

If PNC decides to consolidate those functions in Pennsylvania, "that would decimate Rocky Mount," Plath said.

To sum up the story more succinctly, the Rust Belt's gain is the Sun Belt's loss. Talk about a dramatic reversal of fortune. The two North Carolina downtowns are heading in the opposite direction of Pittsburgh's revitalization.

That anecdote is how I would define the economic reset of the Great Recession. Returning to the US Conference of Mayors report I referenced last night, Table 1 details the gross metropolitan product (GMP) of U.S. metro areas (US$, billions) for 2007-2010. In 2007, Tampa stands at 114.1 and Pittsburgh chimes in with 108.2. Tampa's economy was bigger than Pittsburgh's. The two switch places in 2009. By 2010, Pittsburgh stands at 115.6. Tampa? 113.9. Over the four-year period, Pittsburgh grew and Tampa shrank enough to switch places in the GMP rankings.

Read more about this transformation at Chris Briem's Null Space.

Rust Belt Redefined

In terms of area, the Rust Belt is shrinking. As the United States recovers, part of the nation will be left behind. For most post-recessions, "Rust Belt" aptly described the worst hit and last to rebound. Today, you might be referring to Florida, Arizona, Nevada, and California. Times have changed.

The United States Conference of Mayors and The Council for the New American City has a new report out detailing the state of metro economies and where they are heading. I've hosted the map of return-to-peak employment here. Rather than sing the praises of Pittsburgh, I'll focus on this sentence from the report:

Five of the metro areas not slated to recover until the next decade rank in the 100 largest in the country (see Figure 7).

I added the link to "Figure 7", which you can also view in the report. Here are the five:

1. Cleveland
2. Dayton
3. Detroit
4. Toledo
5. Youngstown

That's the new old Rust Belt, the Industrial Heartland left behind. The Detroit-Cleveland axis is an economic disaster. The reset for these cities is just beginning.

Brain Drain Patterns

The migration story is so entrenched in our culture as to be a paradigm. People are leaving the Rust Belt for the Sun Belt. While technically true, population loss doesn't necessarily equate to brain drain. Likewise, a dramatically increasing population doesn't necessarily equate to brain gain. From the Federal Reserve Bank of Cleveland:

In a recent paper, Ed Gleaser and Kristina Tobio look at the trends in the Sunbelt, where most fast-growing cities are found. They find that productivity gains in the Sunbelt have not greatly outpaced the nation’s since 1980, and demand for the amenity of warm weather has also been unchanged. They explain the continued rapid population growth in the South as a response to large increases in the supply of housing. Policies that encourage low-cost construction may be the ones some regional leaders want to pursue, if they want an expansion of both their graduate and nongraduate populations.

If it is the ratio of college graduates to nongraduates that really matters, then policies that promote total population growth are unnecessary. Resources can be directed elsewhere. Thirteen large MSAs in the top category added fewer graduates than the national average, but still made the top degree share category because their nongraduates figures were even further below the national average. These educated, slow-growing places include Philadelphia, Chicago, and Hartford. These places have succeeded in raising their education levels despite attracting and retaining very few nonskilled workers relative to their initial populations. Keep in mind that this is not that same thing as saying that slow growth will cause a region’s degree share to rise. As Tim Dunne explained in his 2007 commentary, northern, cold weather cities with lower degree shares in 1970 actually shrank in most cases. This did not enable all of them to significantly raise their educational attainment at the city level. At a metro level, their regions remained in the middle or bottom of the rankings.

The war for talent picture is much more complicated than most appreciate. The Sun Belt is winning the population race. Where are the productivity gains? Shrinking (relatively speaking) the number of nongraduates can have a positive economic benefit for a region. That said, regional goals are still cloudy. The problem is with the sweeping geographic abstractions.

To make the same point a different way, consider the issue of international "brain drain":

At the same time, [Philip G. Altbach (director of the Center for International Higher Education)] argued that brain drain is both more limited and more diffuse than people tend to think. Of the former, he noted that "we are talking about a tiny top of the huge system" of higher education all over the world. "There is not a global arms race for community college teachers," he noted, but one for top researchers.

And while there is a pattern of "centers and peripheries" with those in the latter moving to the former, there are actually many "centers," Altbach said.

South Africa, he said, is "bleeding" scholars to Britain, Canada and, to a lesser extent, the United States. But the country is "stealing from its neighbors," attracting academic talent from African countries that don't have South Africa's research infrastructure. Saudi Arabia is "hiring from other Arab countries, and draining some of the best scholars from Egypt and Syria," he said.

And, of course, he said, "the Americans steal from everybody."

The best brain magnets steal from everybody. What is the dominant pattern of talent imports in your region? Superstar cities enjoy a global portfolio. Struggling cities tend to be parochial. Those in between have a regional draw.

I argue that the last recession dramatically altered the rules of the game. The current climate favors the parochial, a result of the decrease in geographic mobility and the increase in value for companies to locate near where the talent is produced. Just as we are beginning to better understand talent migration, the ground is moving under our feet.

All cast considerable doubt on the retention obsession. Keeping graduates from leaving is now a goal, instead of a means to some policy end. A higher rate of retention, similar to population growth, is equated with success. Relatively high retention is, in my view, a red flag. A region cannot grow a large and diverse talent base without strong outmigration. Which superstar cities are tops nationally in talent retention?

Concerning brain drain, there are more questions than answers. The overall baseline assessment is, at best, poor. Doing away with the Rust Belt vs. Sun Belt dichotomy would be a good place to start formulating better talent policy.

Update: Shale Gas Jobs Geography

One of the debates about the Marcellus Shale gas play concerns job creation. The industry, of course, boasts about a boon to the Pennsylvania economy. Skeptics focus on the itinerant labor. Employment gains benefit residents of other states (e.g. Texas). Both sides make good points. Ironically, much of the pro-extraction camp ignores the juiciest data:

From Appalachia to Alaska, the growth is eye-popping. Thousands of new jobs have sprouted up, most well-paying and all boons to their regions. There’s no denying oil and gas extraction jobs are on the rise, and not just in Texas and Oklahoma.

North Dakota is drilling oil at a blistering pace. Pennsylvania and West Virginia, along with parts of New York and Ohio, are seeing a natural gas boom with their Marcellus Shale reserves. And Colorado, Wyoming, Alaska, and other Western states are adding extraction jobs in droves.

The job growth in oil and gas extraction is national, not just in the Marcellus. The trend appears to be of the "rising tide" variety. I have no doubt that shale gas has positively impacted the PA economy in a big way. But beware of predictions looking into the future. Those rosy numbers shouldn't be part of the policy discussion.

Within the industry there are some surprising disparities between states. The growth of the itinerant labor force isn't where you would expect it to be. From the same article quoted above:

Earlier we mentioned approaching the noncovered oil and gas jobs data with caution. But what if we took out the 1099 workers and looked strictly at those covered by unemployment insurance and tracked by the BLS and state LMI offices?

We did this with EMSI’s “covered” dataset, which is roughly equivalent to state LMI. It shows a vastly different state-by-state picture for mining, quarrying, and oil and gas extraction sector. Texas ranks No. 1 in 2008-11 job growth in EMSI’s complete dataset … and last among all states — with a loss of more than 8,000 jobs — when we take out 1099 workers.

Pennsylanvia and North Dakota still were big gainers in the covered dataset. Yet they were two of only seven states that added workers in this sector, and the only two that added any jobs of consequence. This points to just how many contract jobs are flooding into the sector, particularly in states like Texas and Oklahoma.

"1099 workers" are temporary. Nationally, that's the jobs boom. Pennsylvania and North Dakota buck the trend. To be sure, both states are gaining more temp workers (1099) than covered workers. Opponents to drilling have a legitimate gripe. However, over 40% of the 15,000+ new positions created [in PA] from 2008-2011 were of the "covered" variety.

I read this as industry setting up shop in Southwestern Pennsylvania for the long haul. The corporate infrastructure is being developed. It is already established in Texas and Oklahoma, the two states with the largest rise in 1099 workers. In fact, covered workers in those two states are likely heading to PA and North Dakota. I expect that relocation to start showing up in the migration numbers soon (if it hasn't already).

Financial Pittsburgh

Sure, but what about the medical industry bubble that is sure to pop? Pittsburgh standing tall, again:

Dallas-Fort Worth, Pittsburgh and Tucson, Ariz., are the only major metropolitan areas that have more jobs in the financial sector today than they did three years ago, according to an analysis by The Business Journals, the online division of the Business Courier’s parent company, American City Business Journals Inc.

Take that, Charlotte.

Pittsburgh Gets Cracking

According the Pittsburgh Business Times, Royal Dutch Shell wants in on cracking ethane from Marcellus Shale gas. That's another indicator of a looming petrochemical boom for SW Pennsylvania and West Virginia. Piling on more evidence, from today's Financial Times:

The experience in Asia has also given the once highly UK-centric company the confidence to pursue other markets – the US and Russia, in particular. It is targeting petrochemicals businesses, a sector in which it specialises, with the UK arm leading both the sales and marketing effort as well as the resulting production.

“It is very nice to see individuals that five or six years ago didn’t travel further than London, preparing to go to Pittsburgh tomorrow,” says Mr Staff. “The whole culture has changed.”

The juxtaposition of "petrochemicals businesses" and "Pittsburgh" isn't a mere coincidence. I'd bet that the main reason Halifax Fan is flying to the Burgh is the Marcellus Shale. It's an energy bonanza.

I'll venture a bit further out on the ledge in my analysis. The petrochemical renaissance in the United States is dependent on LNG exports remaining dormant:

Moreover, for U.S. LNG exports to make economic sense, domestic gas price would need to stay low, with high enough international LNG prices, and if the LNG prices are still tied to crude oil (which could change depending on market development), then crude oil prices would have to remain elevated. That’s a lot of tricky variables clouding the seemingly rosy LNG export picture.

Some industry participant like Conoco Phillips is not completely sold on LNG exports either. Al Hirshberg, Conoco’s senior vice president of planning and strategy, said at a conference that he does not see the economic case for LNG export terminals being “overwhelming,” and that LNG exports will unlikely ever scale enough to have a big impact on the domestic US gas market. CitiGroup also expects the U.S. could become a swing player in the global LNG market since all planned LNG facilities in North America are going to be two-way.

That cloudy export picture is good news for the likes of Bayer. The petrochemical industry also needs the gas price to remain low. American LNG entering the global market would be a disaster. Increased demand domestically should help ward off that prospect. Hence the rush to get cracking in West Virginia.

The Age Of Return Migration

Nothing says recovery like relocation does. We expect the economy to get better in a geographically uneven pattern. As demand for workers in those lucky places picks up steam, everyone should leave Las Vegas and move to Salt Lake City. That's the theory. The Great Recession continues to be an outlier:

What's striking about the census data is that more people are moving to Kansas and Missouri at a time when we don't seem as mobile as we were 60 years ago.

Nationwide, only 3.5 percent of Americans moved to a different county between 2009 and 2010, the lowest percentage since 1947-48 when the Census started tracking how we move. In 1950-51, about 7.5 percent of Americans moved to a different county.

Experts blamed the slowdown on the mortgage crisis, high unemployment and young adults who want to move but can't afford to with the economy in the tank.

"I think there's a pent-up demand for migration among these young folks," Frey said.

"They're either living with their parents, or spending time in a place they don't want to be, and they're waiting to get a place in the suburbs they can't afford or can't get financing for."

A winner in this restructured migration landscape is Kansas City. The main anecdote of the above article concerns a couple leaving Dallas for the comfy confines of where they grew up. They can manage a suburban mortgage in KC.

Return migration is also less risky. A network of family and friends will smooth the transition, help with finding work. More affordable greenfields aren't the only attraction. Urban and edgy are popping up in unexpected places such as Omaha:

The movie theater, Film Streams, is a marvel. It's brand new, gorgeous and only plays sophisticated independent films. Next door is the Slowdown, which Esquire called the best indie-rock club in the country.

The Slowdown — like Film Streams and almost everything in Omaha that's very cool — is very new.

While I was there, I met several architects and web designers who all said they moved back to Omaha, at least in part, because of this club and the movie theater next door.

They're part of a remarkable wave in Omaha: Professionals are moving back.

Apparently, we've entered "The Age of Return Migration". It's deleveraging and gentrification on a grander scale. Young folks from around the country aren't streaming into Omaha. I wouldn't hold my breath, either. If they get up the gumption and the means to move, I would think an established destination (e.g. Portland, Oregon) to be more likely.

That said, both Omaha and Kansas City won't lack for newcomers. People from elsewhere in the Great Plains will feel at home in the region's best performing locations. Likewise, I predict that the Rust Belt return will entail a substantial number settling in an area different from where they were born. Outsiders, whether they be foreign-born or from the next county over, are vital to these demographically challenged communities. Otherwise, cynics and skeptics will run amok.

Seeking Marcellus Shale Dividend

I'm convinced that unconventional gas is boosting employment in Pennsylvania. I'm almost as sure that the more significant jobs (and migration) boom is yet to come. The war between Ohio and West Virginia for Marcellus Shale-related riches:

[Sen. Brooks McCabe, D-Kanawha,] said, "Ohio is making a not-so-subtle jab at West Virginia. If you see our Marcellus Shale act, we made a shot across the bow in the Legislature this session, saying to industry, 'We want you to aggressively look at West Virginia -- not just to locate a cracker, but all of the downstream facilities that will be provided with feedstock from that cracker.' The stakes are really high. This [Ohio press release] is an example of what's going on out there. This is a huge deal and we have to find a way to be successful. This legislation was a significant first step."

I figure that downstream industries are the big economic prize. West Virginia is positioning itself to be the next Chemical Valley with Pittsburgh as Sarnia, Ontario. Take a look at that job cluster from Wired I referenced yesterday. Pittsburgh makes the cut in what I first thought was IT growth. On second glance, I gather the circle represents a gain of over 500 chemical positions from 2003-2008. Not "Medical Technologies, nor "Biopharma", or even the "Metals" cluster that is emerging in Akron, Ohio.

Pre-Marcellus Shale rush, chemicals were already a big part of the Pittsburgh picture. I would conclude that the necessary workforce is in the region and that the innovation infrastructure is world class. Get ready for the influx of people from Houston that will be pouring into the region over the next few years. Given the anecdotal evidence, I think the move is already underway.

Rust Belt Recovery

Economic development professional Ed Morrison is trying to breathe new life into Great Lakes Nation. He weaves into his narrative some history that would serve as a foundation for a megaregional identity. The goal is to give the "Rust Belt" an image makeover. The geographic abstraction still has a ton of currency:

Jeffrey Bergstrand, a finance professor at the University of Notre Dame, doubts a new wave of jobs will emerge.

"We're in this jobless recovery," Bergstrand said. "The Rust Belt is more sensitive. Where you have more of a manufacturing base, it has a bigger impact."

Sure, in some places the Rust Belt is indeed more sensitive. In terms of the recovery, Great Lakes Nation is incoherent. You don't have a bunch of metros seeking the same policy solutions:

The challenges that Indianapolis is currently facing are quite different from that of Pittsburgh. No matter that both qualify as Rust Belt cities at the fringes of Great Lakes Nation. There is considerable variance within states, forgetting the more complicated megaregion. Metros are increasingly untethered from their host states. Our toolkit of geographic concepts must catch up with the times.

However, Great Lakes Nation could give birth to more metro autonomy. The European Union has the ironic effect of creating more room for subnational expression. Similarly, Rust Belt cooperation can lower the barriers of state borders that slice up many urban corridors. The delineation of Ohio and Pennsylvania will matter less to the TechBelt.

If Great Lakes Nation takes root, we should be mindful of the different terrain within the Rust Belt. Mapping Great Lake Nation over the Rust Belt is a mistake. Many communities aren't as heavily invested in a manufacturing base as they were in the 1980s. Even the term "manufacturing" glosses over distinctive needs within the industry. Take a look at a map in a recent issue of Wired. It tracks the job growth (2003-2008) within 11 different industry clusters. One policy will not fit all.

Pittsburgh's Remarkable Talent Boom

Note: The blog post below was originally published at Area Development.

Oh, to be Austin. Area Development magazine lists it as tops among “Leading Locations for 2011”. A key reason for the region’s success is the abundance of talent:

Austin’s robust tech work force will fulfill these jobs. According to the Census, the area has the sixth most educated work force in the nation. [Dave Porter, senior vice president of economic development for the Greater Austin Chamber of Commerce,] says its highly educated potential employees are the top reason companies choose to relocate and grow in Austin. Many workers filter into the city’s labor pool via the University of Texas at Austin, the state university system’s flagship school, which has more than 48,000 students.

When attracting business, reputation is king. Austin means an ample supply of smart employees. Texas is business friendly. Peruse the cream of the crop. A metro has one or the other, perhaps both. What is Pittsburgh doing there in such illustrious company?

One of the other surprises, Oklahoma City, offers a few hints. Concerning recessions, both OKC and Pittsburgh suffered devastating economic blows in the early 1980s. The latest downturn seems mild by comparison. Area Development highlights fiscal prudence as a strong point. But the diversification of industry is a better rationale for Oklahoma City’s recent run of good news. Pittsburgh can count that among its positive attributes.

Pittsburgh also has the workforce. The Creative Class isn’t migrating there en masse a la chic Austin. Talent is developed organically. The whims of relocation are not an issue. Yet Pittsburgh is suddenly consumed with pulling the best and brightest from elsewhere:

The 800,000-square-foot, eco-friendly tower will be a recruiting tool for the company and city, said Doug Gensler, a principal in the Boston office of Gensler, the architecture firm that designed The Tower and Three PNC.

Pittsburgh is outgrowing the supply coming from local universities and colleges. That’s a huge shift from as little as five years ago, when I first started tracking the economic progress of Rust Belt cities. Despite the reputation as business unfriendly, Southwestern Pennsylvania is booming.

I think that quality of workforce has become much more important than policy regime. The pool of prospective employees is shrinking. There is always a state willing to cut a better deal. Talent is the new oil. Oh, to be Pittsburgh.