New Geography

Author: Joel Kotkin

  • Los Angeles: Will The City Of The Future Make It There?

    When I arrived in Los Angeles almost 40 years ago, there was a palpable sense that here, for better or worse, lay the future of America, and even the world. Los Angeles dominated so many areas — film, international trade, fashion, manufacturing, aerospace — that its ascendency seemed assured. Even in terms of the urban form, L.A.’s car-dominated, multipolar configuration was being imitated almost everywhere; it was becoming, as one writer noted, “the original in the Xerox” machine.

    Yet today the nation’s second-largest city seems to have fallen off the map of ascendant urban areas. Today’s dynamic cities in terms of job and population growth are the “new Los Angeleses,” such as Houston, Dallas, Phoenix or Charlotte; at the same time L.A. lags many more traditional “legacy” cities in job creation and growth, notably New York, Boston and Seattle. Worst of all, L.A. has lost its status as the dominant city on the West Coast; that title, in terms of both economic and political power, has shifted to the tech-heavy Bay Area.

    With a weak economy and little media outside Hollywood, the city has lost much of its cachet. A Businessweek survey last year ranked San Francisco asAmerica’s best city to live in. Los Angeles was 50th, behind such unlikely competitors as Cleveland, Omaha, Tulsa, Indianapolis and Phoenix. In another survey that purported to identify the top 10 cities for millennials, Seattle ranked first, followed by Houston, Minneapolis, Dallas, Washington, Boston and New York. Neither L.A. nor Orange County made the cut.

    L.A.’s relative decline reflects a collective inability to readjust to changing economic conditions. Some of this has to do with the end of the Cold War, but also with the loss of the headquarters of many of the area’s top defense contractors, such as Lockheed and, most recently, Northrop Grumman. In 1990, the county had 130,100 aerospace workers. A decade later, that number dropped by more than half to 52,400. By 2010, the county’s aerospace jobs numbered 39,100.

    With the exception of drone technology, the region’s aerospace industry, as one analyst put it, has become “dormant,” a victim of a talent drain and a difficult business environment. This decline has weakened the metro area’s standing as an industrial center — L.A. has lost almost 20% of its manufacturing jobs since 2007. Meanwhile STEM employment in the Los Angeles-Santa Ana area is still stuck below its 2002 levels; once arguably the world’s largest agglomeration of scientists and engineers, the region has now dipped below the national average in the proportion of STEM jobs in the local economy.

    In contrast to the Bay Area, whose tech community also was largely nurtured by defense contracts and NASA, L.A.’s defense and aerospace industries never pivoted into the vast civilian market. Capital, too, has played a role. The L.A. area has lots of rich people, but a relatively weak venture capital community. For example, the Bay Area was a recipient of roughly 45% of U.S. venture capital investment in the third quarter of 2013, while far more populous Los Angeles-Orange County took in under 6.5%.

    The growth of VC-financed companies is one reason why L.A. has been less able to produce high wage jobs than its northern rival. According to a recent projection by Economic Modeling Specialists Inc., high-wage jobs will account for only 28% of L.A.’s job growth from 2013 through 2017 compared to 45% in the Bay Area.

    Far greater problems can be seen further down the economic food chain. The state’s heavy industry — traditionally the source of higher-paid blue-collar employment — entirely missed the nation’s broad manufacturing resurgence. In the first decade of the 2000s, according to an analysis by the Praxis Strategy Group, L.A. lagged all but 10 of the nation’s 51 large metro areas in creating manufacturing jobs.

    Two other once-unassailable economic niches in L.A., its port and entertainment, also are under assault. The expansion of the Panama Canal has increased the appeal of the Gulf ports, as do plans for expanded port facilities in Baja, California.  These shifts threaten many of the roughly 500,000 generally well-paid blue-collar jobs in the local logistics industry.

    Then there’s the slow but steady erosion of L.A.’s dominance in its signature industry, entertainment. Motion picture employment is down 11,000 since 2001. In the same period New York has notched modest gains alongside growth in New Orleans and Toronto. New announcements of industry expansions and an uptick in production in L.A. show that Tinseltown is far from dead, but challenges continue to mount from overseas and domestic competitors.

    Perhaps most shocking has been the tepid response to this relative decline among L.A.’s business and political leaders. Once local entrepreneurs imagined great things, like massive water and port systems, dominated the race for space and planned out the suburban dreamscapes of Lakewood, Valencia and the Irvine Ranch.

    Arguably the signature achievement of this past decade, and the one getting the most attention in the media, has been the revival of downtown as a residential and cultural hub. Having essentially abandoned the model of a multipolar city, L.A. has poured billions in infrastructure and subsidies into a half-baked attempt to turn Los Angeles into a faux New York. This is something of a fool’s errand since barely 3% of area residents work downtown, and most cultural consumers live far away on the westside or in the San Fernando Valley.

    New Mayor Eric Garcetti is also a density advocate, and is placing huge bets on the massive building of high-end high-rise housing, all this despite weak job and population growth. In his campaign he emerged as the candidate of developers who want to densify the city, including Hollywood, over sometimes fierce grassroots opposition.

    Compared to his inept and economically clueless predecessor, Antonio Villaraigosa, Garcetti represents something of an upgrade. He at least knows jobs matter at least as much as development deals for contributors. Yet he remains pretty much a creature of the failed leadership culture of L.A., which is dominated by public employee unions, subsidy-seeking developers and greens, largely from the city’s affluent westside.

    Can L.A. turn itself around? The essential ingredients that drove the city’s ascendency remain: its location on the Pacific, its near-perfect climate and spectacular topography. The key now is for the region to build an economic strategy that allows it to use its assets, and build around its increasingly immigrant-dominated grassroots economy. Innovation in music, fashion and food continue at the grassroots level, with much of the inspiration coming from the city’s increasingly racially diverse mestizo culture.

    What L.A. needs now is not a slick media campaign, but a concerted effort to tap this neighborhood-centered energy. The city of the future needs to reinvent itself quickly, before it fades further behind its competitors on the coasts and in Texas. Successful cities such as  Boston, San Francisco, Seattle  and Houston all managed to find ways to nurture new industries to supplement their traditional ones. Los Angeles should be able to do the same, but only if it seizes on its fundamental assets can it again become a city with a future.

    This story originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

  • Progressive Policies Burden the Yeoman Class

    Obamacare’s first set of victims was predictable: the self-employed and owners of small businesses. Since the bungled launch of the health insurance enrollment system, hundreds of thousands of self-insured people have either had their policies revoked or may find themselves in that situation in the coming months. More than 10 million self-insured people, many of them self-employed, could meet a similar fate.

    Unlike large companies or labor unions, which have sought to delay or duck implementing the Affordable Care Act, what could be called the yeoman class lacks the political might to make much of a dent in Washington policies. Indeed, in the Obama era, with its emphasis on top-down solutions and Chicago-style brokering, Americans who work for themselves probably are more marginalized today than at any time in recent memory.

    Virtually every major initiative of this administration – from taxation and regulation to monetary policy and Obamacare – has been promulgated with little concern for the self-employed. Many feel themselves subject to an apparent attempt to transfer middle class incomes to the poor just as ever more wealth concentrates in the “1 percent.” Not surprisingly, 60 percent of business owners surveyed by Gallup expressed opposition to the administration.

    The divide between the yeoman and the political community marks a major departure from the norms of American history. After all, people came to America in large part to secure “a piece of the pie,” whether through owning a small business or a farm, goals often unattainable in Europe. Thomas Jefferson, notes historian Kenneth Jackson, “dreamed of the U.S. as a nation of small yeoman farmers who would own their own land and cultivate it.”

    The rural yeoman ascendency lasted well into the late 19th century, when the populist movement fell to triumphant industrial capitalism. Yet the drive to disperse property did not end there, but resurfaced in the expansion of urban homeownership, something strongly supported by the New Deal administration. “A nation of homeowners,” President Franklin Roosevelt believed, “of people who own a real share in their land, is unconquerable.” From 1940-60, nonfarm homeownership rose from 43 percent of Americans to more than 58 percent.

    Early on, some progressives, particularly among intellectuals, recoiled against the rise of a class of petty landowners. Some of them, historian Christopher Lasch observed, saw “a republic of producers” as necessarily “narrow, provincial and reactionary.” This view is echoed today by Democrats such as former Clinton administration adviser Bill Galston, who dismisses small business as “a building block of the Republican base.” Democrats, he suggests, should instead seek a reconciliation with Big Business and its powerful cadre of lobbyists.

    An expanding cohort

    Yet, Democrats someday may rue tossing off the yeoman class. Unlike such groups as white racists, defense hawks and social conservatives, all of whose ranks are thinning, the numbers of the self-employed are growing. Independent contractors, according to Jeffrey Eisenach, an economist at George Mason University, have increased by 1 million since 2005; one in five works in such fields as management, business services or finance, where the percentage of people working for themselves rose from 28 percent to 40 percent from 2005-10. Many others work in fields like energy, mining, real estate or construction. Altogether, there are as many as 10 million such independent workers, constituting upward of 7.6 percent of the U.S. labor force and earning more than $626 billion.

    This shift to self-employment is occurring even in heavily regulated states like California. Since 2001, the number of self-employed people in the Golden State grew by 15.6 percent, versus a gain of 9.4 percent for the nation. In terms of states’ share of self-employed in the workplace, California ranks in the top five; three of the others, Vermont, Maine and Oregon also are blue states.

    Why is this the case? Ironically, this may be a reaction to expansive regulatory regimes that tend to both reduce corporate employment and also encourage some individuals “to take their talents” solo into the marketplace without having to deal with, for example, labor laws and environmental regulations.

    At the same time, technology allows people to work in an increasingly dispersed manor. The number of telecommuters has soared by 1.7 million workers over the past decade, a 31 percent increase in market share, and now accounts for 4.3 percent of all employment.

    Obamacare is only one aspect of government’s assault on the yeoman class. Attempts to regulate housing and encourage denser, usually rental, units ultimately works against the interests of home-based small businesses by raising house prices. The extra bedroom that becomes the home office now can be seen as “wasteful” even if – in terms of generating greenhouse gases – working at home is far more efficient than commuting, even by mass transit.

    Alienating allies

    Over time, these conflicts could threaten the interests of some groups that now reside firmly in the Obama majority coalition. This reflects the changing demographics of small enterprise; the yeomanry is slowly becoming far more diverse. From 1982-2007, for example, African American-owned businesses increased by 523 percent; Asian American-owned businesses grew by 545 percent; Hispanic American-owned businesses by 696 percent; businesses owned by whites increased by 81 percent. Today, minority-owned firms make up 21 percent of the nation’s 27 million small businesses.

    Immigrants, a largely Democratic-leaning constituency, constitute a growing part of the entrepreneurial landscape. The immigrant share of all new businesses, notes the Kauffman Foundation, grew from 13.4 percent in 1996 to 29.5 percent in 2010. They also constitute roughly a quarter of founders of high-tech start ups, and have done so for most of the past generation.

    Women, another Obama-leaning group, have also expanded their footprint; over the past 15 years, the number of women-owned firms has grown by one and a half times the rate of other small enterprises. These companies account for almost 30 percent of all enterprises; from 1997-2012, the number of women-owned U.S. firms increased by 54 percent, versus an overall growth rate for all firms of 37 percent.

    Eventually, the potential yeoman backlash may also spill over to millennials, another key Obama constituency. As a generation, their desire for homeownership and economic self-reliance runs headlong into both the tepid economic recovery and regulatory policies. Over time, as they age, their interests could diverge from the expanding welfare state, whose primary mission appears to be to transfer wealth not only from the middle class to the poor but from younger to older Americans.

    As millennials age, many will seek to buy homes, start businesses and families. In contrast to their common, often-naïve embrace of the idea of bigger government, developed in their student years, experiences as potential homeowners and parents, as well as business owners, might make them skeptical of “top down” solutions imposed by largely baby boomer ideologues.

    Reply from the Right?

    Yet, this will be no cakewalk for conservatives. It is not enough to simply dismiss Obamacare, or other regulations, without endorsing some of the measures’ positive attributes, such as assuring one’s children or protecting the rights of those with “pre-existing conditions.” The yeomanry may want less-Draconian legislation, but they may not be so anxious to leave their health care utterly exposed to unfettered market forces.

    Democrats, in fact, could make a run at this constituency, particularly if the Republicans continue a political approach that alienates, in particular, a more diverse yeomanry – gays, many women and ethnic minorities, immigrants and creative professionals. Here, in fact, it might be better to be more radical than less, proposing something more like a Canadian “single payer” health system that would separate employment status from health care. Democrats also could also support some form of minimum coverage designed for the growing numbers of Americans who work for themselves.

    Ultimately, over time, the yeoman constituency, although poorly organized and without a programmatic agenda, is one that needs to be addressed, if for no other reason than they constitute a growing portion of the workforce. The party, or movement, that successfully does this will have a great opportunity to seize the political future.

    This story originally appeared at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Official White House Photo

  • The Surprising Cities Creating The Most Tech Jobs

    With the social media frenzy at a fever pitch, people may be excused for thinking that Silicon Valley is still the main engine for growth in the technology sector. But a close look at employment data over time shows that tech jobs are dispersing beyond the Valley and its much-celebrated urban annex of San Francisco.

    We turned to Mark Schill, research director at Praxis Strategy Group, to analyze job creation trends in the nation’s 52 largest metropolitan areas from 2001 to 2013, a period that extends from the bust of the last tech expansion to the flowering of the current one. He looked at employment in the industries we normally associate with technology, such as software, engineering and computer programming services. He also analyzed the numbers of workers in other industries who are classified as being in STEM occupations (science, technology, engineering and mathematics-related jobs). This captures the many tech workers who are employed in businesses that at first glance may not seem to have anything to do with technology at all. For instance just 8% of the nation’s 620,000 software application developers work at software firms — the vast majority are employed in industries as disparate as manufacturing, finance, and business services.

    The four metro areas that have generated tech jobs at the fastest pace over the past 12 years are far outside the Bay Area, in the southern half of the country, in places with lower costs of living and generally friendly business climates. In first place: Austin-Round Rock-San Marcos, Texas, where tech companies have expanded employment by 41% since 2001 and the number of STEM workers has risen by 17% over the same period. Looking at the near-term, 2010-13, the Austin metro area also ranks first in the nation.

    The keys to Austin’s success lies largely in its affordability and high quality of life, both in its small urban core and rapidly expanding suburbs. Best known as the hometown of Dell, a host of West Coast tech titans have set up shop there in recent years, including AMD, Cisco, Hewlett-Packard, Intel and Oracle.

    Much the same can be said about Austin’s East Coast doppelganger, Raleigh-Cary, N.C., which ranks second on our list. Like Austin, Raleigh-Cary is a big college metro area, and also hosts the state capital, something that tends to lessen wild swings during industry downturns. Like Austin, Raleigh is not a primary center of the social media boom, but it has registered a 54.7% increase in tech sector employment since 2001 and an impressive 24.6% rise in STEM jobs. Much of the growth comes from global companies such as IBM,GSK, Syngenta, RTI International, Credit Suisse, and Cisco.

    The next two spots go to two surprising metro areas with a less than stellar degree of tech cred: Houston-Sugarland-Baytown, Texas, and Nashville-Franklin-Murfreesboro, Tenn. Not much of a role for social media here, but STEM employment has expanded 24% in Houston since 2001 thanks to boom times for the increasingly technology-intensive energy industry. The Houston metro area ranks second only to Silicon Valley in the proportion of engineers in its workforce.

    In Nashville, tech employment is up 65.8%, largely due to the area’s rise as a hospital management and healthcare IT hub, with a 160% spike in jobs in computer systems design services.

    The Strange Case of Silicon Valley

    How about the Bay Area, the legendary center of the tech industry? There has certainly been considerable growth in the San Francisco-Oakland-Fremont MSA, which has logged a 28% expansion of tech company jobs. The region is unique as a beneficiary of the social media boom: Twitter and other tech darlings are concentrated in the area, with many others in adjacent San Mateo County. Tech employment in San Francisco  plunged by nearly half between 2000 and 2004, but now appears back to the levels experienced in the first dot-com boom.

    In contrast, San Jose-Sunnyvale-Santa Clara — home to roughly 40% of the nation’s venture capital— clocks in at a mediocre 25th on our list. How could this be, giving the presence of such iconic companies as Google, Intel, Facebook and Apple? After all, the area has gained 20,000 jobs in Internet publishing and web search since 2001. However that pales next to the decline in high-tech manufacturing, where the area has lost an estimated 80,000 jobs. This may be one key reason why STEM employment has dropped 12% in the San Jose area over the past 12 years despite the success of so many tech firms over that period. In San Francisco, STEM employment is up, but only a tepid 5.5%.

    This disappointing trend also extends to some other historically strong tech areas, most of which have grown recently but are still struggling with losses over a decade ago. This includes Boston-Cambridge-Quincy (26th) and San Diego-Carlsbad-San Marcos (28th), both of which were early tech high-fliers. Boston-area tech companies have expanded employment by 16% since 2001, but the number of STEM jobs is down 1.6%. The San Diego area registered strong growth in tech and STEM employment in the first years of the millennium, but since 2010 gains have been few. Being first may earn a region kudos, but does not seem to guarantee continued rapid growth.

    But not all of the early high-fliers are underperforming. The Seattle-Tacoma-Bellevue area has remained a consistent tech performer, ranking 7th on our list with 45.5% growth in tech company employment and a 19.5% jump in STEM jobs. One reason for this may lie in the diversity of companies in the region, from software giant Microsoft to dominate etailer Amazon as well as Boeing, a long-time massive employer of technical workers. Seattle’s success, like that of Houston and Nashville, has much to do with both manufacturing and trade as well as an associated rising demand for software services; it is often forgotten that a majority of the country’s scientists and engineers work for manufacturers, and that industrial companies account for 68% of business R&D spending, which in turn accounts for about 70% of total R&D spending.

    Is Tech Moving Downtown?

    Perhaps nothing has captured the imagination of the media and professional urban boosters as much as the notion that tech jobs are moving from the suburbs to the inner core. Although there is some evidence of growth in social media jobs in some central business districts, notably San Francisco, most large urban centers have not done particularly well in technology over the past decade.

    In some ways, this reflects the extreme volatility of Internet-based software and marketing firms, which, unlike tech hardware or customer support services, have shown a notable tendency to concentrate in urban cores. In some places, notably New York, these sectors have grown at the expense of traditional media and advertising employment, which have fallen off dramatically in recent years. None of the three largest metro areas in the country — New York, Los Angeles and Chicago — made it into the top half of our rankings. New York, where any two nerds in a room can expect gushing media attention, clocks in at 36th. Some locals claim the city is now second to the Silicon Valley in tech, but that is widely off the mark. Since 2001, Gotham’s tech industry growth has been a paltry 6% while the number of STEM related jobs has fallen 4%.

    The chances of Gotham becoming a major tech center are handicapped not only by high costs and taxes, but a distinct lack of engineering talent. On a per capita basis, the New York area ranks 78th out of the nation’s 85 largest metro areas, with a miniscule 6.1 engineers per 1,000 workers, one seventh the concentration in the Valley.

    This means that tech growth is likely to be limited largely to areas like new media, which will be hard-pressed to replace jobs lost in more traditional information industries. Since 2001 newspaper publishing has lost almost 200,000 jobs nationwide, or 45% of its total, while employment at periodicals has dropped 51,000,or 30%, and book publishing, an industry overwhelmingly concentrated in New York, has lost 17,000 jobs, or 20% of its total.

    The prospects for Los Angeles-Long Beach-Santa Ana (38th) and Chicago-Joliet-Naperville (42nd) seem no better. Due in large part to the continuing shrinkage of its aerospace sector, the number of STEM jobs in the L.A. area is down 6.3% since 2001though tech industry employment has grown a modest 12%. For its part, Chicago has experience significant decline in both tech employment and STEM jobs over the past 12 years.

    On the positive side of the ledger, L.A. at least still boasts the largest number of engineers in the country. Chicago, in comparison, has barely half as many engineers per capita as L.A. This suggests that Los Angeles may prove better positioned in terms of developing tech-related jobs than its Midwestern rival.

    Look To The Hinterland

    Where should we look for future tech growth? Certainly long-term you can’t count out Silicon Valley and its enormous, and uniquely deep reservoir of engineering expertise. Seattle also seems a safe bet, in part due to its lower energy and housing costs, at least compared to San Francisco and the Valley.

    But perhaps the biggest trend over time will be dispersion. After the top five on our list come a series of less-celebrated metro areas, including Salt Lake City, Indianapolis, Baltimore, Jacksonville, Kansas City and Denver. These areas are generally less expensive than the trendier cities, and could attract more tech investment once the current bubble conditions die down.

    The future of tech may be best represented not by the fresh-faced 20something social media CEOs lionized by the media but by the huge tech corridor along I-15 between Salt Lake and Provo, now filling up with offices of such tech titans as Intel, Adobe and eBay. In recent years the University of Utah has led all universities in fostering startups; it may not have the cachet of Stanford yet, but the trend lines are encouraging. A critical factor here may be the cost of living, particularly for over-30 engineers who can never really hope to buy a house in San Francisco or Silicon Valley but can find housing prices 50% or less than what they would pay on the coast.

    Further out expect other, often smaller communities to emerge as tech hot spots. One recent report from the Progressive Policy Institute spotlighted fast high-tech growth in such places as Madison County, Ala., exurbs like Virginia’s Loudon County, as well as resurgent Orleans parish, Louisiana. Another study, this one by the Bay Area Council, found that of the 10 fastest-growing tech centers in America, seven have populations around or under 150,000.

    This suggests that, contrary to the conventional wisdom, tech employment is likely not to grow fastest in our biggest and most expensive urban cores, but spread out across an ever-widening geography. None will likely rival Silicon Valley, with its enormous resources and powerful inertia, but they will make themselves heard in the marketplace.

    Tech-STEM Metropolitan Growth Rankings, 2001-2013
      Rank Score Tech Industry 2001-2013 growth Tech Industry 2010-2013 Growth STEM Occupation 2001-2013 growth STEM Occupation 2010-2013 Growth
    Austin-Round Rock-San Marcos, TX 1 82.8 41.4% 24.1% 17.1% 15.7%
    Raleigh-Cary, NC 2 82.3 54.7% 18.5% 24.6% 12.3%
    Houston-Sugar Land-Baytown, TX 3 74.0 18.6% 15.2% 24.1% 14.4%
    Nashville-Davidson–Murfreesboro–Franklin, TN 4 72.4 65.8% 20.5% 12.3% 8.0%
    San Francisco-Oakland-Fremont, CA 5 70.1 28.0% 25.0% 5.5% 13.8%
    Salt Lake City, UT 6 69.7 38.0% 15.0% 19.2% 10.4%
    Seattle-Tacoma-Bellevue, WA 7 69.0 45.5% 11.2% 19.5% 10.1%
    San Antonio-New Braunfels, TX 8 67.4 45.1% 12.7% 21.9% 7.4%
    Indianapolis-Carmel, IN 9 67.2 50.4% 21.3% 10.6% 7.5%
    Baltimore-Towson, MD 10 64.1 50.7% 9.8% 19.6% 6.4%
    Jacksonville, FL 11 63.7 83.5% 6.4% 14.3% 4.4%
    Dallas-Fort Worth-Arlington, TX 12 63.5 20.5% 19.6% 8.3% 11.7%
    Kansas City, MO-KS 13 60.1 30.0% 18.5% 7.1% 8.8%
    Phoenix-Mesa-Glendale, AZ 14 56.6 29.7% 17.4% 4.8% 7.9%
    Denver-Aurora-Broomfield, CO 15 54.8 5.7% 17.6% 5.7% 10.2%
    Pittsburgh, PA 16 52.5 14.8% 14.0% 8.2% 7.6%
    Detroit-Warren-Livonia, MI 17 52.2 -3.5% 21.5% -13.8% 16.8%
    Las Vegas-Paradise, NV 18 51.9 34.3% 3.3% 19.0% 4.0%
    Oklahoma City, OK 19 49.8 22.9% 4.3% 8.4% 8.6%
    Riverside-San Bernardino-Ontario, CA 20 49.2 31.5% 8.5% 16.8% 1.3%
    Grand Rapids-Wyoming, MI 21 48.2 -5.1% 6.8% 0.9% 14.4%
    Charlotte-Gastonia-Rock Hill, NC-SC 22 48.2 13.4% 7.7% 6.4% 8.5%
    Portland-Vancouver-Hillsboro, OR-WA 23 47.6 14.4% 9.5% 4.4% 7.9%
    Cincinnati-Middletown, OH-KY-IN 24 47.5 14.1% 14.7% 2.6% 6.5%
    San Jose-Sunnyvale-Santa Clara, CA 25 47.2 18.0% 17.0% -11.9% 10.9%
    Boston-Cambridge-Quincy, MA-NH 26 45.4 16.2% 13.3% -1.6% 7.1%
    Sacramento–Arden-Arcade–Roseville, CA 27 44.4 40.8% 3.6% 7.8% 2.4%
    San Diego-Carlsbad-San Marcos, CA 28 43.6 30.2% 1.5% 11.3% 3.0%
    Atlanta-Sandy Springs-Marietta, GA 29 43.5 3.3% 13.0% -0.9% 7.8%
    Washington-Arlington-Alexandria, DC-VA-MD-WV 30 43.3 18.1% 1.3% 17.6% 2.2%
    Orlando-Kissimmee-Sanford, FL 31 41.7 22.4% 1.5% 11.7% 2.9%
    Louisville/Jefferson County, KY-IN 32 41.2 -17.0% 13.1% 1.5% 8.6%
    Minneapolis-St. Paul-Bloomington, MN-WI 33 40.5 -0.6% 9.0% 2.4% 6.7%
    Milwaukee-Waukesha-West Allis, WI 34 39.9 -3.1% 14.4% -3.8% 7.0%
    Tampa-St. Petersburg-Clearwater, FL 35 39.6 19.8% 10.9% -4.5% 4.8%
    New York-Northern New Jersey-Long Island, NY-NJ-PA 36 36.7 5.9% 12.2% -4.1% 4.3%
    Virginia Beach-Norfolk-Newport News, VA-NC 37 36.3 15.8% 0.7% 6.2% 3.0%
    Los Angeles-Long Beach-Santa Ana, CA 38 33.1 12.0% 6.9% -6.3% 4.1%
    Richmond, VA 39 33.0 25.7% -1.0% 1.4% 1.9%
    St. Louis, MO-IL 40 33.0 22.9% 5.1% -4.1% 2.0%
    Providence-New Bedford-Fall River, RI-MA 41 32.3 23.7% 2.7% -2.1% 1.6%
    Chicago-Joliet-Naperville, IL-IN-WI 42 31.6 -7.5% 12.1% -9.3% 5.5%
    Buffalo-Niagara Falls, NY 43 29.3 17.8% 0.3% -0.1% 0.8%
    Cleveland-Elyria-Mentor, OH 44 28.3 3.7% 6.4% -9.1% 3.7%
    Rochester, NY 45 28.2 -7.5% 17.5% -13.6% 2.6%
    Memphis, TN-MS-AR 46 27.6 -9.7% 5.1% -4.3% 4.0%
    Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 47 26.4 5.1% 2.8% -3.5% 1.3%
    Birmingham-Hoover, AL 48 25.1 -15.3% 7.1% -6.5% 3.3%
    Hartford-West Hartford-East Hartford, CT 49 23.9 6.9% 2.6% -5.8% 0.4%
    Miami-Fort Lauderdale-Pompano Beach, FL 50 20.9 2.6% 0.5% -7.3% 0.6%
    New Orleans-Metairie-Kenner, LA 51 20.9 12.6% 5.9% -14.7% -0.3%
    Analysis by Mark Schill, Praxis Strategy Group, mark@praxissg.com
    Data Source: EMSI Class of Worker, 2013.4 – QCEW, Non-QCEW, and self-employed
    Note: The Columbus MSA is excluded from this analysis because tech job shifts in that region appear to be due to firms changing industrial classifications.

    This story originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Computer engineer photo by BigStockPhoto.com.

  • The ‘Great State’ of San Francisco

    The public stock offering by Twitter reflects not only the current bubble in social media stocks, but also the continuing shift in both economic and political power away from Southern California to the San Francisco Bay Area, home to less than one in five state residents. Not since the late 19th century, when San Francisco and its environs dominated the state, has influence been so lopsidedly concentrated in just one region.

    The implications of this shift are profound not only for the ascendant northerners, but also for the increasingly powerless, rudderless regions that are home to the vast majority of Californians. With some 16 million residents by far the state’s largest region, Southern California long dominated both state politics and the economy. Today it, along with virtually all interior parts of the state, is effectively ruled by the Bay Area’s admixture of venture capitalists, tech moguls, political and environmental activists.

    This is very bad news, not just for conservatives and Republicans, a species close to extinction in the Bay Area, but for many working and middle-class Democrats. The Bay Area ideological grip – fiercely green and politically correct to a fault – has separated California from its historic commitment to economic diversity and into a one-size-fits-all approach.

    The current shift of political power has been building for the last decade, and has put to an end a Southern California ascendency that ran from the days of Richard Nixon and Ronald Reagan to Pete Wilson, Gray Davis and Arnold Schwarzenegger. Today, there is not one Southland politician with any true state-wide influence. Indeed, the only politicians of any influence from Southern California have been a steady procession of union-influenced politicians: Fabian Nunez, Herb Wesson, Karen Bass and John Perez – all who have served as State Assembly speakers. And all of them will eventually fade into well-deserved obscurity.

    In contrast, notes long-time analyst Dan Walters, the Bay Area has established a “near-hegemony in California politics.” Home to both of the state’s U.S. Senators, San Francisco’s Dianne Feinstein and Marin’s Barbara Boxer, it also domiciles the state’s most important House leader, Nancy Pelosi, again of San Francisco. But the real domination is at the state-wide level where Bay Area residents control virtually every key political office, including Lt. Gov. Gavin Newsom, former mayor of San Francisco and Attorney Gen. Kamala Harris, San Francisco’s former district attorney.

    Astute observers of state politics, such as Joe Matthews, note that the “machine” nature of Bay Area politics, most epitomized by former San Francisco Congressman Phil Burton and his brother, John, has shaped a political class with sharper elbows. Urban San Francisco, in particular, he suggests, has a rough-and-tumble aspect missing from Southern California’s more dispersed and largely indifferent variety.

    This bizarrely lopsided configuration could prove a temporary and random phenomena, but the long-term economic and demographic trends favor a growing Bay Area ascendency. The current boom in Silicon Valley is minting billions in new riches for denizens of high-tech companies and their financiers at a time when office parks across most of the state, including Los Angeles and Orange Counties, are suffering significant vacancies. In contrast, those in Palo Alto and San Francisco are filling up even at ever-rising prices.

    This reflects in large part the secular decline of Southern California, which has never fully recovered from the loss of its landmark aerospace industry as well as the Los Angeles riots. The area’s dependence on manufacturing, where it remains the nation’s largest center, has suffered huge damage – down 18 percent just since 2007. Some of this can be terraced to the very regulatory policies backed by Bay Area politicos and pundits.

    Race is a factor here, too. For its part, the Bay Area’s population is increasingly dominated by well-educated Anglos and Asians – while historically underperforming African Americans and Latinos, largely immigrants, are concentrated in southern California. San Francisco, for example, is only 22 percent black or Hispanic; in Los Angeles, this percentage approaches 60 percent.

    There is also a vast chasm which has developed in terms of both job creation and unemployment rates. Over the past six years San Francisco and Silicon Valley, after losing many jobs in the 2000-2001 tech bust, have created 44,000 new jobs and now have recovered their losses from 2007. In contrast, Los Angeles and Orange counties, even after some recent growth, are stuck almost 300,000 below their 2007 levels. Not surprisingly unemployment in Santa Clara county sits around 7 percent while San Francisco county and San Mateo county unemployment numbers are under 6 percent. In contrast Los Angeles, the state’s largest county, stays at roughly 10.8 percent.

    Even worse off are places like the Central Valley and the Inland Empire, that have large numbers of under-educated people, and have long depended on such basic industries as construction, agriculture, manufacturing and logistics. Riverside-San Bernardino counties and Sacramento county together are still almost 200,000 jobs below their 2007 levels. Some of the rural counties in the Central Valley still suffer double-digit unemployment rates and staggering levels of poverty even as mid-twenties Bay Area nerds – often heads of companies with no history of profit – engage millions, and even billions, in IPO wealth.

    The confluence of Bay Area political and economic power is not coincidental. Increasingly the Silicon Valley oligarchs are rapidly replacing Hollywood as the primary source of cash for Democratic politicians.

    Energy provides the clearest example of the Bay Area’s ability to determine policy. Many major tech firms and venture capitalists have made millions backing renewable energy ventures made profitable by state mandates and subsidies. With the high energy-consuming industrial part of the Silicon Valley increasingly eclipsed by social media and software segments, high-priced electricity matters less and less to tech oligarchs who can easily place their servers in lower-cost states. Opposition to oil and gas development, which could resuscitate some of the state’s hard-hit quarters, is predictably strongest in the Bay Area.

    Similarly, strict controls over water use, although expensive for the Bay Area, hit agricultural and industrial users mostly located in the interior the hardest. These, measures do not much impact the ultra-rich buyers in places like Palo Alto, much less in lawn-less San Francisco.

    Is this reconfiguration a permanent one? Certainly the Bay Area’s swagger will decline once the current tech bubble, as is inevitable, implodes, likely within a year or two. The “tech glitz” around concentrations of start-up companies is a movie we have seen before. Back in the early years of the decade, similar firms fell victim to flawed business models and rapid industry consolidation. In San Francisco, for example, tech employment crashed from a high of 34,000 in 2000 to barely 18,000 four years later.

    But even if the Bay Area’s economic edge recedes, its political influence is unlikely to be challenged in the near future given the dearth of talented politicians. Indeed the only possible governor candidate from south of San Jose, Antonio Villaraigosa, is lightly regarded for his less-than-successful term as mayor of Los Angeles; his only hope in a primary lies in bloc voting by his fellow Latinos.

    Instead, most likely, our next governor will be either Gavin Newsom or state Attorney General Kamala Harris, progressives from San Francisco. Until Southern California can develop new leaders to replace today’s mediocrities, and starts to push an agenda appropriate to our poorer and more diverse population, we better get used to living in what has become the Great State of San Francisco.

    This story originally appeared at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

  • Are Millennials Turning Their Backs on the American Dream?

    In his classic 1893 essay, “The Significance of the Frontier in American History,” historian Frederick Jackson Turner spoke of “the expansive character of American life.” Even though the frontier was closing, Turner argued, the fundamental nature of Americans was still defined by their incessant probing for “a new field of opportunity.” Turner’s claim held true for at least a century—during that time, the American spirit generated relentless technological improvement, the gradual creation of a mass middle class, and the integration of ever more diverse immigrants into the national narrative.

    Yet today, many consider this modern period of “expansiveness” to be as doomed as the prairie frontier culture whose denouement Turner portrayed. Nothing makes this clearer than the perception of a majority of middle class Americans that their children will not do better than them, with as many as pessimistic about the future as are optimistic. Almost one-third of the public, according to Pew, consider themselves “lower” class , as opposed to middle class, up from barely one quarter in 2008.

    Are Young Americans Becoming Herbivores?

    To some, this dismal outlook is either inevitable, or even positive, as Americans shift from their historically “expansive” view and embrace a more modest déclassé future. Rather than seek new worlds to conquer, or even hope to retain the accomplishments of prior generations, contemporary young Americans seem destined to confront a world stamped by ever narrowing opportunity, class distinction, and societal stagnation. Once a nation of competitive omnivores and carnivores, America could be turning more docile—a country of content, grazing herbivores.

    Just such a diminished world view has already taken root in Japan, particularly among that country’s younger males. Growing up in a period of tepid economic growth, a declining labor market, and a loss of overall competitiveness, Japan’s male “herbivores” are more interested in comics, computer games, and Internet socializing than building a career or even the opposite sex. Marriage and family have increasingly little appeal to them, sentiments they share with most women their age.

    This devolved future is widely embraced by both left and right. Libertarian-leaning economist Tyler Cowen identifies a permanent upper class, essentially those who command machines and particularly the software that runs them, while the masses, something like 85 percent of the population, need to adjust to lower living standards, and a diet made up largely of beans and rice.

    This approach has appeal to the grandees of finance, who see in a diminishing American dream not only higher relative status for themselves but an opportunity to turn prospective property owners into rental serfs. Large equity funds have been particularly aggressive about buying foreclosed homes and renting them out, often at high rates, to economically distressed families.

    This “rentership” society, as first suggested by Morgan Stanley’s Oliver Chang, reflects, in this sense, an almost Marxian dialectic that sees ownership of property concentrating in ever fewer hands. Conservative theorists have little problem with this, since they naturally defend class privileges and are less committed to upward mobility than assuring the relentless triumph of market capitalism.

    But the most potent apologists for shrinking the American dream come from the very left which, in the past, once championed broad-based economic growth and upward mobility. Instead, progressives increasingly favor their own version of a “rentership society,” albeit one more regulated than the conservative version, but also accepting , and even encouraging, the proletarianization of the American middle class. (Turning them, in the process, into good, reliable clients of the Democratic Party). Goodbye Levittown, with its promise of property ownership and privacy, and back to the tenements of Brownsville, now dressed up as “hip and cool.”

    Some even have suggested getting rid of “middle class norms of decency” governing housing and bringing back the boarding house of the 19th and early 20th Century. The goal, of course, is to facilitate ever more densification of urban areas and to rein in the dreaded suburban “sprawl.”

    This tendency to force densification and downgrade ownership is deeply pronounced among urbanists and the green lobby, two groups with ample power in most blue states and regions. “Progressive” theorists such as Richard Florida see wealth transferring to a handful of “spiky” American cities, places such as San Francisco and Manhattan, where even the prospect of home ownership is inconceivable to the vast majority of the population.

    There are many others, farther out on the green urbanist track, who believe that the entire notion of middle class upward mobility is too consumption-oriented and, well, sort of in bad taste. They maintain that millennials will not only eschew home ownership but the ownership of automobiles and practically anything else bigger than their beloved electronic gadgets.

    Indeed, this transformation would be greeted with enthusiasm by many greens and traditional urbanists. The environmental magazine Grist even envisions “a hero generation” that will escape the material trap of suburban living and work that engulfed their parents. “We know the financial odds are stacked against us, and instead of trying to beat them, we’d rather give the finger to the whole rigged system,” the millennial author concludes.

    Are Americans Millennials Victims of Circumstance?

    Are young Americans ready to move off the competitive playing field and onto the herbivore pastureland? The economic stagnation certainly seems to have had a negative effect on everything from marriage to fertility rates, which are at their lowest levels in a quarter century. Much like their Japanese counterparts, young Americans increasingly avoid both marriage and having children, according to a recent Pew Foundation study. Despite a total rise in population of 27 million (PDF), there were actually fewer births in 2010 than there were ten years earlier.

    Is this a matter of preference or a reaction to hard times?  Hemmed in by college debt and a persistently weak economy, almost 40 percent of the unemployed are between 20 and 34. A smaller percentage of American males between 25 and 34—the key age for prospective families—are in the workforce than at any time since 1948.

    One reason some celebrate the rejection of marriage and family is that it undermines the suburban environments that overwhelmingly attract most families. Urban theorists such as Peter Katz maintain that millennials (the generation born after 1983) show little interest in “returning to the cul-de-sacs of their teenage years.” Manhattanite Leigh Gallagher, author of the predictable anti-burbs broadside The Death of Suburbs, asserts with certitude that that “millennials hate the suburbs” and prefer more eco-friendly, singleton-dominated urban environments.

    Another apparent casualty here may be entrepreneurship, the very thing that characterized both boomers and their successors, Generation X.  Entrepreneurship rates remain strong among older Americans , but start-up rates among young people look far weaker. Millennials’ experience with the economy makes them, according to generational chroniclers Morley Winograd and Mike Hais, “very risk averse,” particularly in comparison with previous generations.

    Can millennials recreate the “Expansive” culture in their own image?

    Winograd and Hais see millennial timidity as a mostly temporary phenomena. Far from rejecting suburbia, homeownership, and the American dream, millennials are simply seeking to recreate it in their own image. Contrary to the notions promoted by the Wall Street financiers, urban land speculators, and greens, most millennials, particularly those entering their 30s, express a strong desire to own a home, with three times as many eyeing the suburbs as the inner core.

    The recession, according to a recent Wilson Center study (PDF), did not kill the desire to own a home among younger people: more than 90 percent of those under 45 said they wanted to own their own residence.    Another survey by TD Bank found that 84 percent of renters aged 18 to 34 intend to purchase a home in the future. And a Better Homes and Gardenssurvey found that three in four sawhomeownership as “a key indicator of success.”

    Survey data also suggests that millennials are highly focused on getting married and being good parents. Nearly four in five millennials express a desire to have children. This will become more significant as millennials reach their 30s and early 40s, the prime age for family formation. Over the next decade, at least six million people will be entering their 30s, and that number is expected to keep expanding through 2050.

    None of this suggests that, as some social conservatives might hope, that the Ozzie and Harriet family is about to make a major comeback. For one thing, millennials will likely get hitched and have children later than previous generations. Their marriages also will probably be less traditional and male-centered. Hais and Winograd assert that millennials are a “female dominated” generation and have a less traditional view of sex roles—or for that matter, what constitutes a family, since they tend to be highly supportive of same sex marriage.

    But if they differ from past generations, most millennials clearly do not aspire to the ideal of singleness and childlessness embraced by more radical boomer enthusiasts. That said, they will not recreate the family or their residence in their parents’ image. They may, for example, be more willing to customize their residences for their own unique needs or for greater energy efficiency, and place greater emphasis on “technology capabilities” than on a larger kitchen, or some more traditional suburbanaccoutrements.

    As they get on with life, they will also make new demands on their bosses, warn Hais and Winograd. Companies will need to accommodate as well the new familial arrangements that Millennials are likely to seek out. This means firms will need to adopt policies that favor telecommuting, flexible hours, and maternity and paternity leave that will allow for a better balance between work and personal life.

    But in the long run, millennials, if given a chance, are likely to maintain the national ethos of aspiration despite the powerful headwinds they now face. As Turner suggested at the end of his famous essay, it would be “a rash prophet who would assert that the expansive character of American life has now entirely ceased.”

    The real issue here is not the declining validity of American aspiration, but overcoming the economic, political and social factors that threaten to suffocate it. Similar challenges—the concentration of wealth of the Gilded Age, the Great Depression, war, and environmental angst—have periodically appeared and were eventually addressed through technological innovation, and critical political and social changes. Rather than accept the shrinkage of the American prospect, we should seek ways to restore it for those who will inherit this republic.

    This story originally appeared at The Daily Beast.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

  • American Cities May Have Hit ‘Peak Office’

    Despite some hype and a few regional exceptions, the construction of office towers and suburban office parks has not made a significant resurgence in the current recovery. After a century in which office space expanded nationally with every uptick in the economy, we may have reached something close to “peak office” in most markets.

    The amount of new office space in development is extraordinarily low by historical standards, outside of a handful of markets. Back in the mid-1980s, according to the commercial real-estate research firm CoStar, upward of 200 million square feet of office space was built annually. After dropping precipitously in the early 1990s, construction rose again to 200 million square feet a year in the early 2000s before dropping well under 150 million square feet in 2006, and lower after that. This year, in what is purported to be the middle of an economic recovery,  we will add barely 30 million square feet,according to Reis Inc.

    Even with this paltry construction, vacancy rates nationwide have barely moved, hovering around 17%. This is nowhere near low enough to justify much more construction in the vast majority of markets, where office rents remain well below 2007 levels.

    Indeed, the trend in real estate remains to convert office spaces to other uses,particularly residential. Large-scale office construction is happening in just a handful of markets; New York and Houston are the only ones with 10 million square feet being built, with smaller amounts in the works in Boston, Washington, Dallas-Ft. Worth and the San Francisco Bay Area.

    Most of the current anemic growth is happening outside downtown areas. Silicon Valley, which is essentially a sprawling suburb, currently has about as much construction as San Francisco. In Houston, another big metro area with robust job growth, there is a new 47-story high-rise being developed downtown, but much of the action is taking place on the periphery, notably in the Energy Corridor. ExxonMobil’s massive new campus, at 3 million square feet, ranks with One World Trade Center in Manhattan as the nation’s largest new office projects.

    Through the third quarter this year, the amount of new office space under construction in suburban areas was roughly double the amount being built in central business districts, by CoStar’s count. Furthermore, only 7.1 million square feet of office space was absorbed downtown in the first nine months of 2013, compared to 51.5 million in suburban areas, CoStar says. But overall there is still 100 million square feet less space being used today than in 2007, and at current absorption rates, it could take six or seven years just to get back to where we were before the recession.

    The Weak Economy

    The key question here is not the geography of office space but why so little is being built. As long as economic growth is modest, don’t expect much change in the skyline in most downtowns, or suburbs. Job growth has been mediocre at best, and much of that has been in the low-wage and part-time category. McJobs and part-time workers do not generally fill office towers.

    The dirty little secret of this recovery is that labor participation rates are at the lowest level since 1978. Underemployment is rife, at around 18% to 20%, and much of that likely includes large numbers of people who used to work in offices.

    This is true even in New York City, where the rate of “office-using employment” has been dropping since the late 1960s and even in the recovery, has yet to rebound to the levels of 2000.

    Changing Use of Space

    Just as we have gotten used to more fuel-efficient cars, companies now utilize space more efficiently than before, largely through information technology. This is a trend many companies plan to accelerate. In the past, for example, your average mid-level executive had his own secretary; now it’s more common to have perhaps one aide for several managers. Historically office developers assumed that each worker would require 250 square feet of space; by the end of the decade this could drop to 100 to 125 square feet.

    Even the most notoriously bureaucratic of professions, law, is scaling back. A recent Cushman and Wakefield survey  found that most firms — many already downsizing — were working to reduce their office footprint per attorney from 800 to 500 square feet. Almost two out of five expect to use “hoteling,” or the sharing of offices among attorneys, something very rare a decade ago.

    At the same time, some of the sectors that are the best bets for expansion, such as information technology and media, are increasingly seeking out unconventional office space. Mayor Mike Bloomberg’s drive to upzone large parts of Midtown Manhattan to create ever-taller towers works operates on the assumption that new users will be much like the old ones. But some experts, such as New York-based architect Robert Stern, suggest that ultra high-rise development does not appeal to either creative businesses and tourists, while preserving older districts, with already developed buildings, does.

    Self-Employment and Home-Based Businesses

    Perhaps the biggest long-term threat lies in the shift from corporate to self-employment. From 2001 to 2012, the number of self-employed workers grew by 14%, according to a recent study by Economic Modeling Specialists. This is occurring not only in the metro areas that suffered the worst during the recession, such as Phoenix, Los Angeles and Riverside-San Bernardino, but also in the healthiest economies such as Houston and Seattle.

    Some of these now self-employed workers may end up in small offices, but many don’t leave home at all. Working at home is growing far faster than commuting by either car or transit, and in most U.S. metro areas, far exceeds those who get to work by public conveyance, most often to downtown areas. Over the past decade the number of U.S. telecommuters expanded 41% to some 1.7 million, almost double the much-ballyhooed increase of 900,000 transit riders.

    Are We Blowing Another Bubble?

    In some specialized, fast-growing markets, new office construction may well be justified. Raleigh is seeing some new construction in its small downtown, as are hot job markets such as Austin and oil-rich Midland, Texas, where a proposed 53-story office tower would be the tallest building between Dallas and Los Angeles.

    But in New York, plans for massive new office tower construction seem to contradict an unemployment rate considerably above the national average. Financial services, the primary driver of the Manhattan market, is showing signs of economic distress, with firms moving middle-management jobs to more affordable places such as Richmond, Va.; Pittsburgh; St. Louis; and Jacksonville, Fla.

    Perhaps even more worrisome, less than half of the space in new buildings in Manhattan is preleased, compared to over 70% in both Houston and Boston, and a remarkable 92% in San Jose/Silicon Valley. This reflects an apparent dearth of large employers in New York who could conceivably afford and fill ultra-expensive office space in the coming years, a recent article in Crain’s New York points out. Tech companies might be expected to help fill the gap, but we have to remember that after the last boomlet Silicon Alley suffered asteep contraction; it has since recovered, but could be hit hard again if the current bubble pops.

    San Francisco, the other current darling of office developers, is even more dependent on the current dot-com boom. The IPOs of Frisco-based firms such as Twitter appear to suggest the prospect of a whole new generation of office occupants. By one account, there is as much as 12 million square feet of new office space in the pipeline in the city, enough to satisfy historical demand for the next 16 years.

    Yet past experience shows many of these companies will likely dissolve or merge in the next few years. They may be fewer in numbers and longer established than last time around, as some local boosters eagerly suggest, but most are still unprofitable and many may never be truly viable. Following the 2000 dot-com crash, San Francisco office occupancy dropped roughly 10 million square feet, while tech employment crashed from a high of 34,000 in 2000 to barely 18,000 four years later.  As one real-estate executive put it at the time, “The office-space market here ”reminds me of the Road Runner cartoon where the Coyote runs into the wall.”

    Observers also point out that more traditional businesses, such as banks, continue to ship jobs elsewhere, in large part due to extraordinarily high costs. The fact that pre-leasing for SF’s new office buildings is barely 33% should add to the caution.

    None of this suggests there are not some good opportunities for new construction, but the office building’s role as a key indicator of the strength of the U.S. economy has faded. In great cities, rather than a ballyhooed era of new office skyscrapers we will see more conversions and the construction of residential high-rises, as well as medical buildings. The secular trend is for the dispersion of business service employment to smaller markets, and into people’s homes. The glory days of the American office tower are over, and not likely to return soon, given technological trends and a persistently tepid economy.

    This story originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Photo by Mark Lyon — Full Floor For Rent.

  • L.A. Ports Face Challenge from Gulf Coast

    In this strange era of self-congratulation in California, it may be seen as poor manners to point out tectonic shifts that could leave the state and, particularly, Southern California, more economically constrained and ever more dependent on asset bubbles, such as in real estate. One of the most important changes on the horizon is the shift of economic power and influence away from the Pacific Coast to the Gulf Coast – the Third Coast – a process hastened by the imminent widening of the Panama Canal. Over time, this could represent a formidable challenge to our status as a critical global region.

    It is easy to live in Southern California – particularly in the more-affluent, coastal sections or the middle-class inland valleys – and hardly know how critical international trade is to our regional economy. Invisible to denizens of Malibu or Newport Beach, the ports of Long Beach and Los Angeles together account for almost 40 percent of U.S. container imports. Along with Hollywood, and our climate, it represents arguably the region’s greatest asset.

    Overall, the ports are the critical linchpin of the roughly 500,000 jobs tied to logistics, warehousing and trade services. These jobs, notes economist John Husing, provide a wide range of generally higher-paying blue-collar employment compared with, for example, hospitality or retail. This is critical in a region with a large undereducated, but motivated, workforce.

    Southern California’s emergence as the nation’s largest trading center has been unlikely, tied more to ingenuity and ambition than natural geography. Unlike its West Coast rivals – San Diego, Seattle and, most particularly, San Francisco – the Los Angeles region does not boast a great natural harbor. Its construction, starting in the early decades of the previous century, was completely man-made and conceived.

    By the 1980s, sparked by a shift of trade from Europe to Asia, the ports of Los Angeles and Long Beach started to overtake, in merchandise trade value, New York, which had dominated U.S. trade since the first decades of the 19th century. Along with trade came business connections, direct air travel and a surge of Asian immigration. Today, Los Angeles, with roughly 1.5 million Asians, ranks first among America’s counties for Asian population, while Orange County, with more than 530,000 Asian residents, ranks third, just behind the Santa Clara-Silicon Valley region.

    Wider canal coming

    These advantages, human as well as geographic, are critical to the region’s global status. But this could change, in part due to the expansion of the Panama Canal – set for completion in late 2014 or in 2015 – which will open to Asian businesses the opportunity to send megaships directly to the Gulf Coast or the Southeast.

    “Trade will shift,” predicts Khalid Bachkar, a professor at the California Maritime Academy.

    There are other challengers to our supremacy, including port expansions in both Western Canada and Mexico that could offer newer facilities and rail connections directly within their own countries and the vast U.S. market. But the greatest challenge seems likely to come from the Gulf, which offers excellent access to trains that carry goods directly to the vast majority of the United States.

    Demographic trends will also play a role. In the 1970s and 1980s, the Pacific Coast seemed like the premier growth market, but high housing prices, taxes and regulatory restraints – and, most importantly, outmigration – have slowed regional business growth.

    In the next four years, notes Pitney Bowes, Houston is expected to have the largest household growth in the country: some 140,000 people, an increase by 6.7 percent. Most of the other fast-growth regions in the nation – Dallas-Fort Worth, Austin, Texas, Raleigh-Cary, N.C., San Antonio, Jacksonville, Fla., and Charlotte, N.C. – are located either along the Gulf or are natural markets for their ports.

    In contrast, Los Angeles is projected to grow by only 1.5 percent and Orange County by less than 2 percent the next four years.

    Critically, the Gulf is, for the first time, attracting a critical mass of Asians. Over the past decade, Houston has enjoyed some of the nation’s fastest growth in Asian population, up some 70 percent, and its Asian community is now the eighth-largest in the country. Houston’s Asian population is now growing three times as rapidly as that of the San Francisco or Los Angeles areas.

    Energy exports

    At the same time, the expansion of oil and natural gas production in Louisiana, Texas and the Plains makes the Gulf ports major players in the emergence of the U.S. as an energy exporter. The Gulf Coast also is home to many of the nation’s largest industrial investments, including from overseas. The Port of Houston, for example, posted a 28.1 percent jump in foreign trade in 2012, and trade at reached records levels at the Port of New Orleans (I work as a consultant in that city).

    Agriculture has also been on a roll in terms of exports, and 50 percent of the nation’s grain shipments through Louisiana ports. Combined with rising energy and industrial growth, the Third Coast now claims a growing share of U.S. trade. Since 2003, the value of exports from the Gulf ports has more than tripled; the region’s share of U.S. exports over that period grew from roughly 10 to nearly 16 percent.

    Once an industrial backwater, the Gulf region has attracted new steel plants, petrochemical plants and facilities involved in everything from airplanes to food processing. All these locations export such items as cars and chemicals, and all import goods, such as car parts and iron ore. According to Site Selection magazine, the Gulf includes four of the top 12 states – led by No. 1 Texas, No. 7 Louisiana, No. 10 Florida and No. 12 Alabama – in attractiveness to investors. Texas and Louisiana ranked first and third among the states for new plants.

    Standing pat

    Ultimately, this is a challenge that our region cannot afford to ignore, particularly with completion of the Panama Canal expansion in as soon as roughly a year. In anticipation, ports along the Gulf, as well as in the Southeast, are almost all improving and expanding their ports. In contrast, Southern California ports – largely because of labor and environmental concerns – may be slow to make the “intense capital improvements,” such as dredging and new road connections. This largely results from environmental pressures that, notes economist Husing, are not nearly as powerful along the Gulf or in the Southeast. A history of labor disputes by highly paid, politically powerful California port workers also has reinforced the notion that the L.A. area ports are becoming an increasingly unreliable place to do business.

    The Third Coast is also positioned to benefit from commerce with Latin America, the Gulf’s historic leading trade partner. Latin America, notes Bill Gilmer, has been home to many of the world’s fastest-growing economies. Since 2002, about 56 million people in Latin America,according to the World Bank, have risen out of poverty.

    Trade with these partners – including Mexico – are ramping up growth in Houston, as well as other Gulf ports. Brazil, notes Jimmy Lyons, has risen to become a trading partner of Mobile, Ala. Strong Latin immigration to virtually all the Gulf cities, particularly Houston and, increasingly, New Orleans, can only strengthen these economic ties.

    Southern California, with its vast Hispanic population and proximity to Mexico, also should be able to serve as a hub for this trade, but this can only happen if the region attaches greater priority to port development. Historically, this region was built by people taking risks on big infrastructure – covering everything from the water delivery systems to the port and freeways – that literally paved the way to economic progress, and growth.

    The key question now is: Do we still have the spirit and willingness to build, as our competitors are on the Third Coast, the Southeast, Mexico and Canada. If we fail to meet the challenge, Southern California could surrender desperately needed potential sources of new employment and a critical linchpin to our continuing status as one of the world’s great global centers.

    This story originally appeared at the Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Port of Los Angeles photo courtesy of NOAA’s National Ocean Service.

  • Fixing California: The Green Gentry’s Class Warfare

    Historically, progressives were seen as partisans for the people, eager to help the working and middle classes achieve upward mobility even at expense of the ultrarich. But in California, and much of the country, progressivism has morphed into a political movement that, more often than not, effectively squelches the aspirations of the majority, in large part to serve the interests of the wealthiest.

    Primarily, this modern-day program of class warfare is carried out under the banner of green politics. The environmental movement has always been primarily dominated by the wealthy, and overwhelmingly white, donors and activists. But in the past, early progressives focused on such useful things as public parks and open space that enhance the lives of the middle and working classes. Today, green politics seem to be focused primarily on making life worse for these same people.

    In this sense, today’s green progressives, notes historian Fred Siegel, are most akin to late 19th century Tory radicals such as William Wordsworth, William Morris and John Ruskin, who objected to the ecological devastation of modern capitalism, and sought to preserve the glories of the British countryside. In the process, they also opposed the “leveling” effects of a market economy that sometimes allowed the less-educated, less well-bred to supplant the old aristocracies with their supposedly more enlightened tastes.

    The green gentry today often refer not to sentiment but science — notably climate change — to advance their agenda. But their effect on the lower orders is much the same. Particularly damaging are steps to impose mandates for renewable energy that have made electricity prices in California among the highest in the nation and others that make building the single-family housing preferred by most Californians either impossible or, anywhere remotely close to the coast, absurdly expensive.

    The gentry, of course, care little about artificially inflated housing prices in large part because they already own theirs — often the very large type they wish to curtail. But the story is less sanguine for minorities and the poor, who now must compete for space with middle-class families traditionally able to buy homes. Renters are particularly hard hit; according to one recent study, 39 percent of working households in the Los Angeles metropolitan area spend more than half their income on housing, as do 35 percent in the San Francisco metro area — well above the national rate of 24 percent.

    Similarly, high energy prices may not be much of a problem for the affluent gentry most heavily concentrated along the coast, where a temperate climate reduces the need for air-conditioning. In contrast, most working- and middle-class Californians who live further inland, where summers can often be extremely hot, and often dread their monthly energy bills.

    The gentry are also spared the consequences of policies that hit activities — manufacturing, logistics, agriculture, oil and gas — most directly impacted by higher energy prices. People with inherited money or Stanford degrees have not suffered much because since 2001 the state has created roughly half the number of mid-skilled jobs — those that generally require two years of training after high-school — as quickly as the national average and one-tenth as fast as similar jobs in archrival Texas.

    In the past, greens and industry battled over such matters, which led often to reasonable compromises preserving our valuable natural resources while allowing for broad-based economic expansion. During good economic times, the regulatory vise tended to tighten, as people worried more about the quality of their environment and less about jobs. But when things got tough — as in the early 1990s — efforts were made to loosen up in order to produce desperately needed economic growth.

    But in today’s gentry-dominated era, traditional industries are increasingly outspent and out maneuvered by the gentry and their allies. Even amid tough times in much of the state since the 2007 recession — we are still down nearly a half-million jobs — the gentry, and their allies, have been able to tighten regulations. Attempts even by Gov. Jerry Brown to reform the California Environmental Quality Act have floundered due in part to fierce gentry and green opposition.

    The green gentry’s power has been enhanced by changes in the state’s legendary tech sector. Traditional tech firms — manufacturers such as Intel and Hewlett-Packard — shared common concerns about infrastructure and energy costs with other industries. But today tech manufacturing has shrunk, and much of the action in the tech world has shifted away from building things, dependent on energy, to software-dominated social media, whose primary profits increasingly stem from selling off the private information of users. Servers critical to these operations — the one potential energy drain — can easily be placed in Utah, Oregon or Washington where energy costs are far lower.

    Even more critical, billionaires such as Google’s Eric Schmidt, hedge fund manager Thomas Steyer and venture firms like Kleiner Perkins have developed an economic stake in “green” energy policies. These interests have sought out cozy deals on renewable energy ventures dependent on regulations mandating their use and guaranteeing their prices.

    Most of these gentry no doubt think what they are doing is noble. Few concern themselves with the impact these policies have on more traditional industries, and the large numbers of working- and middle-class people dependent on them. Like their Tory predecessors, they are blithely unconcerned about the role these policies are playing in accelerating California’s devolution into an ever more feudal society, divided between the ultrarich and a rapidly shrinking middle class.

    Ironically, the biggest losers in this shift are the very ethnic minorities who also constitute a reliable voter block for Democratic greens. Even amid the current Silicon Valley boom, incomes for local Hispanics and African-Americans, who together account for one-third of the population, have actually declined — 18 percent for blacks and 5 percent for Latinos between 2009 and 2011, prompting one local booster to admit that “Silicon Valley is two valleys. There is a valley of haves, and a valley of have-nots.”

    Sadly, the opposition to these policies is very weak. The California Chamber of Commerce is a fading force and the state Republican Party has degenerated into a political rump. Business Democrats, tied to the traditional industrial and agricultural base, have become nearly extinct, as the social media oligarchs and other parts of the green gentry, along with the public employee lobby, increasingly dominate the party of the people. Some recent efforts to tighten the regulatory knot in Sacramento have been resisted, helped by the governor and assisted by the GOP, but the basic rule-making structure remains, and the government apparat remains highly committed to an ever more expansive planning regime.

    Due to the rise of the green gentry, California is becoming divided between a largely white and Asian affluent coast, and a rapidly proletarianized, heavily Hispanic and African-American interior. Palo Alto and Malibu may thrive under the current green regime, and feel good about themselves in the process, but south Los Angeles, Oakland, Fresno and the Inland Empire are threatened with becoming vast favelas.

    This may constitute an ideal green future — with lower emissions, population growth and family formation — for whose wealth and privilege allow them to place a bigger priority on nature than humanity. But it also means the effective end of the California dream that brought multitudes to our state, but who now may have to choose between permanent serfdom or leaving for less ideal, but more promising, pastures.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at U-T San Diego.

     

  • The Cities Creating The Most Middle-Class Jobs

    Perhaps nothing is as critical to America’s future as the trajectory of the middle class and improving the prospects for upward mobility. With middle-class incomes stagnant or falling, we need to find a way to generate jobs for Americans who, though eager to work and willing to be trained, lack the credentials required to enter many of the most lucrative professions.

    Mid-skilled jobs in areas such as manufacturing, construction and office administration — a category that pays between $14 and $21 an hour — can provide a decent standard of living, particularly if one has a spouse who also works, and even more so if a family lives in a relatively low-cost area. But mid-skilled employment is in secular decline, falling from 25% of the workforce in 1985 to barely 15% today. This is one reason why middle- and working-class incomes remain stagnant, well below pre-recession levels.

    Over the past three years, high-wage professions have accounted for 29% of new jobs created, while the lowest-paid jobs (under $13 an hour) have grown to encompass roughly half of all new jobs. Net worth-wise, as a recent Pew study notes, the wealthy — the top 7% — are thriving due to the rebound of the stock and bond markets; the bottom 93%, whose wealth is more tied up in their homes,  is still feeling the hangover from the cratering of housing prices in the recession.

    No surprise then that about a third of all Americans now consider themselves lower class, according to another Pew study, up from a quarter before the recession.

    But middle-income employment has not vanished everywhere.  An analysis of the distribution of new jobs since 2010 by Economic Modeling Specialists, Inc. found a wide disparity among the states. Between 34% and 45% of all new jobs have been mid-wage in Wyoming, Iowa, North Dakota, Michigan and Arizona. The worst performers: Mississippi where only 10% of new jobs have been middle-income, followed by New York, New Hampshire, New Jersey and Virginia, all with 14% or less. (Note: I use the terms “mid-skill” and “middle-income” interchangeably; recent research suggests pay is a reasonable proxy for skill.)

    Generally speaking mid-skilled employment is expanding the most in states with strong overall job growth, and less in high-cost, high-tax states, with the notable exception of Mississippi. The EMSI data also suggest that states with expanding heavy industries such as oil and manufacturing generate more positions for mid-level workers such as machinists, truck drivers, welders and oil roustabouts. At the same time, the states with a bifurcated combination of low-wage industries, like hospitality or retail, and high-paid professions, like software engineers or investment bankers, tend to have fewer opportunities for middle-income workers.

    This pattern becomes clearer if we look at metropolitan areas, the level at which most economic activity takes place. Mark Schill at the Praxis Strategy Group crunched the data for us on employment trends over the five years since the recession in the 51 metropolitan statistical areas with over 1 million people. It’s not a pretty picture. Three years since employment hit bottom, the U.S. still has 2 million fewer mid-income jobs than at the onset of the financial crisis in 2007; half of that deficit is in the largest metro areas.

    But the pain is not evenly distributed. There are eight metro areas that boast more mid-level jobs today than in 2007. The list is dominated by Texas cities, led by Austin-Round Rock-San Marcos, which has added 17,000 mid-skill jobs — an increase of 7.6%  – among the 95,000 new jobs generated in the region. The largest numeric increase is in Houston-Sugarland-Baytown, which has 60,810 more mid-skilled jobs, up 7.4%. The Houston metro area also has easily led the nation in overall job growth since 2007, adding a net 280,000 positions.

    Texas metro areas also come in third and fourth: in San Antonio-New Braunfels, middle-income employment rose 3.4%; in Dallas-Ft. Worth-Arlington , 3.1%. Nearby Oklahoma City comes in fifth with 2.1% growth in middle-income employment, sharing the merits of relatively low costs and a strong energy economy.

    The working class and  the endangered middle class may be favored topics of discussion in the deepest blue regions, but for the most part these metro areas have failed to bolster their middle-skilled labor forces. Los Angeles-Long Beach leads the league with the biggest net loss of mid-skilled jobs since 2007, down by 112,300, or 6.1%. Chicago had the second-largest numerical decline, some 102,100, or 7.6%, followed by New York, which lost 82,350 such jobs, 3.4% of its total in 2007. In contrast, notes economist Tyler Cowen, Texas has not only created the most middle-income jobs, but a remarkableone-third of all net high-wage jobs created over the past decade.

    The loss of manufacturing jobs is clearly part of the problem here; despite the recent resurgence in the industrial sector, the U.S. still has 740,000 fewer middle-skill manufacturing jobs than in 2007. Chicago and Los Angeles remain the nation’s largest industrial regions, but they are also among the most rapidly de-industrializing areas in the country. New York City, once among the world’s leading industrial centers, with roughly a million manufacturing workers in 1950, is down to around 75,000. In contrast, industrial employment has been expanding in the Houston, Seattle and Oklahoma City metro areas, and recently even Detroit.

    In contrast, New York, Chicago and L.A. have seen job gains in such low-wage areas as hospitality and retail, as well as a smaller surge in high-end employment — notably in information and business services. But the welcome growth in these positions is not enough to make up for the big hole in middle-class employment. Since the recession, for example, New York has lost manufacturing and construction jobs at a double-digit rate while hospitality employment grew 18% and retail 10%. Los Angeles and Chicago showed similar patterns, but actually did worse in higher-wage sectors, like professional business services.

    Another major area of lost middle-class jobs has been construction. The U.S. is still down 1.2 million middle-skill construction jobs since 2007 and 125,000 in real estate. These losses have inflicted the most pain in the boom towns that grew fastest in the early 2000s. The biggest loser of mid-skill jobs in percentage terms is Las Vegas-Paradise, Nev., which has suffered a staggering 16.1% loss in such jobs since 2007. It’s followed by Riverside-San Bernardino-Ontario, Calif. (-10.6%); Sacramento-Arden-Arcade-Roseville, Calif., (-10.4%); Tampa- St. Petersburg- Clearwater, Fla. (-9.7%); and Phoenix-Mesa- Scottsdale, Ariz. (-9.3%).

    Whether in the biggest cities, or Sun Belt boom towns, the issue of increasing middle-income employment should be as much of a priority for policymakers as attracting glamorous high-wage jobs or helping the poor. America’s identity has been built around the idea that hard work, particularly with some study for a particular skill, should be rewarded with decent pay. Boosting employment in mid-skill professions, from construction and manufacturing to logistics and energy, is critical to achieving this goal.

    If we fail to stem the erosion of middle-income jobs, we will be faced with a continued descent into a Latin American style society divided largely between an affluent elite and multitudes of the poor, with a thin layer in the middle. This promises miserable consequences for most Americans and the future of our democracy.

    Note: An early version of this table listed incorrect figures in the 2013 total jobs column.

    Middle-skill Employment in U.S. Metropolitan Areas
    Metropolitan Statistical Area Name 2013 Middle Skill Jobs 2007-2013 Change % Change % Change Rank 2013 Location Quotient 2013 LQ Rank
    Austin-Round Rock-San Marcos, TX 248,988 17,485 7.6% 1 0.93 41
    Houston-Sugar Land-Baytown, TX 878,038 60,810 7.4% 2 1.00 17
    San Antonio-New Braunfels, TX 310,920 10,316 3.4% 3 1.07 3
    Dallas-Fort Worth-Arlington, TX 959,326 29,178 3.1% 4 0.98 23
    Oklahoma City, OK 198,944 4,113 2.1% 5 1.05 8
    New Orleans-Metairie-Kenner, LA 177,207 2,676 1.5% 6 1.05 8
    Nashville-Davidson–Murfreesboro–Franklin, TN 263,022 2,309 0.9% 7 1.02 12
    Salt Lake City, UT 221,892 476 0.2% 8 1.07 3
    Denver-Aurora-Broomfield, CO 390,661  (2,824) -0.7% 9 0.96 31
    Indianapolis-Carmel, IN 274,996  (3,143) -1.1% 10 0.98 23
    Boston-Cambridge-Quincy, MA-NH 700,371  (9,683) -1.4% 11 0.90 46
    San Jose-Sunnyvale-Santa Clara, CA 233,796  (5,012) -2.1% 12 0.78 51
    Louisville/Jefferson County, KY-IN 199,292  (4,669) -2.3% 13 1.04 10
    Charlotte-Gastonia-Rock Hill, NC-SC 267,840  (6,888) -2.5% 14 0.98 23
    Pittsburgh, PA 358,823  (9,301) -2.5% 15 1.03 11
    Rochester, NY 147,269  (4,325) -2.9% 16 0.97 28
    Raleigh-Cary, NC 153,838  (4,854) -3.1% 17 0.93 41
    Baltimore-Towson, MD 391,208  (12,532) -3.1% 18 0.95 34
    Washington-Arlington-Alexandria, DC-VA-MD-WV 764,805  (25,078) -3.2% 19 0.80 50
    San Diego-Carlsbad-San Marcos, CA 492,724  (16,382) -3.2% 20 1.09 2
    New York-Northern New Jersey-Long Island, NY-NJ-PA 2,336,777  (82,350) -3.4% 21 0.88 48
    Columbus, OH 272,821  (9,829) -3.5% 22 0.95 34
    Buffalo-Niagara Falls, NY 159,658  (5,770) -3.5% 23 0.99 20
    Richmond, VA 193,104  (7,081) -3.5% 24 1.00 17
    San Francisco-Oakland-Fremont, CA 583,934  (21,618) -3.6% 25 0.87 49
    Seattle-Tacoma-Bellevue, WA 543,988  (21,651) -3.8% 26 0.97 28
    Minneapolis-St. Paul-Bloomington, MN-WI 507,261  (20,643) -3.9% 27 0.91 45
    Portland-Vancouver-Hillsboro, OR-WA 337,705  (19,386) -5.4% 28 1.02 12
    Hartford-West Hartford-East Hartford, CT 179,653  (10,578) -5.6% 29 0.95 34
    Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 789,395  (49,105) -5.9% 30 0.95 34
    Atlanta-Sandy Springs-Marietta, GA 692,336  (44,530) -6.0% 31 0.95 34
    Los Angeles-Long Beach-Santa Ana, CA 1,731,419  (112,332) -6.1% 32 0.96 31
    St. Louis, MO-IL 393,900  (27,502) -6.5% 33 0.98 23
    Kansas City, MO-KS 302,025  (21,222) -6.6% 34 0.98 23
    Memphis, TN-MS-AR 192,693  (14,600) -7.0% 35 1.02 12
    Detroit-Warren-Livonia, MI 517,098  (39,268) -7.1% 36 0.93 41
    Orlando-Kissimmee-Sanford, FL 304,724  (23,533) -7.2% 37 0.95 34
    Cincinnati-Middletown, OH-KY-IN 302,932  (24,111) -7.4% 38 1.00 17
    Chicago-Joliet-Naperville, IL-IN-WI 1,249,263  (102,122) -7.6% 39 0.94 40
    Jacksonville, FL 200,324  (16,482) -7.6% 40 1.06 6
    Virginia Beach-Norfolk-Newport News, VA-NC 298,352  (25,147) -7.8% 41 1.19 1
    Miami-Fort Lauderdale-Pompano Beach, FL 706,788  (60,373) -7.9% 42 0.97 28
    Milwaukee-Waukesha-West Allis, WI 237,871  (20,489) -7.9% 43 0.96 31
    Cleveland-Elyria-Mentor, OH 304,167  (27,158) -8.2% 44 0.99 20
    Birmingham-Hoover, AL 162,440  (15,437) -8.7% 45 1.07 3
    Providence-New Bedford-Fall River, RI-MA 206,473  (20,670) -9.1% 46 0.99 20
    Phoenix-Mesa-Glendale, AZ 578,767  (59,101) -9.3% 47 1.02 12
    Tampa-St. Petersburg-Clearwater, FL 365,043  (39,371) -9.7% 48 1.02 12
    Sacramento–Arden-Arcade–Roseville, CA 259,792  (30,200) -10.4% 49 0.92 44
    Riverside-San Bernardino-Ontario, CA 431,892  (51,373) -10.6% 50 1.06 6
    Las Vegas-Paradise, NV 234,340  (44,849) -16.1% 51 0.89 47
    Total 23,210,895  (1,045,210) -4.3%      
    Source: EMSI Class of Worker – QCEW Employees + Non-QCEW Employees + Self-Employed
    Analysis by Mark Schill, Praxis Strategy Group

    This story originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

  • Taking Flight from Asia

    Viewed from a 50-year perspective, the rise of East Asia has been the most significant economic achievement of the past half century. But in many ways, this upward trajectory is slowing, and could even reverse. Simply put, affluence has led many Asians to question its cost, in terms of family and personal life, and is sparking a largely high-end hegira to slower-growing but, perhaps, more pleasant, locales.

    The Asian Century may have arrived, but many Asians – disproportionately entrepreneurial, well-educated and familial – are heading elsewhere. In the United States, they have surged past Hispanics as the largest source of immigrants and now account for well over a third of all newcomers. But that’s just the tip of this wave: Recent Gallup surveys reveal that tens of millions more – 40 million from the Indian subcontinent and China alone – would come if they could. This is far more than the 5 million in Mexico who would still like to move here.

    For the most part, these highly urbanized Asians are headed to places that may not be exactly pastoral, but are decidedly less-crowded places, either in the suburbs of great cities or, increasing, to sprawling low-density regions such as Houston, Dallas, Charlotte and Phoenix. In large swaths of Los Angeles County’s San Gabriel Valley, parts of the southeastern Orange County as well as the Santa Clara Valley, six cities, including tony San Marino, already are majority Asian, and many, including several in Orange County, are either there or well on the way.

    For the most part, these primarily suburban places, widely disdained by the dominant media and academic classes, appear to seem awfully nice to Asian immigrants. Nationwide over the past decade, the Asian population in suburbs grew by almost 2.8 million, or 53 percent, while their numbers expanded in core cities by 770,000, or 28 percent. In Southern California, the shift is even more pronounced: In Los Angeles and Orange counties – the nation’s largest Asian region, the suburbs added roughly five times as many Asians as did the core city. There are now roughly three Asian suburbanites for every core city dweller in our region.

    This is not just an American phenomenon. Asians, by far the fastest-growing large ethnic group in Canada, constitute a majority in many Toronto suburbs, like Markham, Brampton, Mississauga and Richmond Hill. The same pattern is seen in areas around Vancouver, such as Richmond, Greater Vancouver, Burnaby and Surrey. Asians, who, following New Zealanders, constitute a majority of newcomers in Australia, also tend to settle in suburbs, particularly newer ones.

    It’s most important to understand the reasons these people leave their homelands. Historically, people immigrate from places where there is a perceived lack of opportunity. Yet, many of the Asian countries seeing people leave – places like Singapore, Taiwan and China – have enjoyed consistently higher economic growth rates than any of the destination countries. What these immigrants increasingly understand is that, as their country’s GDP has surged, their quality of life has not and, in many ways, has deteriorated.

    These are the sometimes subtle but important things that tend to be ignored by geopoliticians and urban ideologues, attracted by the density and transit-richness of the Asian cities. “Everyday life,” observed the great French historian Fernand Braudel, “consists of the little things one hardly notices in time and space.” And, by these measurements, life in the United States, Canada or Australia is simply better than that in most Asian countries.

    In contrast, urban Asia, although rich and often colorful, has become an increasingly difficult place both for everyday life and for families. A nice salary might be satisfying, but is unlikely to be large enough to buy a house or apartment in places like Taipei or Hong Kong, where the cost of even a tiny apartment equals more than twice – adjusted for income – what would be sufficient to purchase a house in Irvine, and four times as much as an even larger residence in Houston, Dallas or Phoenix. Not surprisingly, most Asians in America feel they are living better than their parents, compared with their counterparts at home. Only 12 percent would choose to move back to their home country.

    Beyond housing, life in hyperurbanized Asia does not buy much happiness. Prosperous Singapore, for example, is one of the most pessimistic places on the planet, while ultradense South Korea has been ranked as among the least-happy nations in the Organization for Economic Cooperation and Development, ranking 32nd of 34 members. The country also suffers from among the highest suicide rates in the higher-income world.

    This reflects the often-ignored impacts of dense urbanization, including rising obesity, particularly among the young, who get less exercise and spend more time desk-bound. The air is foul, particularly in Beijing, no matter how much money you have. A healthy bank account does not exempt one from emphysema.

    Others complain about the dangers of a political system where wealth can always be confiscated by the state; no surprise, then, that a new survey shows roughly half of China’s millionaires are looking to move, primarily to the U.S. or Canada. During 2010-11, the number of Chinese applying for a U.S. investor visa, which requires a $1 million investment in the country, more than tripled, to more than 3,000. Repression of political thought and, particularly, against religion, also ranks as a major cause for leaving the homeland.

    The family – the historic centerpiece of cultures from India to Korea – may constitute the biggest victim of the hypercompetitive, ultradense Asian lifestyle. Hong Kong, Singapore and Seoul suffer among the world’s lowest fertility rates, with rates around 1. Meanwhile, Shanghai’s fertility rate has fallen to 0.7, among the lowest ever reported, well below China’s “one child” mandate and barely one-third the rate required simply to replace the current population. Due largely to crowding and high housing prices, 45 percent of couples in Hong Kong say they have given up having children.

    For those who do want to start a family, it increasingly makes sense to immigrate. This is evident in rising emigration from China’s cities, Hong Kong and Singapore, where roughly one in 10 citizens now lives abroad, often in lower-density communities in Australia, Canada and the United States.

    The nature of those immigrating is critically important. We are long past the days when the average Asian migrant is a physical laborer or a small-scale merchant. Now, the more typical newcomer is a student or a highly qualified professional. In Australia, Asians, notably from India, China and Taiwan, make up the vast majority of immigrants who qualify for entry under skills-oriented criteria.

    This pattern also can be seen in the United States. Asians now constitute a majority of workers in Silicon Valley. They also tend to concentrate in what may be best described as the country’s largely suburban nerdistans – magnets for high-tech workers – places like Plano, Texas, Bellevue, Wash., Irvine and large swaths of Santa Clara County.

    Does all this mean Asia is about to experience a precipitous decline? Not at all. But it is also increasingly clear that the dense model of development adopted on much of that continent – exacerbated by a mass movement to cities – is not, in a larger social sense, truly sustainable. Societies that become difficult for families, and exact too much stress on their residents, are destined to suffer maladies from ultrarapid aging, shrinking workforces and a host of psychological maladies.

    These strains will become more evident over time. Already, most Asian societies, from Japan and China to Singapore and Taiwan, are experiencing less growth, linked in part to financial pressures from a rapidly aging society. The economic motivations for staying in Asia will likely decline, accelerating the flight both of financial and, more importantly, human capital.

    Every society relies on the resourcefulness of its people, particularly the young. The loss of skilled individuals and, especially, families suggests we may have already witnessed the peak of the half-century-long Asian ascendency, well before the American era has even come to its oft-predicted demise.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at The Orange County Register.

    Singapore skyline photo by Bigstockphoto.com.