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Even as the economy improves, the unemployment rate continues to grow higher and job creation remains a central issue. Not only does unemployment vary widely across cities and regions, certain places have been able to generate many more new jobs than others.
A couple days ago, I posted a chart which compares the ratio of unemployed workers to job openings for America's 50 largest metro areas. It's a pretty good metric of the resilience of job markets in the face of our ongoing employment crisis. The most resilient metros on this score, Greater D.C. and Baltimore, generate about one new job opening for every unemployed person. The least resilient have much higher numbers of unemployed workers for every new opening. In Detroit, the ratio is 18 unemployed workers for each job opening, in Miami its 12 to 1, Las Vegas 8 to 1.
The question becomes: Does this just reflect random, idiosyncratic differences among metros, or might there be more systematic, identifiable factors that distinguish places with more resilient job markets from less resilient ones? To get a handle on this, Charlotta Mellander and I looked at whether and what regional economic factors might affect the ratio of unemployed workers to job openings. (As usual, I point out that our analysis identifies correlation or association between variables and does not in any way imply causality.)
The nature of the job market itself appears to play the most important role. The most highly correlated factor of all was the share of creative class employment (.6). There were also relatively strong correlations for three specific kinds of creative class jobs: science and engineering (.57), legal occupations (.53), and management (.5). We find more moderate correlations for arts, entertainment, and media jobs (.44), computer science and mathematics occupations (.44), and business and finance jobs (.42). Places with more resilient job markets also had higher levels of human capital (.46), measured as the percentage of adults with a bachelor's degree and above. There was no statistically significant association between resilient job markets and health care, education, and architecture and engineering jobs. This is troubling since many believe "meds and eds" jobs to be among the most stable of all as well as being a major source of future employment growth. Job markets in places with higher shares of working class employment were more problematic, the correlation for this variable being negative and significant (.-46).
Not surprisingly, more resilient job markets were also associated with stronger, more higher-paying regional economies. Better ratios of unemployed workers to job openings were associated with higher regional income levels (.58), higher regional wages (.48), and greater regional economic output per person (.45).
The big winners: D.C. and Baltimore. NY and Boston also do well, along with Silicon Valley and San Francisco, Austin, Seattle, and Denver. Salt Lake City and Oklahoma City are also in very good shape, as well as, surprisingly, certain Rustbelt Cleveland and Milwaukee.
Chart from
Creative jobs are not only a big factor in the success of urban areas, they help to power growth in rural areas too. New research by my colleagues at the Martin Prosperity Institute
examines the role of creative jobs in the economic development of rural communities in Ontario.
In the decade 1996 to 2006, creative class jobs led job growth in rural Ontario at 22 percent, considerably ahead of working class jobs which grew at 13 percent and service class jobs which expanded by nine percent. Over the same period, agricultural and resource jobs fell by 20 percent.
A summary of the research is here.
The U.S. unemployment rate is 9.7 percent, the highest in some time, but the burden of unemployment is spread unevenly across the economy. Production workers face a 15.1 percent unemployment rate, while unemployment among construction and extraction workers stands at 17 percent. But unemployment among management and professional workers is only 5.4 percent. Researchers at the Martin Prosperity Institute (MPI) previously identified long-run differences in the unemployment rates faced by industrial workers and knowledge, professional, and creative workers.
New analysis by the MPI team tracks unemployment among management and professional - or creative class - workers from 1983 to the present. While unemployment among creative class workers as a whole is far below the rate faced by production and construction workers, there is considerable variation in unemployment among the various occupations, professions, and job types that make up the creative class.
Creative workers in arts, design, and entertainment occupations consistently face higher unemployment rates and significant spikes during recessions. In contrast to other creative fields, the unemployment rate for arts, design, and entertainment workers sometimes runs higher than the overall unemployment rate.
Computer, sciences, and engineering professionals experience lower rates of unemployment than arts, design, and entertainment workers. But the lowest rates of unemployment and the most stable employment are found in meds and eds occupations - health and education - where unemployment stays consistently low, even during downturns.
The full analysis is here.
The big story last week was the census report on the fall-off in Americans' incomes. The New York Times' David Leonhardt called it a "lost decade" with 2008 median household income of $50,303 falling beneath the 1998 figure of $51,295. While the national pattern is troubling, the trend in U.S. income varies widely by state.
Kevin Stolarick, research director of the Martin Prosperity Institute, compiled state-by-state statistics comparing incomes in 2007-2008 and 2005-2006.
The first map below shows the change in income for the 50 states. There were some big losers - New Jersey (-$7,214), Vermont -($5,757), Georgia (-$3,304), Delaware (-$2,558), Minnesota (-$2303), Tennessee (-$2218), Arizona (-$1,891)and Florida (-$1,890).
But there were also some big income gainers - Colorado ($4,658), North Dakota ($4,412), Oklahoma ($3,998), Alaska ($3,756), New Hampshire ($3,663), DC ($3,467), and Alabama ($3,405).
The second map shows the percent change in income by state.
Once again we see the patterns of winners and losers. Unlike in the nation as a whole, incomes actually increased in 29 of 50 states. Eight states saw income gains of more then five percent - Oklahoma (9.6 percent), North Dakota (9.2 percent), Alabama (8.4 percent), Colorado (8.1 percent), D.C. (6.8 percent), Alaska (6.2 percent), New Hampshire (5.7 percent), and Oregon (5.0 percent).
On the other hand, two states saw income losses of 10 percent or more - Vermont (-10.3 percent) and New Jersey (-10.1 percent); and incomes declined by more than five percent in two others - Georgia (-6.4 percent) and Tennessee (- 5.1 percent).
Business Week economist Michael Mandel has produced a terrific chart comparing college costs to the earnings of young college graduates (25- to 34-year-olds) from 1991 to 2008 (below).
While the lines track one another for most of the 1990s, they began to diverge by the late 1990s, and the gap has grown considerably over the past decade. Mandel finds that college costs in real terms are up by 23 percent since 2000, while real pay for young college grads has fallen by 11 percent.
Money quote: "This can't go on. It's just not possible."
It's more than a jobless recovery, we've been looking at a jobless
decade or more, at least in terms of private sector jobs, according to Business Week's chief economist, Michael Mandel.
Beneath
this trend lies a broad and fundamental restructuring of the U.S., and
virtually every other advanced economy - the decline of manufacturing
and the rise of professional, knowledge-based, and creative work on the
one hand, and lower-end service work on the other. This chart (via the New York Time's Floyd Norris) depicts the shift.
American attitudes toward immigration are hardening, according to a new Gallup poll. Half of all Americans say immigration should be "decreased" - up 11 points from 39 percent last year.
Anti-immigration sentiment is growing across all major political groupings. Some 61 percent of Republicans say they would like to see immigration decreased, up from 46 percent in 2008, compared to 46 percent of Democrats, up from 39 percent; and 44 percent
of Independents, up from 37 percent.
The poll also saw a shift in American attitudes toward whether
"immigration is a good or a bad thing for the country" with more than a
third (36 percent) saying it is a bad thing.
Gallup notes that this marks "a return to the attitudes that prevailed in the first few years after 9/11."
Immigration in America has gone in great cycles over the past century or two. While immigration has typically fallen during economic crises, the U.S. has prospered from its relative openness to global talent. America saw an influx of leading scientists, entrepreneurs, artists, and musicians during the Great Depression which helped bolster its position at the frontiers of science, technology, entrepreneurship, and the arts during the long post-war boom.
Economic crises are transformative periods when talent flows can be reset and countries and regions rise and decline. The future belongs to those countries and regions that can attract the best and brightest across the entire world.
Growing anti-immigrant sentiment, should it continue, is bad news for American technology, entrepreneurship, and the economy in general. Let's hope it turns around.
Yesterday, we looked at the relationship between housing prices and income. Today, we turn to the relationship between housing prices and wages. Wages are a useful way to gauge regional housing prices because they only count money that is earned by doing work. Income, on the other hand, counts any and all earnings from investments, interest, dividends transfers, and other sources.
The graph below plots housing prices in 2009 against wage levels for 2008 (the most recent data available).
There is a clear, positive, linear, and significant relationship between wages and housing values - the correlation is 0.71 and the R2 0.51. Metros above the fitted line had higher housing prices than wages relative to national levels, while those beneath the line had lower than expected housing prices.*
Near the top are many of the same regions from yesterday's analysis. Honolulu is once again the greatest outlier, with housing prices exceeding wage levels by a differential of $384,290. Metros in California once again play a prominent role at the top of the list, including San Diego ($87,365), Los Angeles ($63,340), and San Francisco ($60,148). New York also registers a substantial differential of $76,896 as well as Miami ($46,128).
On the other hand, there are metros where housing prices were less than their incomes would predict based on the national trend. In Decatur, IL, for example, housing prices were $131,344 less than what its wage level could support based on the national trend. In Michigan, both Saginaw ($123,140) and Lansing ($119,334) had differentials over $100,000, as did two Ohio cities, Akron ($105,447) and Cleveland ($105,386). Atlanta ($86,079), Washington, D.C. ($65,446), and Dallas ($51,896) all had differentials of greater than $50,000, while Houston ($48,874), Chicago ($48,794), and Boston ($42,834) all had differentials of greater than $40,000. The difference was more modest in Philadelphia ($20,520).
* Detroit is not included: It's 2009 housing price data was not available.
Last week, we looked at the relationship between past and current housing prices. We saw that there are some regions where housing prices have fallen more than what might be expected based on national trends, while prices have declined considerably less than expected in others.
Today, we shift gears looking at the relationship between housing
price and incomes. The graph below compares median housing prices in
2009 to income per capita levels in 2007 (the most recent figures
available).
Housing prices and incomes are closely associated with one another: The correlation coefficient is 0.68 and the R2, 0.46. Metros above the fitted line have housing prices that are higher than their incomes relative to the national trend, while those below the line have housing values that are less than what their incomes would predict relative to the national trend.*
In Honolulu, for example, the differential was a whopping $371,777. Almost half of the top 10 regions are in California. In San Jose the differential is $120,134, San Diego ($106,625), Los Angeles ($103,278), and San Francisco ($59,633). The differential was also significant in the Pacific Northwest - Portland ($74,490) and Seattle ($60,848), as well as Salt Lake City ($77,526), and New York ($93,900).
On the other hand, there are metros where housing prices were significantly less than their incomes would predict based on the national trend. In Bridgeport, CT, for example, housing prices were $151,460 less than what its income level could support based on the national trend. In Cape Coral, FL, the figure was $110,460. This was also true in Rustbelt regions like Akron ($106,692) and Cleveland ($105,130) which had differentials greater than $100,000. There were also considerable differentials in two Texas cities, Houston ($93,586) and Dallas ($58,602). In addition to this, Atlanta ($50,166), Chicago ($30,337), Philadelphia ($18,699), and Washington, D.C. ($17,280) all had housing prices that are less than their incomes would predict based on the national trend.
* Detroit is not covered: Its 2009 housing price data was not available.
Richard Florida
