New Geography

Category: Economics

  • The New Boom Towns

    The steep hike in gas and energy prices has created a national debate about the future of American metropolitan areas — mostly about the reputed decline of suburbs and edge cities dependent on cars. But with all this focus on the troubles of traditional suburbs, one big story is overlooked: the rapid rise of America’s energy-producing metropolitan areas.

    In many of the nation’s strongest regional economies, $5 a gallon gas is less a threat than a boon. From Houston and Midland in Texas, to a score of cities across the Great Plains, today’s energy crisis is creating new wealth and new jobs in a way not seen since, well, the energy crisis of the 1970s.

    This reflects a global trend that is turning once out-of-the-way places, like Dubai and Alma Alty, into glittering high-rise cities. Other energy- and commodity-rich places are undergoing a similar boom — from Moscow and St. Petersburg in Russia, to Calgary and Edmonton in Canada and Perth in Australia.

    What all these places have going for them is control of what Kent Briggs, former chief of staff for Utah’s late Gov. Scott Matheson, once called “the testicles of the universe.” These cities base their wealth not on clever financial technology, cultural attributes or university-honed skills but on their position as centers of the global commodities boom.

    In the process, there has been a shift in the balance of economic power away from financial and information centers like New York, Los Angeles, Boston, Chicago and San Francisco. These cities are deeply vulnerable to the national financial and mortage crises. New York, according to David Shulman, former Lehman Brothers managing director, faces upward of 30,000 to 40,000 layoffs in its financial sector. San Francisco in the last quarter gave away a Transamerica Pyramid’s worth of office space.

    In contrast, things have never looked better for cities now riding the energy and commodity boom. By far the biggest winner is Houston, whose breakneck growth has been fueled by its role as the world’s premier energy city. As with Dubai, this is less a function of the city’s proximity of actual deposits (though the Gulf of Mexico represents one of the most promising energy finds in North America), than to its premier role as the technical, trading and administrative center of the worldwide industry.

    This prominence is, in historic terms, relatively recent. As late as the 1980s “oil bust,” notes historian Joe Feagin, Houston’s energy sector remained “a colony of New York,” where many of key industry corporate and financial decision-makers still lived.

    Yet, today, Houston’s national, even global dominance, of the energy business is palpable. With the lure of low-cost office space and housing stock, as well as myriad personal ties among executives and leading engineers, Houston managed to consolidate its position as the predominant center of the oil and gas industry. In 1960, Houston had barely one of the nation’s large energy firms, ranking well behind New York, Los Angeles and even Tulsa; today it has 16, more than all those cities combined.

    High wages offered by energy firms — annual salaries for geologists average $132,000 or more; while blue-collar workers make roughly $60,000 — have attracted a new generation of skilled executives and technicians to the region, which also enjoys a far lower cost a living than many other major cities. Areas like River Oaks, Galleria and Energy Corridor are home to well-educated, upwardly mobile workers in their late 20s and 30s. The area is growing at a time when these workers are, according to recent census numbers, leaving places like San Francisco, New York, Los Angeles and Boston.

    “People from other areas say that you guys don’t make much down there,“ said Houston executive recruiter Chris Schoettelkotte. “[But] the guys from L.A. make the same amount of money in the same field here. We pull them from Wharton, the Ivy League and Stanford and they get paid through the nose… Houston can get the talent.”

    Houston’s status as energy capital is also propelling it into the ranks of first-tier cities. Today, Houston has the third largest representation of consular offices. It ranks behind only Los Angeles and New York, and has outstripped traditional commercial centers like San Francisco and Chicago.

    It’s energy, along with the port and growing airport, that makes the Texas city a world capital. “When I go overseas people put Houston with New York and L.A.,” said Houston salvage entrepreneur Charlie Wilson. “In many cases, Houston is considered to be at the top of the world class because of oil. If you’re in China, you’re looking at Houston because of the oil.”

    But Houston is not alone in benefiting from the rising price of energy and other commodities. According to the new Inc./Newgeography.com job growth rankings other energy cities include Dallas — home of Exxon Mobil –- as well as smaller Texas burgs like Midland, Odessa and Longview.

    This is a dramatic turnaround for places like Midland. Until recently, said Midland oilman Mike Bradford, wildcatters had held back from drilling, because they feared the high oil prices would not last. Now they are convinced that the energy market has broken free of OPEC control and prices will remain high. “We think high [oil and gas] prices are for real — and we’re going nuts,” said Bradford, who also sits on the Midland County Commission.

    But you don’t have to be in Texas to be part of an energy boomtown. Bakersfield, Calif., oil capital, is also thriving, despite the hard times throughout the Golden State because of the mortgage crisis. Alaskans, who now receive more than $1,600 per capita from the state’s Permanent Fund Dividend, twice what they received in 2005, are likely to see their wealth increase. If there’s an expansion of drilling there, look for Anchorage and other Alaskan cities to enjoy even flusher times.

    Another hot spot is in the Great Plains. Energy production and high commodity prices are pacing the economies of regional centers like Des Moines; Billings, Mont.; Cheyenne, Wy., and Sioux Falls, S.D. In Bismarck, Grand Forks and Fargo, N.D., where incomes are surging, there’s a sense that these are the best of times. One sure sign: The energy boom — coal, oil, wind as well as biofuels — has produced a a billion-dollar state surplus for North Dakota.

    The energy and commodity boom is changing the face of these small cities in key ways. Fargo, the butt of sophisticated jokes with the Coen Brothers’ movie, now boasts a first-class arena, fine restaurants, a luxurious boutique hotel and a thriving arts scene.

    Grand Forks has a growing condo market. Scores of smaller cities — like Bismarck and Dickinson – are also showing signs of a new quasi-urban sophistication. After decades of demographic stagnation, some of these towns are seeing healthy population gains.

    Rising unemployment is not a problem here; a looming labor shortage is. In some markets, there are signing bonuses and $12-an-hour wages at fast-food business.

    If energy prices hold firm, and particularly if the nation begins to ramp up energy production, we can see the boomtimes extend to energy-rich Utah, Colorado, New Mexico and Louisiana. These can mean more growth in already healthy economies like Albuquerque, Salt Lake City and Denver; but also for long hard-pressed New Orleans and other Gulf Coast cities.

    Finally there’s another group of potential winners: areas that have been selected to produce the energy-efficient vehicles of the future. Even as Detroit, Flint and Ft. Wayne, Ind.,– producers of SUVs and trucks — suffer, many cities in the mid-South, like Nashville, Huntsville and Chattanooga, Tenn., seem certain to gain as Nissan, Toyota, Volkswagen and other foreign producers ramp up production.

    Perhaps the ultimate example of “world turned upside down” by energy prices may end up being Mississippi, long a perennial loser in the economic sweepstakes. But this week, Toyota announced it would start building its popular hybrid Prius in Blue Springs, Miss., in late 2010. That’s just outside Tupelo, Elvis’ birthplace.

    We may not see a reappearance of the King — but for many people this resurgence is just as stunning.

    None of this, however, suggests that San Francisco, Los Angeles or New York are about to be eclipsed by Houston — much less Fargo or Tupelo. But if the history of cities tells us anything, places well-positioned for growth industries tend to emerge as ever more serious players.

    It worked for industrial cities like Chicago, which emerged from obscurity in the late 19th Century; or later for high-tech centers like San Jose, Austin and Boston. If energy and commodity prices stay high for another decade, we may have to get used to a shift in the power of places across the American landscape.

    Joel Kotkin is a presidential fellow in urban futures at Chapman University and the author of “The City: A Global History.” He is executive editor of the website newgeography.com. This article first appeared at The Washington Independent.

  • A look at the Information Sector

    The Information sector of the economy is has followed an interesting trajectory over the past 15 years. The info sector built up to a huge peak in the early part of this decade, and has seen general decline since that time.

    Growth in Information Subsectors:

    The big boom and bust was caused by employment inflation of the telecommunications sector. Publishing followed a similar, but less extreme path. Both industries have reverted to employment levels in the early 1990s.

    Motion picture and recording, data processing, broadcasting, and Internet publishing have all seen modest gains since the early 1990s.

    Information growth by percent:

    Here’s the fastest growing metro areas in the information sector through the recent period of decline. We’re seeing a decentralization effect here: smaller metros with historically manufacturing-centric otherwise specialized economies are building information industries.

    Information growth by number of jobs:

    Seattle is leading the charge and Madison is rapidly becoming and information center in the central states. I wouldn’t have guessed Springfield, MO or Orlando would show up here.

  • Flushing in Florida?

    It’s all gloom and doom in the Miami Herald today after recent job numbers indicate the state is last in the nation in job creation.

    The top job-loss state in the nation. Shrinking wages. Collapsing population growth. Record home foreclosures.

    Florida’s economy is not just firmly and bleakly in the red —- it will likely stay that way until next June, according to the state government’s top economists who issued their most pessimistic financial forecast in years.

    With few exceptions, the economists’ Wednesday forecast shows that most economic indicators will do worse in this budget year when compared to a forecast they issued in February.

    A good sign that the recent growth in Florida was built on a house of cards, this is right in line with the findings of our Best Cities analysis.

    Link via Steve Bartin.

  • Suburbs Thriving, Cities Stagnating in Keystone State

    The headline in the Philadelphia Inquirer said it all, “Philadelphia’s population shrinking, though region’s is growing.” This in the midst of what is purported to be a condominium boom in its thriving center city.

    But facts are facts: Philadelphia’s population has dropped 4.5 percent. This ranks it first among the top-25 U.S. cities in population loss from 2000-2007. This data causes you to pause and rethink the real impact of major public investments in the city spurred on by a governor who is the city’s former two-term mayor.

    For one, gambling was supposed to bring good jobs to the city. The two winning bidders each created projects on the Delaware River, but these projects are stuck in a protracted political battle and their fate at these riverfront locations is uncertain along with the thousands of jobs they have promised.

    Part of the problem for the casinos is that a new vision has been created for the Delaware Riverfront. The Penn Praxis plan envisions recreation and greenways, not gambling for this area of the city. As a result, the gaming interests are being asked to consider building somewhere else within the city.

    There is also the Pennsylvania Convention Center. The first phase was built into the old Reading Railroad terminal on east Market Street. Supporters contend that it has spurred a hotel and restaurant boom in the city and there is validity to this position.

    But work rules issues have plagued the center since its inception. The result has been that most convention groups have chosen not to return because of arcane union rules that made it beyond difficult to do simple things like set up a booth or get electric power to a display. Negotiations have brought some relief, but problems remain to be solved.

    Despite these problems the convention center is now slated to expand about two blocks west of its current location. The costs have escalated dramatically and now exceed $800 million . This is an increase of nearly $100 million since the deal to move forward was approved and buildings were condemned and razed.

    On July 12, Governor Rendell hinted that he was having second thoughts about the viability of the expanded center when he said that the center is “getting to the point where the cost will outweigh the benefit.” These remarks were made while the governor was signing legislation that would increase the taxes on a hotel room in Philadelphia by more than 15 percent to pay for tourism promotion and the convention center.

    Stadium Economics
    Public dollars have also helped to fund a new football and baseball stadium in South Philadelphia. Citizens Bank Park is a real gem of a baseball stadium – a fun family entertainment venue where the Philadelphia Phillies play 82 games a year. Across the street is Lincoln Financial Field where the Philadelphia Eagles play their games as well as Temple University. There are only 20 – 25 games played there each year. The Phillies stadium cost $458 million and the Eagles complex $512 million, most of which came from public investment.

    What has been the economic impact of this investment? Has the neighborhood been revitalized by this investment? The short answer is no. They are basically commuter stadiums where fans come, see, and go.

    Rick Eckstein, who is a professor at a local university and author of Public Dollars, Private Stadiums: The Battle over Building Sports Stadiums, has studied the economic impact of public investment in stadium projects. He concludes, “I have been studying and writing about publicly financed stadiums for more than 10 years and cannot name a single stadium project that has delivered on its original grandiose economic promises, although they do bring benefits to team owners, sports leagues and sometimes players.”

    Over the years billions of dollars has been invested in tourism and entertainment projects and the results are clear: the projects required more dollars than originally thought and the promises of profound economic benefits have never materialized as expected.

    Philadelphia is a lot more fun than it was 20 years ago, but its economy remains stagnant and its core population continues to leave to find opportunity elsewhere.

    There is also another trend resulting from this kind of pubic investment. The more public money that is poured into a region the more taxes and fees follow.

    In Pennsylvania, these kinds of investment go far beyond Philadelphia. Pittsburgh has two new stadiums costing a total of more than $1 billion and a new $375 million convention center that is touted as, “the cornerstone of western Pennsylvania’s hospitality industry.”

    Erie has the Bayfront Convention Center at $44 million and funded it with a new five percent hotel room tax. The Altoona region has Blair County Convention Center & Sports Facility Authority a $50 million project funded with $48 million in federal and state grants. The City of York invested economic and political capital in securing a $28 million revenue bond to fund a minor league baseball stadium. The City of Chester just was awarded a soccer franchise and is planning a new stadium to go along with the new casino as core projects to revitalize its economy.

    When we look back at the billions of dollars that has been spent on these projects and the results, you are left to wonder whether or not these dollars could have been spent more wisely in other areas to build an economy on sturdier foundation.

    The results have not been encouraging. Population growth in Pennsylvania between April 2000 and July 2006 was a mere 1.3 percent. Private non-farm employment decreased 0.1 percent according to the U.S. Census Bureau. Pennsylvania’s senior population continues to be among the highest in the nation at 15.2 percent in 2006.

    Philadelphia lagged behind the national average of the percent of the population with a bachelor’s degree by 4.5 percentage points in 2000; Pittsburgh’s mean household income was nearly $12,000 below the national average. None of the major cities in Pennsylvania gained population during the early years of this century.

    Suburban Growth
    Meanwhile there is a very different story in suburban and rural counties. Montgomery County’s population grew at a rate nearly three times that of the State of Pennsylvania and Bucks County grew by nearly four times. In Berks County, the next county beyond Philadelphia’s four suburban collar counties, population growth was a healthy 7.4 percent and household income exceeded the national average.

    In rural Monroe County, located outside of Wilkes-Barre, population spiked by nearly 20 percent over six years while in Pike County, northeast of Scranton, we saw staggering growth of 25.7 percent and household income exceeding the national average.

    The people of Pennsylvania want what every other American wants for their families: a nice home, good schools, quality government services and a safe community. They are abandoning cities because they cannot keep this promise to their middle-income wage earners.

    However, they are finding what they want in Pennsylvania’s first and second ring suburbs and in rural communities that don’t invest in stadiums, convention centers or entertainment to build their economies. Instead these communities provide a quality of life that attracts people and the jobs are following.

    An economy built on tourism and entertainment provides very few family wage jobs. These funds would likely be better invested in quality of life and infrastructure in order to create high wage, blue collar jobs in the global economy.

    If not, people will continue to vote with their feet as they look for opportunity beyond the casino, restaurant and tourism industries and a better quality of life outside of cities that are increasingly being viewed as opportunity-free zones.

    Dennis M. Powell is president and CEO of Massey Powell an issues management consulting company located in Plymouth Meeting, PA.

  • Manufacturing Growth Nodes

    Manufacturing is often viewed as a massive anchor to regional job growth. Here’s two lists of metro areas that not only withstood the national job hemorrhaging of 2001-2003, but they are actually growing.

    Growth by percent:

    Read more manufacturing analysis in as part of our Best Cities Rankings: Is Manufacturing Weighing Down the U.S. Economy?

    Growth by number of jobs:

  • Where Are the Best Cities to Do Business?

    Our comprehensive annual guide to which places are thriving — even in an economy many consider in recession.

    By Joel Kotkin and Michael Shires

    What a difference a year and a deflated housing bubble makes. Inc.com’s 2008 list of the Best Cities for Doing Business, created in conjunction with Newgeography.com, uncovered some of the most dramatic changes since we started this ranking back in 2004. Five major trends were immediately revealed; trends that are shaping the business environment right now across the country and will continue to over the next several years.

    The list focuses on short- and long-term job growth. It tells us precisely not just where jobs are being created — a sure sign of economic vitality — but where the momentum is shifting. For entrepreneurs, this suggests what may be the best places to locate or expand your business.

    The Bubble and the Fall of the Sunshine Boys

    Since the list’s inception, Florida has been the standout state in each of our size-based categories — small, midsize, and large. But not this year. Now, Florida is the state that fell back to earth. Stung by plummeting construction employment and the mortgage finance crisis, many of our former highfliers across the state are hurting. Ft. Lauderdale, last year’s No. 3 among the large metros, dropped 24 places. West Palm Beach, No. 6 last year, dropped to No. 41. And Jacksonville, No. 12 in the large category, fell seven places.

    The fall, however, was much more devastating for the smaller communities, such as Ft. Myers-Cape Coral. The area ranked No. 1 last year in the midsize category but plummeted 42 places this year. Lakeland-Winter Haven, down 45 places, Deltona-Daytona Beach, down 49, Palm Bay-Melbourne, down 53, and Bradentown, down 65, fared even worse. In even smaller towns, the scenario was bleaker. Ft. Walton Beach dropped 85 places and Naples-San Marco Island, No. 4 last year, plummeted 105 places, the most of any metro in our survey.

    “We’re the foreclosure capital of America,” admits Bill Valenti, founder and CEO of Florida Gulf Bank, founded in 2001 in Fort Myers on the once booming west coast of the Sunshine State. Many of the people that moved into the area bought relatively expensive homes expecting continued asset appreciation to make up for the fact that many jobs in the area pay modest or low wages. Now the area has seen median house prices drop from $320,000 to $223,000 in two years. “Something had to give and it did.”

    Although Florida’s fall was by far the biggest, the housing collapse has also humbled high fliers in other states as well. Last year’s No. 1 among the large metros, Las Vegas, dropped seven places while No. 2, Phoenix, dropped 12; the other big Arizona city, Tucson, No. 12 last year among the midsize category, fell 34 places. Midsize Reno, No. 8 last year and previously No. 1, dropped 21 places.

    Outside Florida, the sharpest pain was felt in California. Property-driven economies in Oakland, Santa Ana-Anaheim, Sacramento, and Riverside-San Bernardino all dropped by around 20 places or more. The big enchilada, Los Angeles, fell another eight places from its already mediocre 48th ranking last year. Almost every city below LA on the list is either a Rustbelt disaster or a perennially underperforming Northeastern big city.

    If this trend continues to play out, California’s problems could be worse than those in Florida. When the bubble corrects, Florida still can boast relatively low costs, no income taxes, and a favorable business climate in addition to warm weather. By contrast, California’s land use laws, high taxes, and massive $20 billion state deficit don’t bode well for the future of the state, suggests Bill Watkins, executive director of the University of California at Santa Barbara’s Economic Forecast Project. “There’s a lot of uncertainty,” he says. “If you are expanding or starting a business, there’s not a lot of reason now to come to California.”

    The Texas Ascendancy Continues

    While California is struggling, says Los Angeles-based architect David Hidalgo, Texas is thriving. Hidalgo just completed a large Latino-themed shopping center in Ft. Worth and sees more of his business coming from the Lone Star State. “That’s where the opportunities are,” he says. “Its costs, regulation, and infrastructure drive you to Texas.”

    Our rankings certainly bear out Hidalgo’s assertion. In many ways Texas has become the new Florida, dominating the top of the list. Among the largest metro areas, a remarkable five of the top 12 best places to do business are from the Lone Star State, ranging from Austin (No. 2) and Houston (No. 4) to Ft. Worth (No. 9) and Dallas (No. 12). Among the small cities, Midland, now ranks No. 1, up 10 places from last year. Odessa and Longview, both big gainers, round out the Texas stronghold on the top portion of the list.

    Texas’ boom reflects solid growth in a variety of industries, from energy and agriculture to manufacturing and trade. “The big difference for Texas is we did not rely on the real estate bubble,” suggests Bill Gilmer, a Houston-based economist for the Federal Reserve. “Our gains are based on jobs elsewhere and that has insulated us pretty well.”

    Here Come the Carolinas

    The other big winners this year are concentrated in the Carolinas. Like Texas, these two states are being fed by varied economies. Certainly, technology companies have been a factor here, many of them in Raleigh-Cary, N.C., which ranked No. 1, up six places, on our list of largest metro areas. Finance has played a large part, too, with Charlotte (No. 5), up 18 places, emerging as the big but low-cost, family-friendly alternative to the New York financial center.

    Demographics are a big part of the story here. Our analysis from Praxis Strategy Group shows that Raleigh and Charlotte, are among the biggest magnets for young, educated workers, particularly those in their late 20s and early 30s.

    “People are coming here for basic reasons and taking their families with them,” observes Sociologist John D. Kasarda, director of the Kenan Institute at the University of North Carolina at Chapel Hill. “They are coming for jobs, particularly from the Northeast, and an affordable quality of life.”

    To some extent, Kasarda adds, Raleigh and Charlotte are well-known success stories, but he points to wider, less documented successes in the region. Driven by gains in tourism, logistics, manufacturing, and technology, more and more midsize Carolina cities are joining the party. These emerging players include Charleston, S.C. (No. 6); Asheville, N.C. (No. 7); Durham, N.C. (No. 11); Greenville, S.C. (No. 18); and Columbia, S.C. (No. 19). These cities made considerable gains over last year and should be seriously considered for new business opportunities.

    The Pacific Northwest-Intermountain West Surge Continues

    Like last year, the northwestern quarter of the country did very well. Three of the top 11 big metro areas in the region between the foggy West Coast and the high mountains, including Salt Lake City (No. 3), Seattle (No. 10) and Portland, Ore. (No. 11), all gained ground. This ascendancy was even more evident at the midsize level, with the success of cities such as Provo-Orem, Utah (No. 1); Tacoma, Wash. (No. 2); Ogden, Utah (No. 8); Boise, Idaho (No. 12); and Spokane, Wash. (No. 14). Small cities, including St. George, Utah (No. 2), Coeur d’Alene, Idaho (No. 3), Bend, Ore. (No. 7) and Grand Junction, Colo. (No. 9), also saw gains.

    In many ways, the gains here parallel those in the Carolinas. Places like Salt Lake City, Seattle, and Portland, according to the Praxis Strategy Group analysis, all continue to gain educated residents from other parts of the country. The lure, in many cases, lies with strong and diverse job growth and low housing prices compared to coastal California and the Northeast.

    Seattle continued its strong growth, notes economist Paul Sommers, due largely to the success of two companies — Microsoft and Boeing. These companies have been expanding, providing high-wage jobs, and attracting skilled talent to the area. Another key advantage in this high energy cost environment: the Northwest’s prodigious supplies of cheap and clean hydroelectric power. This helps everyone, from people building airplane parts to dot-com firms sucking copious amounts of electricity to run their servers.

    Some of the other areas in this vast region benefit from what might be called “grey power.” Older, often more educated and affluent, baby boomers are flocking to the smaller towns and cities in this region, bringing capital and, in some cases, entrepreneurial know-how. Like the Carolinas, the area between the foggy Pacific Coast and the Rockies seems poised for sustained growth.

    Revenge of the Superstars?

    Perhaps the most surprising shift in the 2008 rankings, and in some ways the most subtle, has been the improvement in a host of very expensive, highly regulated urban regions that Wharton economist Joe Gyourko calls “superstar cities.” For many years these cities — New York, San Francisco, San Jose, Boston — have clustered at the bottom of our growth-oriented list, all suffering big losses from the 2000-2001 dot-com bust.

    This year has seen the revenge of the “superstars.” Although not surpassing Texas, the Carolinas or the Northwest, these elite cities have made a strong showing. In just one year, New York (No. 22) propelled itself 21 places while San Francisco (No. 29) and San Jose (No. 33) gained at least 25 places, and Boston (No. 40) went up 19 places.

    The main reason for this modest, but significant turnaround, suggests David Shulman, former managing director of Lehman Brothers, is simple: the powerful financial sector expansion of the past few years. These are all cities where big money plays a big role, either financing new dot-com start-ups or simply serving as the places where multimillion-dollar bonuses are spent on a host of high-priced services.

    Yet, Shulman notes, these gains may be short lived. The impact of the subprime and mortgage meltdown hit first in places like California and Florida, and is only beginning to affect the major financial centers. Spurred by the credit crisis, Shulman fears new regulations will limit financial innovation and wipe out whole sections of industries like mortgage-backed securities and some derivatives.

    “A lot of these gains are going to rewind,” suggests Shulman. “New York is losing jobs as we speak. Anyplace with exposure to financial services is going to suffer over the next two years.”

    Joel Kotkin is a presidential fellow at Chapman University and executive editor of Newgeography.com

    Michael Shires, Ph.D. is a professor at Pepperdine University School of Public Policy

  • Is Manufacturing Weighing Down the U.S. Economy?

    The answer may surprise you.

    Ever since we started ranking the Best Cities for Doing Business in 2004, the bottom rung of the rankings has been largely dominated by older industrial cities where factories have long been abandoned and once booming economies have dried up. The 2008 list bears this sobering fact; among the largest regions surveyed, Detroit sits on the bottom at No. 66, with Warren Troy-Farmington Hills, Mich., Cleveland, Providence, R.I., Philadelphia, and the New York twins — Rochester and Buffalo — doing only slightly better.

    The same pattern can be seen on the lists of midsize and small cities, where the bottom rankings consist largely of former industrial towns along the Great Lakes belt, including Ohio, Michigan, and Indiana. Dayton, Ohio, falls last at No. 96, lying at the bottom of the midsize list of cities. Among the small metros, Battle Creek, Mich., languishes at No. 173, with Michigan cities Saginaw and Flint doing only slightly better.

    So given this persistent underperformance, is manufacturing weighing down the U.S. economy? The answer may surprise you. Even though the industrial towns dominated by what used to be called the Big Three automakers (General Motors, Ford, and Chrysler) and their suppliers have been devastated by slumping sales, a host of other manufacturing regions have emerged as strong performers. For the most part, the largest beneficiaries of these changes are located either in the Intermountain West — the region between the Rocky Mountains and the Sierra Nevada, and the Sun Belt region stretching across the southern bottom of the country. Here, U.S. car makers are not well represented and smaller communities with a host of specialized industrial companies have expanded in the face of tough times.

    For example, large metros, such as Las Vegas (No. 8), Houston (No. 3) and Salt Lake City (No. 4), have attracted specialized industrial companies from high-cost, high-regulation locales like California, including aerospace, electronics, and industrial equipment. All these areas have experienced industrial job growth since 2000; Las Vegas alone has seen its number of manufacturing jobs grow by more than 30 percent.

    But much of the action is in smaller areas. Many of them, like Midland, Texas, (No. 1); Longview, Texas, (No. 11); and Morgantown, W.Va., (No. 15), are tied to energy production. Such places have experienced 15 percent or more industrial job growth since 2000.

    Another hot spot is in the Great Plains. Many cities in the region have attracted sophisticated manufacturing firms in technology, farm machinery, and electronics as well as an expanding number of energy-based companies ranging from oil, gas, and coal to wind power. Grand Forks and Fargo, N.D., No. 56 and No. 28 respectively, have experienced a quiet industrial boom, increasing their manufacturing jobs by more than 14 percent since 2000.

    Already home to numerous agricultural implement firms, the largest manufacturer in Grand Forks is LM Glasfiber, a Danish manufacturer of propeller blades for windmills. Since the North Dakota office opened in 1999, it has expanded from 20 to 900 employees. Plant Manager Ralph Sperrazza says he appreciates the loyalty and dedication of the employee base, many of whom are returnees from larger metropolitan areas such as Minneapolis.

    One effect of LM, local economic development officials reveal, has been a notable tightening of the labor market and an increase in wages in Grand Forks. The same result, notes North Dakota State Economist Larry Leistritz, is occurring elsewhere in the region as other core industries, ranging from energy and office furniture to farm equipment, have enjoyed rapid growth.

    “These are the best times we’ve seen in many decades,” Leistritz beams. “And it is being felt broadly across the entire society.”

  • Suburbia’s Not Dead Yet

    While millions of American families struggle with falling house prices, soaring gasoline costs and tightening credit, some environmentalists, urban planners and urban real estate speculators are welcoming the bad news as signaling what they have long dreamed of — the demise of suburbia.

    In a March Atlantic article, Christopher B. Leinberger, a visiting fellow at the Brookings Institution and a professor of urban planning, contended that yesterday’s new suburbs will become “the slums” of tomorrow because high gas prices and the housing meltdown will force Americans back to the urban core. Leinberger is not alone. Other pundits, among them author James Howard Kunstler, who despises suburban aesthetics, and New York Times columnist Paul Krugman, see the pain in suburbia as a silver lining for urban revival.

    Not so fast. The “out of the suburbs, back to the city” narrative rests more on anecdote than demographic or economic fact. Yes, high gas prices and rising sub-prime mortgage defaults are hurting some suburban communities, particularly newly built ones on the periphery. But the suburbs remain home to a majority of Americans and a larger proportion of U.S. families — and people aren’t leaving those communities in droves to live in cities. Even with economic growth slowing, many suburbs, exurbs and smaller towns, especially those whose economies are tied to energy, are continuing to do better than most cities in terms of job creation and population growth.

    The ominous predictions that the end of suburbia is at hand echo those in the 1970s, when there was also a run-up in gasoline prices. Then it was neo-Malthusians such as biologist Paul Ehrlich, the author of “The Population Bomb,” who argued that the idea of suburbia was unsustainable because it eats up so much land and energy. But suburban growth continued as people bought more fuel-efficient cars and companies moved jobs to the periphery, which cut commuting times. Contrary to pundits’ forecasts, during this decade of high energy prices, the country’s urban populations, for only the first time in recent history, actually fell, according to a census analysis by economist Jordan Rappaport at the Federal Reserve Bank of Kansas City.

    But today’s gas prices, at more than $4 a gallon, are the highest ever, and the prospects of them significantly dropping any time soon are slight. The conditions for an exodus from suburbia to the cities would seem ideal once again.

    Nevertheless, since 2003, when gas prices began their climb, suburban population growth has continued to outstrip that of the central cities, with about 90% of all metropolitan growth occurringin suburban communities, according to the 2000 to 2006census. And the most recent statistics from the annual American Community Survey, which is conducted by the U.S. Census Bureau, show no sign of a significant shift of the population to urban counties, at least through 2007.

    The flat condominium markets in most large urban markets are another sign that people are not streaming into cities from the suburbs and buying. Many condo projects in such cities as Los Angeles, Chicago, Miami and San Diego have either been canceled or converted into rentals, with many units remaining vacant. As a Southern California condo developer told me recently, lower house prices are not going to make people more disposed to buying apartments.

    But the biggest reason the suburb-to-city narrative is not following the script of the urban boosters and theorists has to do with employment. Living close to your workplace makes sense, not only because it cuts commuting costs and reduces greenhouse-gas emissions — by saving time, it also gives people more time for family and leisure activities.

    The problem for many cities is that they lack the jobs for people to move close to. Since the 1970s, the suburbs have been the home for most high-tech jobs and now the majority of office space. By 2000, only 22% of people worked within three miles of a city center in the nation’s 100 largest metro areas.And from 2001 to 2006, job growth in suburbia expanded at six times the rate of that in urban cores, according to an analysis of Bureau of Labor Statistics by the Praxis Strategy Group, a consulting firm with which I work.

    A desire to live closer to their jobs doesn’t mean that people have to move to the inner core, particularly if that’s not where the jobs are. Of the 20 leading job centers in Southern California by ZIP Code, none are downtown. The central core does remain an important job center, but it accounts for barely 3% of regional employment. Among those who work downtown, some may shift from cars to public transit, although many will simply buy a more fuel-efficient car and stay put in the suburbs.

    For residents who live in suburban areas with large concentrations of employment — Burbank, Ontario and West L.A. — commutes to work can be shorter than those experienced by their inner-city counterparts, according to Ali Modarres, a professor of geography at Cal State Los Angeles. Commutes in these communities, on average, are less than 25 minutes, while in high-density areas, such as Pico-Union, they average 35 minutes.

    The relative and continuing health of these suburban employment centers would seem to preclude any large-scale flight to cities. But urban areas with limited or shrinking employment opportunities, and suburbs that bet on housing to sustain their economies, will continue to have trouble attracting residents either because of a scarcity of jobs or long commutes at a time of expensive gas.

    The suburb-to-the-city narrative faces other obstacles. By the early part of the next decade, the large millennial generation born since the early 1980s will begin to form families, and they will, as have previous generations, probably seek open space and good schools for their children — and that means they will settle in the suburbs. And there is no census evidence suggesting that immigrants have reversed their decade-old pattern of moving to the suburbs.

    The growth of telecommuting, fed by technological advances, further ensures that suburbia has a future. By 2006, the expansion of home-based workers had grown twice as quickly as in the previous decade. And by 2015, according to demographer Wendell Cox, there will be more people in the country working electronically from home full time than are taking public transit.

    More numerous will be those who work at home part time. Nearly 29 million Americans telecommute at least once a month, according to WorldatWork, a nonprofit consultancy. At many companies — IBM, Sun Microsystems and AT&T among them — upward of 30% of their employees work from home. In some regions, such as the San Francisco Bay Area and Los Angeles, almost one in 10 workers are part-time telecommuters, according to a 2004 study done by Resources for the Future, a Washington-based think tank.

    Continuing high energy prices will likely change the nation’s geography, but not in ways some urban theorists are predicting. Rather than cramming more people and families into cities, they may instead foster a more dispersed, diverse archipelago of self-sufficient communities. From here, that looks like a far more pleasant scenario not only for suburban and exurbanites but for urban dwellers who don’t want to live under dense conditions reminiscent of 19th century industrial cities or the teeming metropolises of the contemporary Third World.

    Joel Kotkin is a presidential fellow in urban futures at Chapman University and executive editor of NewGeography.com

  • The Three Geographies

    By Joel Kotkin and Mark Schill

    Officials in both Presidential campaigns, as well as analysts like Michael Barone, tell us that it is time to “throw out the map”. Yet if we are about the jettison the broad “red” and “blue” markers, perhaps we should explore a very different geographic matrix for this election.

    We believe Americans’ political perspective — if not the final voting behavior — is largely shaped not so much by their state but by the type of place, they reside in. These define much about an area, such as how many people are homeowners, take transit, have children living at home, the preponderance of middle class households, and the extent economic and racial diversity.

    Although not uniform across the country, we believe the most effective breakdown of how Americans live can be seen in three basic geographic forms — the urban, suburban and what we call “small town/rural”. These geographies show significant differences in almost all major characteristics, including in voting behavior. And even when voting for the same party, they often do so with different motivations.

    Democrats in the small cities and towns of the Great Plains, for example, closely follow issues related to agricultural and infrastructure policies that help expand economic opportunities, including energy development. In contrast, urban politics in places like New York, Chicago, or San Francisco tend to have a far greener tinge and concern with social issues such as gay marriage.

    Over the next three months, we plan to break down the country by these three geographies and posit how they live may affect their vote. First thing to do is estimate the size of these three geographies. Examining the census, we believe that urban centers — that is core cities of our nation’s large metropolitan areas — represent roughly 32% percent of the total population. The rural/small town component, in many ways the opposite of the urban core, represents roughly 17 percent.

    By far the largest percentage of Americans lives in the third geography, the suburbs. Located between the rural edges and the urban cores, this is where Americans have been migrating with remarkable consistency for over a half century. Despite varied attempts to proclaim a “back to the land” or “back to the city” movements, through oil price rises and declines, suburbs have shown no long-term sign of secular shrinking. In fact, during the last six years, roughly 90% of all growth in metropolitan areas has taken place there

    If suburbs, with roughly 51% percent of the population, represent the largest geography, they also, not surprisingly, are most representative of the nation as a whole. Once overwhelmingly white, they now have a racial breakdown far closer to the national norm than either cities, which are much more heavily minority, or rural/small towns, which are considerably less so.

    Perhaps more importantly, suburbs tend to have higher concentration of middle class voters than the other geographies. This may explain in part why the suburbs, particularly the outer ring, bore the initial brunt of the mortgage crisis — suburban households are fifty percent more likely to be owner-occupied but also generally endure higher prices than rural/small town residents. Although their commutes, particularly on the fringes, are not markedly longer than those of urbanities are, they are more dependent on their cars than those who live in such transit oriented cities as New York, Chicago and Boston.

    Higher gas prices and the problems with suburban mortgages have some representatives of urban America convinced that their return to national preeminence is imminent. In the last energy crisis during the 1970s, pundits also predicted a similar “back to the city” parade but this did not occur. Actually, over time companies moved their facilities to the suburbs where their workers already had migrated. People also changed their driving habits, most conspicuously by tossing out their gas-guzzlers for more economic models, largely produced by Japanese firms.

    Other factors should temper urban enthusiasm as well. For one thing, despite the much-ballyhooed revival of central cities, urban areas remain home to most of the highest concentrations of poverty in the nation. What characterizes urban areas, even relatively successful ones such as Chicago, New York and San Francisco, has been their growing bifurcation between extremes of rich and poor. Some , less fabled cities, such as Pittsburgh, even are suffering the ultimate demographic indignity: more people are dying than being born.

    However, in one way urban areas are clearly ascendant: politics. Cities by their nature tend to create coherent, high articulate political, media and economic voices. In contrast, suburban governance generally rests with highly decentralized legislative bodies or in the hands of bland professional managers. Urban America boasts very effective lobbyists and cheerleaders, through both media-savvy Mayors like Michael Bloomberg in New York; well-endowed think tanks, tapping old money sources and developers, serve to promote urban interests. Suburbs, in contrast, generally lack any sense of self-awareness and lack the institutional support to promote their cause.

    A Barack Obama presidency could provide a shot of adrenalin to the urban lobby. Senator Obama illustrates some of the most attractive parts of urbanism such as ethnic diversity, sophistication and a well-articulated commitment to social justice. He also epitomizes some the most turpitudinous, reflected by his ties to the sleazy Chicago machine and links to rent-seeking real estate interests who increasingly, along with public employee unions, dominate urban politics.

    Senator Obama’s dominance of the urban geography was complete throughout the primaries and is likely to consolidate even further during the general election. More than any time in the last half-century, Republicans, and even moderate Democrats, are becoming a rare, even endangered species in the big city.

    This is bad news for John McCain. He’s the kind of Republican who might have once been thought at least mildly saleable in urban areas. In many ways he suggests the pragmatism of past Republican Mayors such as New York’s Rudy Giuliani, Brent Schundler in Jersey City, Indianapolis’ Stephen Goldsmith and Richard Riordan in Los Angeles. However, in today’s urban political climate, defined by ultra-green and leftist cultural politics, the niche for even these kinds of Republicans seems to have all but evaporated.

    Perhaps the most intriguing, and least understood geography can found among the small towns and rural areas. Although they too have become more diverse, overall such communities tend to be poorer, less educated and more homogeneous (in most of the country white) than suburban areas. Yet there are now growing pockets of affluence in parts of this geography, aided by the boom in energy, food, manufacturing and, to some extent, technology related industries.

    In the recent past, the Republicans have owned this demographic. Senator Obama, after initial successes in Iowa and Wisconsin, generally did not do well in less prosperous rural/ small town areas in non-caucus states. In contrast, Hillary Clinton, who morphed into more of a populist late in the campaign, clearly touched a nerve in struggling small towns from Nevada to Pennsylvania. Any candidate who speaks about stimulating economic growth and opportunity could appeal to such areas.

    There is perhaps a greater opportunity for Senator Obama in those many parts of rural/small town America that are doing well. Although all rural and small town Americans may seem “bitter” — to use Obama’s unfortunate phrase — to the urban elites, considerable numbers of small towns are doing better than any time in decades. Plugged into the global economy, internet and their satellites, they are no longer the isolated, bigoted rubes of city imaginings. A forward-looking pro-growth agenda could be surprisingly successful in such places.

    Yet in the end, we believe the election will be decided largely in the suburbs, the largest if least self-defined of the geographies. Throughout the primaries, Senator Obama battled Ms. Clinton to a rough draw in the suburbs. He generally did best in the higher end, closer in suburban communities as well as those with large minority population, much as John Kerry did against George Bush in 2002. Now the question is whether he can expand that suburban base to the often less affluent, newer and somewhat more exurban counties.

    Senator McCain, from sprawling Phoenix, needs to rally the hard-pressed homeowners and commuters of the suburbs. Recent polls suggest he now holds as much as a ten point lead among suburban voters. To consolidate that advantage, and even expand it, he must offer a vision that promises a future under the next Republican President better than the present one. In contrast, given his lock on the cities, Obama simply needs to split the suburban geography and make a respectable showing in the rural/small towns’ constituency to reach the top of the greasy pole.

    Mark Schill contributed to this report, also appearing at Politico.com.

    Joel Kotkin is a Presidential Fellow in Urban Futures at Chapman University and executive editor of NewGeography.com. Mark Schill, an associate at Praxis Strategy Group, is the site’s managing editor.

  • Do higher gas prices push people from small towns?

    The Kansas City Star published an article and video package over the weekend suggesting that because of high gas prices, the “country could see a migration that would greatly reduce the population of Small Town America.” This may be news to those at the Star, but this exodus from many small towns and farming communities has continued unabated for decades, and gas costs are a minor factor in the equation.

    What really matters is proximity to employment. Living in a small town is a conscious lifestyle choice, and while the dollar cost of a long commute is a factor, it’s not as important as the time cost trade off. Lower density areas already offer shorter commute times than metro areas.

    Take our extreme commuter example from the KC Star article. Even if he is paying another $200 a month in gas costs, he’s likely saving over $500 a month by choosing to live in a small town. Besides, he’s already chosen years ago to make the daily time investment in his commute.

    On top of that, gas prices in the rural heartland are some of the cheapest in the nation. If fuel costs are the primary motivator, where is he going to go?

    Increased fuel costs certainly will cause us to refine our lifestyles in favor of conservation. But, if you’ve already chosen to live in a certain type of place, you move in favor of a new type of lifestyle or to find work. In our nation’s small towns far from job clusters, hanging out a shingle reading “We have $2 a gallon gas!” will have no effect.