New Geography

Category: Economics

  • Orlando: Uncle Sam Meets Mickey Mouse

    Hawks and doves disagree on whether World War II ended the Great Depression.  Depending on which species of bird squawks louder, military spending may be the only way out of our current financial malaise.  In many ways it is already happening, although it is a surreptitious and quiet influence felt mostly in the high-tech economic sector.  Defense growth in one of the most unlikely places – Orlando, Florida – has already begun to diversify the region’s income stream, create a new urban corner of Central Florida, and tap into some of the natural allies and partners that already exist here.  Mickey Mouse is now sharing Orlando with Uncle Sam as the militarization of the local economy increases.

    America’s current rough patch, as Dr. Roger Siebert recently wrote about , seems to be deeper than any in recent memory, and recalls the 1930s.  During that time, isolationism was only cured by a slap in the face:  Pearl Harbor.  Today’s isolationism, so vigorously voiced in the calls to depart Afghanistan, seems to echo that period.  Enlistment in the military isn’t exactly vigorous, and intervention in troubled regions is not on the radar screen of even the most ardent hawk.  America seems too self-involved at the moment to care.

    Yet at this very same time, Pentagon spending is quietly rising in the modeling, simulation, and training fields.  Already employing 53,000 Floridians, 9,000 more than the state’s hallowed agriculture industry, this growth sector is hugely dependent upon a high-skilled, high-wage workforce.  The ability to train soldiers, sailors, and pilots without the expense of actual bombs and equipment has clearly demonstrated its benefits to the satisfaction of the military brass, making it inevitable that more is to come.

    Co-located next to Florida’s premier high-tech medical research park, Lake Nona, the National Simulation Center is the most common name used to describe the efforts underway at the Central Florida Research Park on the east side of town.  More importantly, however, the Center is adjacent to the University of Central Florida.  Already the second largest university in the country, UCF is home to much of this Center’s local 18,000 workforce.   With Navy, Air Force, and Marines research and training, the Simulation Center has quietly become the world’s largest military simulator .

    Regionally, it leverages its old Naval Training Center roots and proximity to NASA facilities at Cape Canaveral to capture workers, skill sets, and continuous research and improvement.    While the town struggles with slumping tourism and anemic population growth, the high-tech military industry is rapidly taking over as one of the biggest new economies to hit Florida.

    Spinoffs from military research can only benefit Central Florida’s attractions and rides, as future tourists will be able to experience more and more virtual thrills in addition to more traditional meatspace rides and shows.   In the meantime, it remains a quiet partner in diversifying the economy.

    In the 1990s, the Naval Training Center left Orlando, ostensibly because it duplicated facilities that the Navy had elsewhere.  Its developable land, close to downtown Orlando, became Baldwin Park, and the old barracks, classrooms, and laboratories were quickly bulldozed for lucrative residential real estate.  Few were aware that the functions of the Orlando Naval Training Center were downsized, not eliminated, and were quietly relocated to the east side of town.

    The Training Center evolved into the National Simulation Center. As a research-intensive industry, it capitalized on its new proximity to the University of Central Florida’s campus, and began an interchange with the engineering and computer science programs at that school.  UCF, today with over 50,000 students, has quickly grown to become the nation’s second largest university, just behind Ohio State.  UCF’s own Research Park has grown to rival the fabled Research Triangle in North Carolina, due to the synergy between military and higher education.

    Its new location also moved the Training Center a little bit closer to the Kennedy Space Center as well.  The Navy has always had a presence at Cape Canaveral, and with the employee base around the Space Center available less than an hour’s commute away, the Training Center has already benefitted from the availability of this highly skilled workforce who has suffered from the ebb and flow of NASA’s political fortunes.

    Medical research being conducted by Scripps, Burnham, and Nemours will also benefit from this activity, as they are all building new facilities at Lake Nona.  This medical research campus will employ many with the same skills, education, and training as the Simulation Center, and provide choices for the scientists and engineers living in Lake Nona’s suburbs.  This makes the residential real estate around Lake Nona a bright spot in Central Florida’s otherwise horrendous housing market .

    Surrounding the Simulation Center, small companies have already started feeding creativity and innovation into the giant maw of the military, and spinoffs – commercialization of its technology – have also benefitted larger companies such as Orlando’s game design team at Electronic Arts and the military contractor Lockheed Martin.  This supply chain, once established in Orlando, gives localized sustainability to this industry and suggests that it has achieved a foothold among the tourism, agriculture, and growth industries firmly established in Central Florida.

    Geographically, East Orlando is difficult to develop.  Like the surface of swiss cheese, land above the flood plain, traditionally agricultural, is interlaced with wetlands and lakes, and it has been historically ignored for the broad swaths of low-hanging fruit closer to the theme parks and population centers on the west side of town.  Pressure to develop, however, has suddenly put this area in the spotlight, and controversial proposals by homebuilders and other owners have raised questions about whether Florida should stay on its historic pathway of man vs. nature.   Infrastructure – roads, utilities, and other unglamorous investment – still doesn’t exist in much of East Orlando.  Because development has historically been in small pockets fragmented by the area’s mosaic of wetlands, connectivity and sheer mass will be difficult to achieve without great cost to the environment.

    Yet this does not have to be so.  Dense development can happen with respect to nature, as proven by countries such as Germany and Sweden .  If left to the same old forces that developed the rest of Florida, it is unlikely that East Orlando will experience any innovation regarding development strategy, and Central Florida will host the same old battles of environmentalists vs. developers again and again.  The state’s growth strategy – leaving it up to private interests – may have already guaranteed this outcome.

    If, however, innovation transcends the research mission and influences the style of development to support this research, then the military and medical centers in East Orlando have a chance to provide a true, new pathway to the future.  Like Victor Gruen’s 1963 concept for Valencia, which recognized such modern aspects of society such as the car, East Orlando could be planned as an employment-based community within the context of nature using contemporary science and technology.  Orlando, the ephemeral city home to amusement parks and orange groves, could become a model for development to influence other areas struggling with the same questions.

    Militarization of the economy may become a vehicle for true change.  The cluster of military agencies and private businesses, headed by Lockheed Martin, all revolve around this economy and provide a badly-needed shot in the arm of Orlando’s workforce.  With high-salary, highly educated workers, global connectivity, and a growth engine no less than the Department of Defense, Orlando can be assured of some good times ahead while the tourism and housing sectors recover.  The region’s leadership must think carefully how to embrace this new savior, and what the greater implications are for the future.

    Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

    Photo by Research Development Engineering Command

  • The Katrina Effect: Renaissance On The Mississippi

    In this most insipid of recoveries, perhaps the most hopeful story comes from New Orleans. Today, its comeback story could serve as a model of regional recovery for other parts of the country — and even the world.

    You could call it the Katrina effect. A lovely city, rich in history, all too comfortable with its fading elegance and marred by huge pockets of third-world style poverty, suffers a catastrophic natural disaster; in the end the disaster turns into an opportunity for the area’s salvation.

    Had Katrina never occurred New Orleans would likely have continued its inexorable albeit genteel decline; the area’s population dropped from 627,000 in 1960 to 437,000 in 2005, the year the hurricane occured. Instead the disaster brought new energy and a sense of purpose to the Big Easy.

    I first realized that New Orleans was going through some kind of renaissance when looking at some numbers.  In our list of the country’s biggest brain magnets — based on analysis of where college-educated adults were moving to by demographer Wendell Cox —  New Orleans ranked No. 1, ahead of such hot spots as Raleigh-Durham, N.C., and Austin, Texas.

    Then came our analysis of the best large cities for jobs: New Orleans ranked No. 2 in our survey, up a remarkable 46 places. New Orleans’ performance was particularly impressive in the information field, which includes software and entertainment, and in which the Big Easy grew the most — over 30% last year alone – among our major metros.

    Yet numbers do not tell the whole story. Sometimes statistics simply look great against the background of catastrophic decline. New Orleans was so far down and received so much recovery money that recent improvements could be explained as a short-term bounce back from a disaster.

    But the resurgence of New Orleans, whose population is now back to almost 350,000, represents something far more significant and long-term. For one thing, the storm undermined the corrupt, inept political regimes that had burdened the area for decades. “Katrina shattered the networks and broke down the old hierarchies,” notes Tim Williamson, a New Orleans native and founder of Idea Village, a nonprofit focused on aiding local entrepreneurs.  ”People felt we were dying. Now we feel like we are refounding a great American city.”

    For example, inept leaders like former Mayor Ray Nagin and the equally lost Kathleen Blanc have been replaced by more effective figures like Mayor Mitch Landrieu and Gov. Bobby Jindal. Equally important, according to a recent Brookings report, New Orleanians have become noticeably more engaged with their community. Particularly impressive have been improvements in the local schools, once among the nation’s worse. Last year, the majority (61%) of public school students in Orleans Parish (counties in NOLA are called parishes) attended charter schools, which are now attracting some middle class families.

    Most impressive, this once stagnant region has transformed into an entrepreneurial hot bed. “Five years ago people thought we were crazy to be here,” says Matt Wisdom, founder of Turbosquid, a firm with 45 employees that provides three-dimensional images to corporate clients. “Now instead of people being amazed we are here, they want to get here to ride the wave.”

    Walking along Magazine Street from the edge of the Garden District to the Central Business District, you still pass some rough areas. But the way is peppered with scores of independently owned shops and small businesses, many of them opened since the hurricane. Their owners for the most part appear to be younger than 40.

    “We used to have this huge brain drain to the Northeast, the West Coast and Texas, but this has changed,” Williamson says. “After Katrina everyone was forced to become an entrepreneur. The dominant concept for the rebuilding has become one of resiliency and self-employment — it’s been bottom up. It’s become as much of our identity as Mardi Gras or the Jazzfest.”

    Since its founding back in 2000 Idea Village has assisted 1,000 local companies with business plans, financing and focus. Most are small, but some of what Williamson calls post-Katrina generation companies, like Naked Pizza, founded in 2006, have expanded rapidly. Specializing in a healthy, organic version of the traditional high-fat fast food, Naked Pizza has won financial backing from Dallas Maverick owner Mark Cuban. The company, which employs 40 employees at its New Orleans headquarters, expects to have over 70 franchises by the end of the year  .

    Many rapidly rising businesses specialize in digital media, attracting talent from other places like the West Coast and New York. 37-year-old Kenneth Purcell, founder of Iseatz, moved his entertainment and travel business from New York to NOLA in 2009 and has since grown his company from seven people to 25.

    One big advantage of starting a business in New Orleans is its affordable housing. Based on median price against median household income, the region’s prices are roughly 50% less than those in New York or San Francisco. This is particularly attractive both to middle-aged couples with children who can afford a spacious suburban home that are far less expensive than their equivalents in Los Angeles, Westchester or Silicon Valley.

    It also is attractive to the smaller subset of employees, many of them young, who are drawn to traditional cities. Some New Orleans neighborhoods remind me of pre-1980 Greenwich Village, offering a charming urban environment without either the extortionate price tag or oppressive density.

    Immigration, much of it from Mexico, also is contributing to the regional remake. Over the past decade, as both white and black populations dropped, the Asian population grew by 3000 and Hispanics by 33,500, most of them settling in suburban Jefferson Parish.  Once predominately African-American, New Orleans is returning to its more multi-racial past while re-establishing its strong cultural and social ties to Latin America.

    Yet despite all positive signs, it may be too early to proclaim, as some boosters do, a “New Orleans miracle.” After all, the city’s population remains over 100,000 below its depressed pre-Katrina levels. There are still over 47,000 vacant housing units in the city, many of the uninhabitable, notes Allison Plyer, who runs the Greater New Orleans Community Data Center. Overall, the recovery remains stronger in the suburbs, many of which suffered less damage from the storm. The share of regional population living in Orleans Parish, where the city of New Orleans is located, has slipped to 29% compared with 37% in 2000. Jefferson Parrish now has more jobs than the city across all income categories.

    Plyer believes the priority for the entire region lies in restoring the higher-paid blue-collar and middle-class jobs that for decades have disappeared from the city.  Young tech and media firms can help gentrify parts of a city, but they are not sufficient to provide opportunities to the vast majority of its residents. To do this, Plyer suggests, the region will have to focus more on “export” oriented jobs in industries such as  energy, manufacturing and trade.

    Critically these fields can provide decent salaries for a broad swath of workers.  Right now, Plyer adds, 45% of the workforce earns less than $35,000 a year, one byproduct of the domination of the generally low-paying tourism industry. Jobs connected to shipping pay twice as much on average as tourism; energy three times as much. A new steel plant announced recently by Nucor in suburban St. James Parish could create more than 1200 jobs with average pay of $75,000 annually.

    “We’ve allowed Houston and Biloxi to move ahead in a lot of these other industries,” she explains.  ”We have to move ahead in engineering and services and energy to compete with Texas. We can’t be just a tourism economy.”

    Ultimately, New Orleans’ long-term recovery may depend on exploiting historic raison d’etre: location. The region  stands astride the primary corridor for the Midwest grain trade and sits in the middle of the Gulf trade routes. It also boasts some of the nation’s richest energy deposits.

    Coupled with its enormous cultural appeal, resurgence in the  more traditional economy could spark the most remarkable urban comeback story of the new century. Once the poster child for urban despair, New Orleans may develop a blueprint for turning a devastated region into a role model not only for other American cities but for struggling urban regions around the world.

    This piece originally appeared at Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by Adam Reeder

  • Diagnosing New Inflation Symptoms

    It’s been more than three years since the Great Recession began, and it’s no longer debatable that the federal spending in its wake did not provoke inflation. Years of forecasts by fiscal conservatives about the result of government expenditures have proved to be wrong. After three fiscal stimulus packages, core inflation — which excludes the volatile prices of oil and commodities— remains very much in check. The core rate is the most reliable guide to future inflation, and it has not trended upward.

    Headline inflation, however, the rate that does include these two, has increased. Is the recent uptick in gas and food prices a game-changer on inflation? Does it mean that predictions of an inflation tsunami were well-founded? And what’s the best course to follow now?

    Many commodity prices have made double and triple digit gains over the past year. The changes are more than a blip — cotton futures, for example, have risen 162 percent— even if the cost of oil continues to decline. These prices are notoriously subject to rapid change for reasons that don’t reflect the structure of the U.S. economy. Factors can include Middle East politics, weather, activity in the developing world, and, most significantly today, speculative profiteering.

    Gold and other commodities have become a hot destination for players — money managers — as these markets have become the rare opportunity for high returns. In the absence of federal regulation and supervision, the low interest rates that are so crucial to business growth and to the vast majority of Americans have been allowed to feed into the permissive speculative superstructure.

    The run-up has clearly impacted the poor and the hungry in the undeveloped world. In academic and policy circles, there’s a high level confidence that commodities account for only a small share of GDP in wealthy countries, and so aren’t of concern as long as core inflation is under control. At the Levy Institute, in contrast, our research shows that even in the developed world expensive food, energy, and materials can crowd out other household purchases. Consumer budgets can be hurt even before serious headline inflation appears.

    If commodity prices were to continue to climb broadly and sharply, the Federal Reserve could face the prospect of a serious episode of cost-push inflation, similar to what we saw in the 1970s and ’80s. Fed Chairman Ben Bernanke might find himself occupying the chair of Paul Volcker in more ways than one.

    This kind of inflation is caused neither by the effects of low interest rates on the broader economy, nor by government spending. And, as with any symptom of ill health, the cause dictates the appropriate treatment. So if Bernanke’s response was to raise interest rates dramatically in the hope of abating inflation to some arbitrarily low target, it would be a risky mistake. An interest rate rise would be a serious danger to growth and job creation. Business and labor are far too fragile to deal with a double whammy from rising gas and food prices coupled with monetary policy tightening.

    A better response would be ‘watchful waiting’, a phrase seen in the December 1996 minutes of the FOMC (Federal Open Market Committee) meeting. A commodity price inflation could remain at least somewhat isolated.

    Higher commodity prices will be used as an excuse to charge that the Fed’s supposedly lax policy has unleashed an inflationary flood of cash throughout the economy. But the Fed’s so-called ‘easy money’ is parked at the Fed itself, as bank reserves, since banks are not lending. This can’t cause inflation either. Logic hasn’t stopped newly re-branded Republican presidential candidate Newt Gingrich, who recently admonished that “The Bernanke policy of printing money is setting the stage for mass inflation.”

    Those who purchase securities for long-term investment evidently disagree. Bond traders aren’t anticipating an inflationary surge. Just look at the yield spread between inflation-indexed and non-indexed Treasury securities of the same maturity. It has remained almost constant over the past year. In other words, buyers who want their returns insulated from inflation are paying only slightly more for protection than they were last year. That flatness — the unwillingness to pay a premium for inflation insurance — indicates that long-term bond buyers haven’t revised their inflation forecasts.

    Also unlikely to revise their predictions: inflation doom-drummers, even as energy prices level, and wages, another inflation indicator, are by no means jumping. Like eons of ‘the-end-is-nigh’ prognosticators, they don’t exactly have a great track record. Back in spring 2008, a frenzied Glenn Beck urged Fox viewers to “Buy that coat and shoes for next year now.” Some of his Washington cohorts are coy about inflation’s estimated time of arrival. Republican House Majority Leader Eric Cantor, for example, tells us that “fears” of “future” inflation are “hanging over the marketplace.” Others, like former Pennsylvania Senator Rick Santorum, say its already arrived (Obama brought it). The accusations continue despite a lengthy stretch of the lowest inflation rates in modern U.S. history, even with the current commodities rise.

    Paul Ryan (R-WI) has been hailed as both a truth sayer and a soothsayer on the economy. He recommends that the Federal Reserve raise interest rates now to head off inflation “before the cow is out of the barn”, ignoring the pain this would cause families and businesses. Here’s my recommendation: Don’t trust predictions about the future from those who’ve misread the present, and been very wrong in the past.

    Dimitri Papadimitriou is President of the Levy Economics Institute of Bard College, and Executive Vice President and Jerome Levy Professor of Economics at Bard College.

    Photo by Deb Collins (debs-eye): Beurs van Berlage, built by Hendrik Berlage between 1896 and 1903 as the commodities exchange in Amsterdam.

  • Chicago: Out of the Loop

    The “global city” is one of the dominant themes related to  urban success today.  In this model, cities serve both as huge agglomerations of top specialized talent and also as “control nodes” of the global economy serving as key sites for the production of financial and producer services demanded by the new globalized economy. In her seminal book on the subject, Saskia Sassen noted New York, London, and Tokyo as the paradigmatic examples of the global city.

    The status of global cities, however, is protean, and not all “global cities” are created equal or occupy a similar status. Tokyo, for example, is clearly fading in the face of the shift of economic power from Japan to the Chinese sphere of influence – Shanghai, Beijing, Hong Kong and Singapore.

    Chicago has long prided itself as one of those cities, and consistently rated in the top ten global cities in various surveys. It’s a huge business services hub, financial hub, transport hub, cultural center, and massive draw for talent. The greater Loop area is clearly a classic global city area, densely packed with knowledge workers, with gleaming towers all around – over a hundred of which went up in the last decade. The transformation of the Loop and the surrounding neighborhoods in the last 20 years has been nothing short of stunning and remains a testament to the record of both Mayor Daleys.

    Even at its best, the global city model has its weaknesses, such as extreme income inequality, but at least it seems to provide a model that works in an era when so many urban formulas have failed.  Chicago, for example, has used its global city status to avoid the rot that has hit so many Midwestern cities.

    But for Chicago, though its global city side is running strong, there’s a serious problem. Although impressive both economically and awe-inspiring in its physical form, the greater Loop economy is just too small – especially relative to the size of the region. This suggests that the Chicago region cannot rely primarily on the global city to carry its economy.

    This might seem difficult to believe given that the greater Loop is the second largest business district in the United States and home to over half the region’s office space. But it can be easily illustrated by comparing Chicago employment to that in Manhattan.  Here’s a comparison of total jobs in Manhattan vs. all of Cook County, Illinois.


    Source: Quarterly Census of Employment and Wages

    As you can see, Manhattan has almost as many jobs as all of Cook County, and the two are converging. Given trends in both cities, it doesn’t seem unreasonable to think that in the near future Manhattan may actually have more jobs than Cook County.  Not only are there more jobs in Manhattan, but they pay significantly higher wages.  Here is a comparison of the average weekly wage between the two:


    Source: Quarterly Census of Employment and Wages

    Manhattan wages dropped as a result of the financial crash, but still remain 70% higher than Cook County – and until the crash had been pulling away.  They may be surging again as Wall Street has been a notable beneficiary of the bailouts. But the difference in scale is significant under any circumstances. Manhattan, with a mere tenth of the regional population, has about as many jobs as Cook County, which has over half the regional population. The wealth and income engine of Manhattan is simply of a different order and power than any other US city. As a result, the global city side of New York for which Manhattan is a proxy really can pay the freight for not just the outer boroughs, but also the greater region and the budgets of not only New York but to some extent New Jersey and Connecticut as well.

    By contrast, Chicago’s global city side, strong as it is, simply cannot perform the same role in powering its region and state. Though estimates are that it encompasses something like 600,000 people participate in it, and though the Loop along with select suburban business districts are legitimately thriving, this economy is just too small to support the entire region. In fact it can’t pay the bills even for the rest of Chicago itself, much less the region or state, especially considering that the non-global city parts are basically Rust Belt in character.  That’s one reason local government finance is in such rough shape.  The city is facing a deficit of about $650 million and the state’s unfunded future liabilities are upwards of $160 billion.

    Clearly, Chicago needs to continue focusing on expanding the size of its Loop economy and ensuring that it remains a top global city destination in the future. But unlike some other places that can hang their hat on that if they want, Chicago has to go beyond just being a global city and also be something more. After all, Chicago does not enjoy a “lock” on any industry, like New York with finance and media, or even Houston in energy, the Bay Area in technology or Los Angeles in entertainment. In almost every major business category it is not the lead player, which allows for greater economies of agglomeration and, perhaps even more importantly, a powerful and enduring global signature.

    But bluntly, the world city economy is too diffused and small to offer much to the 90% of its people who aren’t a part of that.  In short, Chicago needs more “outside the Loop” thinking.

    A critical aspect of the challenge here lies with improving  the state and local business climate, recently rated as one of the worst in the country by Chief Executive magazine. If you’re a hedge fund partner, architect, or celebrity chef, things are great. But for bread and butter type businesses and workers, which constitute the vast majority of the economy, things are quite different. That’s why everyone from the CEO of Caterpillar,based three hours from the city, on down is publicly complaining and threatening to move.

    Fixing this means finally rooting out the corruption that undermines confidence in local government, restructuring state and local finances to provide more certainty to investors, continuing to focus on education, addressing the infrastructure investment deficit, and radically reducing the red tape that plagues small and medium sized businesses.

    None of these are sexy or easy. In fact, the CEO of the Chicagoland Chamber of Commerce recently said he’s not putting any faith in claims by Rahm Emanuel, the new mayor  that red tape relief is on the way, reflecting the level of skepticism in the local business community right now. Today businesses in the city literally need a city ordinance passed in order to do seemingly simple things like add an awning or get a sidewalk café permit – something that is totally at the discretion of the alderman.  The Chicago Reader recently reported that this sort of “ward housekeeping” accounts for over 95% of city council legislation. Clearly this approach is toxic to business.  That’s why these items are absolutely mission critical items to creating a regional economy that can actually generate employment and pay the bills going forward. Glamor jobs and prestige employers downtown just aren’t going to cut it by themselves anymore.

    Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile.

    Photo by Doug Siefken

  • Is The Information Industry Reviving Economies?

    For nearly a generation, the information sector, which comprises everything from media and data processing to internet-related businesses, has been ballyhooed as a key driver for both national and regional economic growth. In the 1990s economist Michael Mandell predicted cutting-edge industries like high-tech would create 2.8 million new jobs over 10 years.  This turned out to be something of a pipe dream. According to a recent 2010 New America Foundation report, the information industry shed 68,000 jobs in the past decade.

    Yet this year, information-related employment finally appears to be on the upswing, according to statistics compiled by Pepperdine University economist Michael Shires. The impact of this growth is particularly marked in such long-time tech hot beds as Huntsville, Ala., Madison, Wis., and San Jose-Sunnyvale-Santa Clara, Calif., in the heart of Silicon Valley, all of which have relatively high concentrations of such jobs.

    The San Jose area, home of Silicon Valley, arguably has benefited the most from the  information job surge. Much of this gain can be traced to the increase in social networking sites such as Facebook, LinkedIn and Twitter, all of which have been incubated in the Valley. Good times among corporations  have led many to invest heavily in software productivity tools, while those marketing consumer goods have boosted spending for software and internet-related advertising.

    The 5,000 mostly well-paying information jobs added this year was enough to boost San Jose’s standing overall among all big metros 20 places to a healthy No. 27 in our ranking of the best cities for jobs.

    But as economists enthuse over the tech surge, we need to note the limitations of information jobs even in the Valley. Software and internet jobs, which have increased 40% over the past decade, have not come close to making up for the region’s large declines in other fields, notably manufacturing, construction, business and financial services. Overall, the region has lost 18% of its jobs in the past decade — about 190,000 — the second-worst performance, after Detroit, among the nation’s largest metros. It still suffers unemployment of close to 10%, well above the national average of 9.0%.

    This dual reality can also be seen in the local real estate industry. Office vacancies may be back in the low single digits in some markets popular with social networking firms, such as Mountain View, but they remain around 14 or higher throughout the region — 40% higher than in 2008. No matter how impressive reporters find a new headquarters for high-fliers like Facebook, the surplus of redundant space, particularly in the southern parts of the Valley, suggest we are still far from a 1990s style boom.

    Some observers also warn that the long-term prospects for the Valley may not be as good as local boosters assume.  Analyst Tamara Carleton cites many long-term factors — like the financial condition of local cities and diminishing prospects for less skilled workers — that make it tougher on those who live below the higher elevations of the information economy. She also says that a precipitous decline in foreign immigration could slow future innovation.

    This dichotomy is even more evident in the other big information gainer among our large cities, Los Angeles. Although it is little known by the media or pundit class, the Big Orange actually boasts the nation’s single largest number of information jobs. Its over 5% growth in information jobs translates to roughly 10,000 new positions over the past year. In LA, the big sector for information jobs is likely not social media but traditional entertainment, one of the area’s core industries.

    Yet information growth clearly is not bailing out the overall economy. Other much larger sectors, such as manufacturing and business services, continue to shrink. The area still suffers from an unemployment rate of roughly 12%.

    Other information winners among our large metros include Boston and Seattle, both traditional centers for software-related jobs. These areas have not been as hard-hit by the real estate and industrial declines as their California counterparts, so increasing information employment does not constitute the outlier that we see in the Golden State.

    Less expected gains were notched by some of our other big information sector winners. One big surprise was New Orleans-Metairie-Kenner, whose information sector, including a growing film and television industry, expanded almost 39% in past year. As is the case with its strong overall rankings in our best cities survey, the Big Easy’s comeback from the devastation of Katrina is heartening. But we must curb our enthusiasm by pointing out that total regional employment remains 100,000 less than it was before the hurricane.

    Equally intriguing has been the strong performance of Warren-Troy-Farmington, Hills, Mich., and Detroit-Livonia, each of which has benefited from the resurgence of the American auto industry. In these areas, information jobs tend to be tied to the needs of large industrial companies. The state has also waged a major campaign for film and television jobs, as part of an attempt to diversify its economy.

    Yet for all the hype that surrounds industries like media and software, it’s critical to point out that overall this is not a huge employment sector. Even in Seattle — home to Microsoft, Amazon and other software based companies — information jobs account for barely 6% of the total. In Los Angeles, it’s 5%, compared with 10% each for manufacturing and hospitality. In media-centric New York, information accounts for barely 4% of jobs, less than half that of financial services and one-third that of the huge business service sector.

    In most other areas, including those experiencing strong growth, information jobs constitute an even smaller part of the economy. In New Orleans, Warren, Mich., and Detroit, such jobs account for less than 2% of employment . Still, the growth of this sector is a promising one for  economies that have long been dominated, like New Orleans, by the generally low-paying hospitality industry, or in the case of the Michigan cities, the volatile and often chronically hurting manufacturing sector.

    The increase in information jobs, however welcome, should not be sold as a universal elixir for  creating widespread prosperity. Over time, strong regional economies are those that rely on diverse employment sources rather than one.  Growth in high-tech and media jobs can wow impressionable reporters and earn economic developers bragging reights, but they can do only so much to lessen the recession’s impact on the vast majority of workers and the broader regional economy.

    Top Cities for Information Job Growth, 2009-2010
    New Orleans-Metairie-Kenner, LA 38.86%
    Honolulu, HI 25.11%
    Shreveport-Bossier City, LA 18.85%
    Huntsville, AL 14.71%
    Leominster-Fitchburg-Gardner, MA  13.33%
    Redding, CA 10.53%
    Madison, WI 10.20%
    San Jose-Sunnyvale-Santa Clara, CA 10.01%
    Grand Rapids-Wyoming, MI 7.63%
    Providence-Fall River-Warwick, RI-MA 6.33%
    Top Big Cities for Information Job Growth, 2009-2010
    New Orleans-Metairie-Kenner, LA 38.86%
    San Jose-Sunnyvale-Santa Clara, CA 10.01%
    Providence-Fall River-Warwick, RI-MA 6.33%
    Los Angeles-Long Beach-Glendale, CA  5.08%
    Warren-Troy-Farmington Hills, MI  3.97%
    Boston-Cambridge-Quincy, MA  3.54%
    Riverside-San Bernardino-Ontario, CA 3.46%
    Charlotte-Gastonia-Rock Hill, NC-SC 3.02%
    Detroit-Livonia-Dearborn, MI  2.48%
    Seattle-Bellevue-Everett, WA  1.47%

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by Angelo Amboldi

  • Are We Unraveling?

    Is the fabric of society unraveling? That’s been a fear expressed throughout our history, and sometimes it has even been true (the Civil War comes to mind ). But our divisions have always healed over time. I would go so far as to say that nothing defines America more than its ability to absorb minority views, cultures, practices and peoples (a two-way street of acculturation by which outsiders are absorbed while the mainstream expands). 

    But I sense there is something else going on right now. I confess that after spending 30 years of debunking fears of unraveling in my writings and speeches, today I am not so sanguine. What’s different? What’s changed?

    Are we “one shock away from a full-blown crisis?” I dare say we are already there. But have we not overcome many grand crises over our history? What’s different this time? I fear we are losing three of our national characteristics: resiliency, dynamism, and social/cultural cohesion.

    Declining Resiliency

    Our economy and society are both based on the ability, proven time and again, to overcome hardships and bounce back from misfortune. Resiliency turns out to be a better approach to economic and social well-being than trying to avoid all risks. But that ethic is declining. Part of the problem is we are prevented from practicing it by legislators, regulators, lawyers, environmentalists, activists of all kinds – the entire edifice of nanny state , busybody America.

    Declining Dynamism

    Historically, the nation’s dynamism – its ability and proclivity to innovate – has brought economic inclusion by creating numerous jobs. It has also brought real prosperity – engaging, challenging jobs and careers of self-realization and self-discovery. But dynamism has been in decline for a decade. So write Edmund Phelps and Leo Tilman in the Harvard Business Review.

    There are several culprits for this decline: a stifling patent system; a focus among public companies on quarterly results, rather than long-term value creation; and a financial system that for a generation has focused its talent and resources not on funding business innovation but on proprietary trading, regulatory arbitrage and arcane financial engineering.

    Declining Social Cohesion

    In a recent lecture at the American Enterprise Institute, Charles Murray gave a preview of his forthcoming book, “Coming Apart at the Seams.” His thesis: America has never been a classless society, but over the last half century the United States has developed new lower and upper classes that diverge on core behaviors and values to an unprecedented degree. The divergence of America into these separate classes is different in kind from anything America has ever known, maintains Murray, and if it continues, will end “the American way of life.”

    What has Murray so troubled are disconcerting trends in the white working class, for if things are bad in the lower middle class, things can’t be good in the country as a whole. Looking at America’s four essential Founding virtues (Industriousness, Honesty, Marriage, and Religiosity), Murray finds widening gaps between the upper-middle and working classes:

    Marriage: In 1960, 88% of the upper-middle class was married, versus 83% of the working class, a negligible 5% gap. Today, 83% of the upper-middle class is married, but among the working class, marriage has collapsed: only 48% are married. That’s a revolutionary change, as is the percentage of children born to working class single women (from 6% to nearly 50% in the last 50 years).

    Industriousness: The percentage of working class males not in the workforce went from 5% in 1968 to 12% in 2008. Among those with jobs, the percentage working less than 40 hours a week increased from 13% in 1960 to 21% in 2008.

    Religiosity: The percentage of Americans saying they have no religion increased from 4% in 1972 to 21% in 2010. A substantial majority of the upper-middle class (58%) retains some meaningful form of religious involvement, whereas a substantial majority of the working class (61%) does not.

    Honesty: The great increases in crime and incarceration over the past decades have overwhelmingly victimized working class communities, while hardly touching upper-middle class communities.

    A New Lower Class

    In addition to the decay of the Founding virtues in the working class, Murray finds a new lower class emerging: people who are becoming increasingly detached from society. He measures the magnitude of the problem by considering three sets of people that cause difficulties for a free society: men who can’t make even a minimal living, single women raising minor children, and social isolates, people with no connections to family, church or any local activities. Such people are very rare in upper-middle class populations (around 5%), but are becoming very common in the working class, having grown from 10% of that group in 1960 to fully 35% today, representing a difference in degree so large as to constitute a difference in kind from anything the nation has ever seen.

    How do these numbers translate into real life in real communities? They translate into an unraveling of daily life in small ways and large.

    A New Upper Class

    In The Bell Curve (1994), Murray made the case that the nation was experiencing a fundamental change in the nature of its elites. All of the trends identified there have proven out:

    • The increasing market value for brains
    • A college system that gets almost all talented youth into college and sorts the very smartest into a handful of elite colleges
    • The increasing degree to which the most able marry the most able, and pass on not only their financial success to their children but their abilities as well

    This has led to an increasing isolation of the upper class from the rest of the country as it develops a distinctive culture of its own.

    So, are we unraveling?

    Everyone knows the movie Caddyshack. Indeed, for millions of us guys between the ages of 30 to 75, it’s considered a classic. Caddyshack was filmed in 1979, and released in 1980. Why did it resonate, and why does it still? Maybe because we all know the feeling that was expressed in the film’s marketing tag: “Some people just don’t belong.” And we have all worked lousy, low-paying jobs in which we had to suck up to people with money. I caddied every summer of my high school years in the 1960s. It was not unusual in those days, just as it is unheard of now, for teenagers to have such jobs (I also, at one time or another, delivered papers, drove a delivery truck, distributed telephone directories, painted outdoors, worked on a farm, and  a factory assembly line, as well as  other jobs I can’t even remember.) But here’s the thing: we did not resent, envy or hate the rich people – hell, we hoped to be rich some day ourselves. Instead, we actually found some  absurd humor in the American condition. Of course we didn’t belong among the priviledged – yet – but we resolved to act differently when and if we got there!

    We rubbed shoulders with the rich and privileged all the time everywhere: in school ( the public schools), in town, at the playground for pick-up games (!), at the frozen pond, at Little League games, at places of worship, at the shops, stores and markets, at the movies, etc. It was natural (and by the way, we would walk, run, or ride our beat-up bicycles). We used to consider ourselves as different parts of one American society. We respected the authority of adults, whatever their station. There were many points I could have gone wrong in life when young, but there was always a responsible adult standing in the way, and pointing in the other direction: a parent, teacher, coach, cop, rabbi, priest, or neighbor. They weren’t afraid to get involved, unlike today, where the fear of lawsuits or of being seen as judgmental has stunted this wholly voluntary communal behavior.

    Are there countervailing factors? Sure. Perhaps the biggest is that we have overcome threats to social cohesion before. But if our current situation is truly unprecedented, then as the warning goes, past performance is no guarantee of future success. Where might these trends go? I think we may be separating into two economies, societies, and cultures  into one that is highly productive and functional and one that is less so.

    Dr. Roger Selbert is a trend analyst, researcher, writer and speaker. Growth Strategies is his newsletter on economic, social and demographic trends. Roger is economic analyst, North American representative and Principal for the US Consumer Demand Index, a monthly survey of American households’ buying intentions.

    Photo by BerlinMoritz

  • Queens, New York: Mr Bornstein’s Neighborhood

    Beauty is in the eye of the beholder. And most people who drive through blocks of industrial urban neighborhoods in Queens County, New York find them ugly, depressing, and sometimes dangerous. I spend a great deal of time in these kinds of neighborhoods, and to the shock and surprise of many – especially my close friends and family – I find them just as interesting and usually more exotic than the overly-planned communities touting the new urbanism popping up all over the country.

    Queens is the second largest borough of New York City. With a population that is arguably the most diverse in the world – 165 languages and counting – it is more than a melting pot. It is what’s in store for counties the world over. Before the word “globalization” hit the Economics 101 textbooks, trading and sharing by people from all over the world was already underway in the 50+ neighborhoods of Queens.

    While I always knew this on an instinctive level, it was brought home to me over the past year. In January 2011, the Queens Economic Development Corporation took over a former union-operated job training facility/commercial kitchen and transformed it into an incubator for start up food and other small businesses. Located on 37th Street in Long Island City, just over the Queensborough Bridge from midtown Manhattan, it is literally ten minutes away from the glamor of midtown sophistication.

    But that ten minute drive demonstrates how fast urban landscapes can change.

    At one time, Long Island City was one of the great manufacturing hubs of the metropolitan region. Any late 1800’s through the mid 20th century photo of the east side of New York City showed belching smokestacks in the background, across the East River. Driving from Manhattan into Queens over the Queensborough Bridge, one would see a giant neon stapler jumping up and down atop the Swingline factory. Above the Eagle Electric plant another neon sign would remind us that ‘Perfection Is Not An Accident.” A few blocks away, Chiclets, Sunshine Biscuits and Silvercup Bakery employed thousands. Those large manufacturers are now history. Long Island City has been transformed; sleek residential and office towers are the new landmarks.

    The streets are now largely populated by office workers and residents who no doubt shop in the posh Manhattan emporiums, though there are more than just a few traces of the area’s industrial past. While large swaths of the community have been rezoned to allow new uses, there are still manufacturing and service areas protected by the zoning codes.

    These blocks are not on the New York City tourist trail. But they are the heart and guts of the city. Just like those internal organs, they are not pretty to look at, but are essential to the life of our city. Though the great manufacturing operations are gone, there are still thousands of small workshops and factories that, when aggregated, are viable economic engines.

    On these streets, the Queens Economic Development Corporation has opened a new center to accelerate small business development. The Entrepreneur’s Space: An Incubator for Food & Business is home to 5,000 square feet of kitchens and 2,000 square feet of small office space and classrooms. Over 100 clients represent the diverse population of New York City. They turn out French pastries, Finnish breads, Indian candies, Mexican salsas, and Caribbean specialties, in addition to vegan cupcakes, granola bars, and exotic artisan chocolates. All clients are provided with business consultations. Our goal is to nurture growing businesses, and, when they are ready, send them out into the world.

    The press has taken notice: a front page story in the New York Times>, plus Fox Business Channel, BBC, and others. In a period when most small business news is negative, stories about The Entrepreneur’s Space have been positive, with one exception: Inevitably, our location on this block of 37th Street is referred to as “a gritty industrial zone,” “a street with repair shops,” and, most hurtful to me, “unattractive.”

    This one square block is home to over 40 businesses, an eclectic mix that includes a family-owned plumbing company that has been around for 50 years, an immigrant-owned commercial laundry, a repair shop for food vending carts, a lighting-equipment business for the film industry, a day treatment program for the disabled, and a coffee shop, among many others.

    This block is a village.

    While it is not considered pretty (not many Bloomingdale’s-clad folks strolling the streets), it is certainly neighborly. Just as in small town America, residents help each other out. Last winter we split the cost of a snow blower with the electric company next door, least we both end up with violations for not clearing our sidewalks during the snowiest winter in memory. The disabled folks in the day treatment program down the block are probably more welcome here than they would be in many residential areas. And, at the coffee shop on the corner — 90 cents a cup and served in nanoseconds — the counterman knows how every one likes their coffee.

    Our block employs about 400 people ranging from the highly skilled and highly paid to those recently released from incarceration and rehab programs and earning the minimum wage. Combined, it probably has a payroll of a few million dollars, and generates enough in property and sales taxes to pave a lot of streets and pay the salaries of all the teachers in the nearby public school. Many of the 100 clients in the Entrepreneur’s Space were cooking and baking in home kitchens prior to signing up with us. Aside from the fact that it is illegal to cook at home and sell commercially, these clients understood that if they wanted their businesses to grow they had to find suitable accommodations. I think of the Entrepreneur’s Space as a “halfway house” between life in a tiny New York residential kitchen and a slick commercial kitchen with gleaming industrial equipment.

    But until then, the Entrepreneur’s Space clients are just like the rest of the occupants of the neighborhood, working hard to develop their businesses. They’ve created new occupations for themselves, and many have even begun to hire part time assistants.

    No business on 37th Street is a Fortune 500 company or listed on a stock exchange. The block is like so many in the industrial neighborhoods of New York’s boroughs: not very pretty to look at, but a solid community, diverse in every sense of the word. These neighborhoods are home to thousands of jobs throughout our city… and the jobs they create are truly beautiful.

    Seth Bornstein is the Executive Director of the Queens Economic Development Corporation, a non-profit organization that helps to create and retain jobs through neighborhood development, entrepreneurial assistance and business and tourism attraction programs. The Entrepreneur’s Space: An Incubator for Food & Business is their newest program. A native New Yorker, he lives in Forest Hills, Queens.

    Photo: Fanny Reboul and Victoria Khaydakova of Entrepreneur’s Space Zoj Granola.

  • Manufacturing Stages A Comeback

    This year’s survey of the best cities for jobs contains one particularly promising piece of news: the revival of the country’s long distressed industrial sector and those regions most dependent on it. Manufacturing has grown consistently over the past 21 months, and now, for the first time in years, according to data mined by Pepperdine University’s Michael Shires, manufacturing regions are beginning to move up on our list of best cities for jobs.

    The fastest-growing industrial areas include four long-suffering Rust Belt cities Anderson, Ind. (No. 4), Youngstown, Ohio (No. 5), Lansing, Mich. (No. 9) and Elkhart-Goshen, Ind. (No. 10). The growth in these and other industrial areas influenced, often dramatically, their overall job rankings. Elkhart, for example, rose 137 places, on our best cities for jobs list; and Lansing moved up 155. Other industrial areas showing huge gains include Niles-Benton Harbor, Mich., up 242 places, Holland-Grand Haven, Mich., (up 172),  Grand Rapids, Mich., (up 167)   Kokomo Ind., (up 177) ; and Sandusky, Ohio, (up 128).

    Industrial growth also affected some of the largest metros, whose economies in other areas, such as business services, often depend on customers from the industrial sector. Economist Hank Robison, co-founder of the forecasting firm EMSI, points out that manufacturing jobs — along with those in the information sector — are unique in creating high levels of value and jobs across other sectors in the economy.  They constitute a foundation upon which other sectors, like retail and government, depend on.

    Take the case of Milwaukee. The Wisconsin city rode a nearly 3% boost in industrial employment to increase its ranking among the best large metros for jobs: It rose from a near-bottom No. 49 (out of 65) to a healthy No. 23. As manufacturing employment surged, others sectors, notably business services, warehousing and hospitality, showed solid increases after years of slow or even negative growth.

    Milwaukee’s growth reflects some of the greater trends affecting the industrial sector, whose overall income is up 21% since mid-2009.  The Fed’s monetary policy, combined with deficit-related concerns, has certainly helped by depressing the value of the dollar, keeping American prices more competitive with foreign producers. Low prices have helped U.S. industrial exporters gain sales, much as it has boosted agricultural commodity producers to sell their goods to growing countries like China, India and Brazil. Exports now account for 12.8% of all U.S. output, the largest percentage since the Commerce Department starting tracking in 1929.

    These new markets are particularly strategic to regions like Milwaukee and other parts of the Great Lakes. Despite the industry’s massive shrinkage of the past decade, these areas retain significant specialized skills in fields like machine tools, automotive parts and temperature controls, which are all in demand in the developing world as well as at locally based firms, many of which are enjoying high profits. Allen-Edmunds, a high-end shoe maker based in the region, has seen export business surge.

    Similarly Peoria, Ill., has benefited from a boom in overseas orders for heavy equipment from Caterpillar, its dominant industrial company. Caterpillar sells the kind of heavy moving and mining machinery now in great demand, particularly in developing countries.

    One big driver of industrial growth has come from the source of so much pain in the past: the auto industry. Although production remains 25% below its 2007 peak, the industry, which accounts for roughly one-fifth of the nation’s industrial output, is on the rebound.  Ford Motor is achieving its best profits in over a decade, and both Chrysler and General Motors are officially in the black.

    Long-depressed industry center Warren-Troy-Farmington Hills, Mich., topped our list of manufacturing job-creators, with an impressive 8.2% increase. Second place went to the Detroit-Livonia-Dearborn area, which experienced 3.5% growth. Of course this recent expansion hardly makes up for decades of decline — auto industry employment, for example, is still down over 34% from its 2005 peak. But industrial expansion has clearly improved job prospects across the board; over the past year, for example, Warren experienced healthy growth in its information, business services and wholesale trade sectors.

    Of course, not all the big gainers in the industrial sphere are located in Great Lakes. The movement of manufacturing to other parts of the country, particularly to Texas and the Southeast means a better industrial climate helps those regions as well.  The list of fastest-growing industrial areas among our big metros includes San Antonio, Texas (No. 3); Atlanta (No. 7); Oklahoma City (No. 8) and Austin-Roundrock, Texas (No. 10) — all of which did very well in our overall jobs survey. Many of these areas are business-friendly, have low housing costs, reasonable taxation and business-friendly regulatory environments that induce industrial expansions.

    Another contributing factor to industrial growth in places like Austin is high-tech manufacturing. Covering everything from servers to specialized production equipments, the expansion of this sector accounts for a healthy 1.7% upturn in San Jose, No. 6 among our large metro regions, a welcome turnaround for an area that shed some 17% of its industrial jobs over the past decade.

    But some of the best progress took place in smaller communities spread across the country. Take Yakima, Wash., which came out first on our manufacturing job growth list with a heady 19% growth in industrial jobs.  Metal fabrication plants companies such as Canam Steel have led the way, with some of the new demand coming from Canadian sources.

    Other strong performers included Midland, Texas, which ranked sixth in our industrial rankings — fifth  among the smaller cities. Here an expanding oil and gas sector has sparked a strong revival not only in manufacturing but also in business services and finance.

    If manufacturing growth has become a new shaper of overall job growth, some regions may need to move beyond the post-industrial mindset that dominates so much of regional e development orthodoxy. Take the coastal areas in California: Los Angeles-Long Beach, which has the nation’s largest industrial base and high unemployment, continues to lose manufacturing jobs – over 28% gone over the past decade — in part due to strict regulatory controls and a basic inattention to this sector by government officials.

    In contrast, some hard-hit economic regions like Modesto, in California’s Central Valley, have promoted industrial growth. Last year, a nearly 14% increase in manufacturing jobs — much of it food related — helped the area gain some 92 places on our survey . They have not exactly won a gold medal, but certainly the improvement amount to  more than chopped liver.

    To be sure, cities can grow without robust manufacturing. Take financial centers like New York, university towns or Washington, D.C., where paper-pushing remains the core competency. But for many areas, particularly those beyond the urban “glamour zone,” getting down and dirty at the factory represents a solid economic strategy. In fact, it may be one of the best way to nurture your region back to health.

    Top Cities for Manufacturing Job Growth, 2009-2010
    Yakima, WA 19.0%
    Sebastian-Vero Beach, FL 17.4%
    Palm Coast, FL 16.7%
    Anderson, IN 14.3%
    Youngstown-Warren-Boardman, OH-PA 13.2%
    Midland, TX 13.0%
    Modesto, CA 12.0%
    Yuma, AZ 9.8%
    Lansing-East Lansing, MI 9.3%
    Elkhart-Goshen, IN 9.3%
    Top Big Cities for Manufacturing Job Growth, 2009-2010
    Warren-Troy-Farmington Hills, MI 8.2%
    Detroit-Livonia-Dearborn, MI  3.5%
    San Antonio-New Braunfels, TX 3.2%
    Milwaukee-Waukesha-West Allis, WI 2.9%
    Louisville-Jefferson County, KY-IN 2.0%
    San Jose-Sunnyvale-Santa Clara, CA 1.7%
    Atlanta-Sandy Springs-Marietta, GA 1.7%
    Oklahoma City, OK 1.6%
    Pittsburgh, PA 1.6%
    Austin-Round Rock-San Marcos, TX 1.5%

    This piece originally appeared in Forbes.com

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo by bobengland

  • The Best Cities for Jobs 2011

    These may be far from the best of times, but they are no longer the worst. Last year’s annual “Best Cities for Jobs” list was by far the most dismal since we began compiling our rankings almost five years ago. Between 2009 and 2010, only 13 of 397 metropolitan areas experienced any growth at all. For this year’s list, which measured job growth in the period between January 2010 and January 2011, most of the best-performing areas experienced actual employment increases — even if they were modest.

    For Forbes’ list of the best cities for jobs, we ranked all 398 current metropolitan statistical areas, based on employment data from the Bureau of Labor Statistics reported from November 1999 to January 2011. Rankings are based on recent growth trends, mid-term growth and long-term growth and momentum. We also broke down rankings by size — small, medium and large — since regional economies differ markedly due to their scale.

    Reflecting the importance of the war effort in stimulating local economies, command of this year’s best place for jobs was handed to the Army from the Marines. Killeen-Temple-Fort Hood, Texas, shot up to No. 1 from No. 4, while Jacksonville, N.C., last year’s first-place winner and home to Camp Lejeune, dropped to 19th place.

    Read about how we selected the 2011 Best Cities for Job Growth

    Once again the best places for jobs tended to be smaller communities where incremental improvements can have a relatively large impact. Eighteen of the top 20 cities on our list were either small (under 150,000 nonfarm jobs) or mid-sized areas (less than 450,000 jobs).

    But no place displayed more vibrancy than Texas. The Lone Star State dominated the three size categories, with the No. 1 mid-sized city, El Paso (No. 3 overall, up 22 places from last year) and No.1 large metropolitan area Austin (No. 6 overall), joining Killeen-Temple-Fort Hood (the No. 1 small city) atop their respective lists.

    Texas also produced three other of the top 10 smallest regions, including energy-dominated No. 4 Midland, which gained 41 places overall, and No. 10 Odessa, whose economy jumped a remarkable 57 places. It also added two other mid-size cities to its belt: No. 2 Corpus Christi and No. 4 McAllen-Edinburgh-Mission.

    Whatever they are drinking in Texas, other states may want to imbibe. California–which boasted zero regions in the top 150–is a prime example. Indeed, a group of California officials, led by Lt. Gov. Gavin Newsom, recently trekked to the Lone Star State to learn possible lessons about what drives job creation. Gov. Jerry Brown and others in California’s hierarchy may not be ready to listen, despite the fact that the city Brown formerly ran, Oakland, ranked absolute last, No. 65, among the big metros in our survey, two places behind perennial also-ran No. 63 Detroit-Livonia-Dearborn, Mich.

    One lesson that green-centric California may have trouble learning is that, however attractive the long-term promise of alternative energy, fossil fuels pay the bills and create strong economies, at least for now. Even outside of Texas, oil capitals did well across the board, not surprising given the surging price of gas. Our No. 2 small metro, Bismarck, N.D., which also No. 2 overall, is the emerging capital of the expanding Dakota energy belt. Also faring well are Alaska’s two oil-fire cities, Fairbanks (No. 10 on our small list) and Anchorage (No. 3 on the medium-sized list).

    There were some intriguing surprises as well. Most welcome are signs of revival from New Orleans-Metarie, La., which moved up a stunning 46 places to capture the No. 2 slot among our large metros. The region lost 11% of its population and nearly 16% of its jobs during the last decade. But now the Big Easy seems to be finding its place again among America’s great cities. Jobs, up 3.5% since 2006, have been created by rebuilding, a resurgence of tourism and a growing immigrant population – the region’s Hispanic population grew by 35,000 over the past decade.

    There were other inspirational improvements this year. Sparked by a revival in manufacturing, a host of former sad sacks in parts of the Midwest are showing signs of definite improvement. Niles-Benton Harbor, Mich., a long-time denizen at the bottom of our list, shot up a remarkable 242 places this year to a respectable No. 121. Another old industrial city, Kokomo, Ind., ascended 177 places to No. 215, while Holland-Grand Haven, Mich. improved by 172 places to No. 221 and Grand Rapids, Mich., rose 167 places to No. 183. Milwaukee, a long-time loser among our largest metros, moved up by a healthy 163 places overall to a better-than-average No. 143.

    The Northeast Corridor has also made strong progress. Here the likely explanation can be found in the fruits of Obamanomics. The stimulus has been particularly good for the vibrant economies surrounding the ever-expanding federal leviathan. Among the large metros, Washington-Arlington-Alexandria, Va., did best of all the cities outside the South, repeating its No. 6 ranking among large metro areas. Right behind, at No. 7 on the large city list, sits the primarily suburban Northern Virginia metro area, while Bethesda-Rockville-Frederick, Md., ranks 12th.

    The other big East Coast winners are the financial and university-oriented economies, which have reaped huge benefits from the TARP bailout and the Obama Administration’s college-centric stimulus plan. After the Texas cities and the imperial center, most of the best performing big metros are located in financial and university centers, including No. 9 New York City, No. 10 Philadelphia, No. 11 Pittsburgh, No. 13 Boston and No. 15 Raleigh-Cary, N.C.

    So who’s losing? Outside of Oakland and the big Southern California metros — including No. 60 Los Angeles, No. 59 Sacramento, No. 58 Riverside-San Bernardino and No. 50 Santa Ana-Anaheim- Irvine — the bottom tier consisted of a motley crew of mid-South cities like Memphis (#64 on the big city list) and still-struggling, former big Sunbelt boomtowns Las Vegas (No. 62), West Palm Beach-Boynton Beach-Boca Raton, Fla. (No. 56), Ft. Lauderdale-Pompano Beach-Boynton Beach, Fla. (No. 54), Phoenix-Mesa-Glendale, Ariz. (No. 53), Atlanta-Sandy Springs-Marietta Ga. (No. 52) and Tampa-St. Petersburg-Clearwater, Fla. (No. 51).

    For the most part, these areas rose with the housing bubble and will not fully recover until the economy diversifies beyond real estate speculation. Already some of the bubble victims are showing signs of life, including No. 155 Merced, Calif., up 134 places, and No. 167 Orlando, Fla., which rode a revived interest in tourism to jump 89 places since last year.

    While energy, America’s three wars, the recovering financial markets and real estate problems have played the lead role in setting the stage for the best places to do business, the Intermountain West has shown resilience with Salt Lake City, at No. 20 among large cities; Provo-Orem, Utah, Ogden-Clearfield, Utah, and Boulder, Colo. at Nos. 10, 25 and 26, respectively, among mid-sized cities; and Logan, Utah, and Fort Collins, Colo. at Nos. 9 and 38 among small cities.

    As America struggles with a weak economic recovery, opportunities abound across the geography of the states—even in places where it seems bleakest like California, Nevada and Florida. If old industrial areas can stage the glimmers of a comeback, along with over-taxed and over-regulated Gotham, and greater New Orleans can rise from the near dead, these areas, with generally newer infrastructure and attractive climates, might be next to experience a resurgence of their own.

    Read about how we selected the 2011 Best Cities for Job Growth

    This piece originally appeared in Forbes.com

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

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

    Photo by Bas Lammers

  • Life and Death in the Labor Market

    The Wall Street Journal recently listed the Top 10 Dying Industries, via research firm IBISWorld. Some industries didn’t just see temporary decline during the recession – some won’t recover and will slowly (or quickly) disappear. IBISWorld’s data format is a little different than ours, and its categories are somewhat obscure, but we thought it would be interesting to pull together a similar table with the associated job data.

    With one major exception, all of these industries have seen some shakeup. But job loss by itself doesn’t tell the full story. Wired telecommunications carriers lost the most jobs, but are tied with newspaper publishing for the second smallest percentage change on the list. This is probably because these are entrenched industries and will take longer to become totally obsolete. Contrast those industries with photofinishing. Photofinishing has been a smaller industry all along, but its percent loss is at 68%. Consider the last time you looked at snapshots that weren’t digital, and then say a little prayer for the photofinishing industry.

    Description 2001 Jobs 2010 Jobs Change % Change
    Wired Telecom. Carriers 1,038,230 709,179 -329,051 -32%
    Mills 487,344 208,526 -278,818 -57%
    Apparel Manufacturing 273,650 127,175 -146,475 -54%
    Newspaper Publishing 428,659 289,997 -138,662 -32%
    DVD, Game & Video Rental 167,526 84,442 -83,084 -50%
    Record Stores 84,884 30,416 -54,468 -64%
    Photofinishing 66,170 20,901 -45,269 -68%
    Manufactured Home Dealers 43,203 19,430 -23,773 -55%
    Formal Wear & Costume Rental 19,889 12,217 -7,672 -39%
    Video Postproduction Services 26,098 26,319 221 1%

     

    The one industry on this list that is not like the others is video postproduction services. As we mentioned earlier, there’s not an exact relationship between our industry groups and IBISWorld’s, so where it has found overall decline we’ve found slight growth. Here’s a look at our overall fastest-declining industries since 2001:

    Description 2001 Jobs 2010 Jobs 2001-2010 % Change 2001-2010 Change 2009-2010 Change
    Crop and animal production 3,060,000 2,630,246 -14% -429,754 -11,754
    Professional Employer Organizations 798,710 432,936 -46% -365,774 -6,154
    Wired Telecommunications Carriers 1,038,230 709,179 -32% -329,051 -31,331
    New Single-Family Housing Construction (except Operative Builders) 849,104 526,926 -38% -322,178 -57,059
    Department Stores (except Discount Department Stores) 857,007 562,392 -34% -294,615 2,786
    Temporary Help Services 2,349,389 2,125,113 -10% -224,276 284,107
    New Car Dealers 1,118,633 902,006 -19% -216,627 -3,062
    Postal Service 866,747 698,630 -19% -168,117 -8,185
    Nonresidential electrical contractors 767,556 609,549 -21% -158,007 -47,931
    Scheduled Passenger Air Transportation 560,105 409,277 -27% -150,828 -2,988

     

    This table shows some pretty major decline in several industries. “Crop and animal production” along with “new single family housing construction” stand out. The interesting one on this list is “temporary help services.” That industry shows overall decline of over 224,000 jobs, but this amazing comeback from 2009-2010 where it gains over 284,000 jobs. It ends up with the smallest percentage decline on the list, 10%. However, if we look from 2001-2009, it would top the list here, with a loss of over 508,000 jobs, or 22% decline.

    The industry with the largest percentage loss over that period, “professional employer organizations,” shows 46% decline. That industry, a provider of leased employees typically for human resources management, has shown steady decline since 2003. While that decline looks to have slowed recently, it hasn’t stopped. We’ll have to wait for more data to see what happens.

    Is There Life in Manufacturing?

    Before we get to the better news, let’s look at a quick reminder about what manufacturing has been doing over the past 10 years. From 2001 to 2010 the manufacturing sector lost 4.7 million jobs nationally. Pretty dismal. However, there are industries within the sector that show growth. If we look from 2001-2010 the top 10 fastest-growing manufacturing industries are.

    Description 2001 Jobs 2009 Jobs 2010 Jobs 2001-2010 2009-2010
    Wineries 27,531 47,117 46,850 19,319 -267
    Perishable Prepared Food Manufacturing 24,584 36,785 36,962 12,378 177
    Oil and Gas Field Machinery and Equipment Manufacturing 48,327 61,698 59,673 11,346 -2,025
    Ship Building and Repairing 92,336 103,526 100,841 8,505 -2,685
    Surgical and Medical Instrument Manufacturing 107,547 115,938 115,721 8,174 -217
    Ethyl Alcohol Manufacturing 3,272 9,797 9,708 6,436 -89
    Plastics Packaging Film and Sheet (including Laminated) Manufacturing 5,879 11,782 12,302 6,423 520
    Digital Printing 20,894 27,531 27,308 6,414 -223
    In-Vitro Diagnostic Substance Manufacturing 13,444 19,916 19,458 6,014 -458
    Spice and Extract Manufacturing 16,126 20,708 20,980 4,854 272

     

    This still isn’t the good news. As the table demonstrates, most of the industries showing high growth from 2001 to 2010 have slackened considerably from 2009 to 2010, and many of them have declined. We would hope to be seeing some hint of recovery in these industries, but instead we’re seeing loss.

    To zero in on industries showing current growth in the manufacturing sector, we’ll look at the top 10 manufacturing industries showing the most growth from 2009 to 2010.

    Description 2001 Jobs 2009 Jobs 2010 Jobs 2001-2010 Change 2009-2010 Change
    All Other Plastics Product Mfg. 400,046 260,516 264,562 -135,484 4,046
    All Other Motor Vehicle Parts Mfg. 167,487 106,257 109,069 -58,418 2,812
    Automobile Mfg. 168,403 94,904 97,424 -70,979 2,520
    Travel Trailer and Camper Mfg. 36,231 23,190 25,347 -10,884 2,157
    Motor Home Mfg. 17,612 9,473 11,525 -6,087 2,052
    Motor Vehicle Metal Stamping 111,209 55,426 57,470 -53,739 2,044
    Wet Corn Milling 9,185 8,127 10,166 981 2,039
    Motor Vehicle Seating and Interior Trim Mfg. 65,601 40,325 42,194 -23,407 1,869
    Iron and Steel Mills 118,583 85,200 86,837 -31,746 1,637
    Motor Vehicle Transmission and Power Train Parts Mfg. 96,132 53,644 55,109 -41,023 1,465

     

    As you run over this list you’ll probably get the takeaway pretty quickly. The lesson of this table is that the federal auto manufacturing bailout had an immediate positive effect. In an already declining industry sector the bailout has enabled auto manufacturing to recover, very slightly, after a long period of decline.

    Of the three industries on this list not directly related to auto manufacturing (all other plastics mfg., wet corn milling, and iron and steel mills) only wet corn milling showed growth from 2001 to 2009. This means that nine of the top 10 manufacturing industries that have grown from 2009 to 2010 are industries showing a sudden turnaround, without a growth trend in place. Because these correlations are so close, we took a quick look at the relationship between auto manufacturing and iron and steel milling in our input-output model and did not find a strong industry tie. The same was true for auto manufacturing and all other plastics mfg.

    Life vs. Death

    So where do we go from here? First we looked at dying industries. Then we looked at industries within a dying industry sector that are recovering because of massive infusions of money from the government. Is it all really that depressing out there?

    The following table shows high growth industries looking into the future. We applied a filter to get industries growing beyond than the national average, percentage-wise, and then chose the top 10 projected to add the most new jobs from 2008 to 2014.

    Description 2008 Jobs 2014 Jobs Change % Change
    Local government 14,425,000 14,905,114 480,114 3%
    Crude Petroleum and Natural Gas Extraction 556,883 987,818 430,935 77%
    Home Health Care Services 1,294,652 1,697,041 402,389 31%
    Offices of Physicians (except Mental Health Specialists) 2,439,113 2,834,694 395,581 16%
    Investment Advice 855,566 1,220,851 365,285 43%
    Portfolio Management 731,703 1,088,517 356,814 49%
    General Medical and Surgical Hospitals 4,312,784 4,669,173 356,389 8%
    Private Households 1,623,184 1,922,073 298,889 18%
    Services for the Elderly and Persons with Disabilities 663,261 936,620 273,359 41%
    Federal government, civilian, except postal service 2,069,474 2,327,756 258,282 12%

     

    Local government tops the list, adding nearly a half million jobs. Its percentage growth is the lowest on the list, however. On the other hand, crude petroleum and natural gas extraction is projected to grow by around 430,000 jobs from 2008 to 2014 and projects 77% growth. Health industries make an excellent showing. Between home health care services, offices of physicians, general medical and surgical hospitals, and services for the elderly and person with disabilities, there’s a total projected addition of 1,427,718 jobs. Also notable: two finance industries show up here, investment advice and portfolio management, both of them indicating that after the crash folks are interested in getting some outside advice on their holdings. 

    Much of this growth appears to be driven by demographics: the huge baby boomer generation is reaching senior status, and the U.S. is projected to continue its overall population growth fueling the need for growth in local government and health care to serve growing demand.

    Of course, this isn’t a comprehensive look at industry growth. Everyone knows that the health sector is growing, and we’re starting to spot other reasons for hope. But the truth is that the US economy recently underwent a major shakeup, and hasn’t totally bounced back yet. As far as manufacturing goes, there’s not a ton of good news right now. There is some life out there. But we’ve still got a long way to go.

    Rob Sentz is the marketing director at EMSI, an Idaho-based economics firm that provides data and analysis to workforce boards, economic development agencies, higher education institutions and the private sector. He is the author of a series of green jobs white papers.

    Illustration by Mark Beauchamp