In this least good year in decades, someone has to sit at the bottom. For the most part, the denizens are made up of "usual suspects" from the long-devastated rust belt region around the Great Lakes. But as in last year's survey, there's also a fair-sized contingent of former hot spots that now seem to resemble something closer to black holes.
Two sectors have particularly suffered worst from the recession, according to a recent study by the New America Foundation: construction, where employment has dropped by nearly 25%, and manufacturing, which has suffered a 15% decline. The decline in construction jobs has hit the Sunbelt states hardest; the manufacturing rollback has pummeled industrial areas such as the Great Lakes as well as large swaths of the more recently industrialized parts of the Southeast.
Then there is California, a state that should be doing much better given its natural advantages and vast human capital but whose regions--with the exception of government-rich Hanford--share various degrees of distress. The bursting of the real estate bubble has hit the Golden State hard, but seeing so many poor performances in my adopted home state is distressing and points to much deeper problems. Rankings author Michael Shires, pointing to the looming prospect of high taxes and expanding regulation, notes that "While California's economy has come roaring back many times before, a resurgence this time will be slowed by the state's increasing willingness to aggressively tax and regulate those who will make it happen."
Rust Belt Ruins
The traditional manufacturing heartland long has suffered, and in this recession industrial jobs have declined rapidly and only now seem to be slowly expanding. Ever since we started these surveys back in the early 2000s, cities and towns along the rust belt have inhabited the bottom rungs.
Starting up from the last place finisher, No. 397 Warren-Troy, Mich., these old industrial cities dominate the nether regions; of the bottom ten finishers overall, six come from the Wolverine State, including long-suffering Detroit, which ranks 394th overall and 65th on the list of large metros (next to its neighbor, Flint, in last place). Other rust belt bottom-dwellers include No. 395 Elkhart and No. 392 Kokomo in nearby Indiana.
Perhaps more disturbingly, many of those at the bottom come from what used to be called "the new South," cities that industrialized late and often benefited from the flow of jobs from the old rust belt. Places such as No. 396 Morristown, Tenn., No. 390 Dalton, Ga., and No. 389 Hickory-Lenoir-Morganton, N.C., have suffered from a recession that has either forced companies to shut down or move overseas.
Sun Belt Busts
Ever since the collapse of the housing bubble in 2007, we have seen a remarkable turnaround in many Sunbelt regions. Traditionally, these led the list as emerging boomtowns. Now many appear more like bust-towns.
Take a look at the rapid decline of such hot spots as Las Vegas, which now ranks 57th out of the 66 largest metros in the country; Phoenix, now lurking at No. 51; and No. 61 West Palm Beach, No. 56 Fort Lauderdale, No. 54 Tampa and No. 45 Miami, all in Florida. Many of these cities stood proudly near the top of the list as recently as three years ago. Perhaps nothing illustrates the reversal of fortunes than the fall of Reno, once our fastest-growing mid-size region, now No. 92 in the same category.
California: The Great Disaster
No state has suffered a greater reversal of fortunes than California. Five or six years ago California regions generally inhabited the top half or third of our lists. Today they generally have fallen even faster than the other Sunbelt states, even though the state's economy boasts many assets beyond merely real estate speculation.
California now accounts for a remarkable 7 of the bottom 20 regions on our big metro list. The diversity of the disaster spans both the urban centers and the exurbs--witness exurban Riverside-San Bernardino at No. 63 and the city of Oakland at No. 62. Historic high-flyers No. 59 Los Angeles and neighboring Santa Ana-Anaheim Irvine, which checks in at an abysmal No. 60, didn't fare much better.
Perhaps more shocking is the poor performance handed in by the state capital, Sacramento, a former high-flyer now mired at No. 54, and San Diego, a high-tech haven with a near-perfect climate, that resides at No. 48. Even No. 47 San Jose/Silicon Valley has done poorly, despite all the consistent hype about the world class tech center. The likes of Steve Jobs of Apple and Eric Schmidt at Google may be minting money, but the region, paced by declines in construction, manufacturing and business services, now has 130,000 fewer jobs than a decade ago. San Francisco does not do much better, clocking in No. 42, just ahead of its equally celebrated alter-ego Portland, Ore.
Prognosis From the Emergency Room
If this list tells us the current occupants of intensive care, what then are the prognoses for recovery? It seems the story differs for each of our three basic categories. For the rust belt cities, relief will only come when the country decides to reprioritize industry, while allowing for the restructuring of firms and contracts. On the bright side is the recovery of Ford and the potential for a second life for a greatly reduced General Motors and even Chrysler. A modest surge in production of these firms and related industries, such as steel and electronics, could help some selected regions rise up from the bottom.
The recovery of the Sunbelt economies seems likely to take hold first. Despite the giddy predictions of East Coast pundits that places like Las Vegas, Phoenix, Orlando and Tampa are doomed to what Leon Trotsky allegedly described as the "dustbin of history," this is not the first time these areas have suffered a setback. They have still not shown much life yet, but I would not count them out for the long term. There is a lot to be said for a sunny climate, greatly enhanced affordability and what many see as a high quality of life.
Ultimately, notes Rob Lang, director of Brookings Mountain West and professor of sociology at the University of Nevada-Las Vegas, the assets of these regions have either not changed--pro-business administrations and warm weather--or, in the case of housing affordability, have become more attractive. "Phoenix and Las Vegas will be fine," Lang predicts, noting that Las Vegas is working to reinvent itself beyond gaming to becoming a "convening capital" for the world economy. Similar dynamics could also boost cities in Florida, particularly if they begin focusing beyond tourism and housing.
And then there is California, which by all rights should be leading, not lagging, the current recovery. Statewide unemployment, already 12.6%, has been rising while most states have experienced a slight drop. Silicon Valley companies, Hollywood and the basic agricultural base of the state remain world-beaters. But the problem lies largely in an extremely complex regulatory regime that leads companies to shift much of their new production and staffing to other states as well as foreign countries. The constant prospect of a state bankruptcy, in large part due to soaring public employee pension obligations, does not do much to inspire confidence among either local entrepreneurs or investors.
Hopefully this will be the year when Californians decide that it needs an economy that provides opportunities to people other than software billionaires, movie moguls and their servants. It will have to include much more than the endlessly hyped, highly subsidized "green jobs." More than anything, it will take rolling back some of the draconian regulations--particularly around climate-change legislation--that force companies, and jobs, to go to places that, while not as intrinsically attractive, are friendlier to job-creating businesses.
This article 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. He is author of The City: A Global History
Photo: JSFauxtaugraphy
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It would amaze you what people think.
When I tell them that the bulk of future economic growth will likely occur in the Southeast and TX I get incredulous looks. That said, I have firsthand exposure to this change whenever I visit my family in South. I think what you've got going on there is the region experienced a prolonged period of economic decline dating back as far as the civil war. Even when I was a kid in the 80's much of the region with perhaps the exception of Florida- the favorite retirement location for Northeasterners- was experiencing nothing short of economic doldrums.
I've been living in the Bay Area for the better part of 10 years thus far and in that time period the change in my home state has been phenomenal. To give you an example, my Mother teaches in a high school. Just for this year her school has gotten 10 new students. All of them are from California. Most are from higher cost coastal cities like SF and LA. My Mother asked a few of them why their family moved there and the overwhelming reply was that their parents wanted more affordable housing and access to better public services like schools.
The downtown area in the city I grew up in has basically been completely revitalized. Much of the town was dead and dormant in my youth. Now it has its own share of brewpubs, fancy restaurants, and art galleries. All in the space of maybe 5-6 years. I attribute this to the massive influx of newcomers from coastal states.
I think the US has a tendency to have waves of migration to areas that have opportunity. In the past the migration was about moving from one coast to another. Either that or to the rust belt states for manufacturing jobs. Now that both coasts are now fully populated and expensive the shift is now inwards to areas that have formerly been ignored.
In the case of California its rather interesting. You have this state that produces the lion's share of economic wealth in the US. It has a dominant position in the tech, entertainment and research industries. Yet it is in decline. Not because of the lack of success from its companies but rather its inability to provide for its residents in the form of very basic necessities: Affordable housing and civic needs: aka- schools and so forth.
So it will be interesting to see what affect this strain on California and probably Northeastern residents will have in the future. Like I mentioned, my wife and I have very good paying jobs. But if those high salaries mean we're still in essence poor then I will gladly give it all up to live where I can do so more reasonably. I can't help but think that at some point this will either have an adverse affect on the California economy in the form of a brain drain, national competition or will the California economy shift more towards a service oriented one similar to Florida where the cream of the crop comes to retire and play.
Either way, I'm giving it another 8 months and I am moving out of here.
move, you won't regret it
I moved from the almost-as-expensive-as-California and equally as family un-friendly Northwest to the Phoenix metro area about a year ago. My wife and I found great jobs here, and the house we were able to buy down here is phenomenal. To get what we bought here up there would cost 6-700k, compared to ~250k here.
The people here are friendlier overall and there are tons of things for kids and families to do.
If you can find a good job off of the coasts, move, it is one of the better decisions we have ever made.
The comments about California are interesting.
But there's a little more to it I believe. What it boils own to is that the cost of housing hasn't come down enough in most major California hots pots- particularly the Bay Area. That and even though wages in the tech biz are fairly high, the cost of living and housing is even higher.
I'll use myself for example. My Wife and I both work for tech companies. We make a great income. By national standards we're in the upper 5-10% earning bracket. Yet even living in the East Bay these days you can see that the "cheap" houses are hovering around the 450-500k mark. Even with a 100k down payment the monthly payments are absolutely ridiculous. All it would take would be a job loss from either of us and we would very quickly be in financial trouble.
Where am I going with this? I think places like the Bay Area have a serious problem in regards to what I just mentioned. There are many people like us who tend to be younger and make a decent income. Yet since the housing bubble didn't fully deflate prices here and they remain well above rational levels companies will have to do one of two things: Pay us more or relocate to a lower cost area. Affordable housing is what most families require in any given area. If none exists they'll leave the area as they are doing as evidenced by the many articles here.
When enough of this action happens and you have enough younger professionals plying their trade in new cities this leads to national competition for the various companies back in California who now not only must compete with lower cost labor in other states but also against young companies with new ideas.
your comment
thank you very much...this is very consistent with our findings
joel