Decade since recession: Thriving cities leave others behind

As the nation’s economy was still reeling from the Great Recession, Seattle’s was about to take off.

 

In 2010, Amazon opened a headquarters in the little-known South Lake Union district – and then expanded eight-fold over the next seven years to fill 36 buildings. Everywhere you look, there are signs of a thriving city: building cranes looming over streets, hotels crammed with business travelers, tony restaurants filled with diners.

Seattle is among a fistful of cities that have flourished in the 10 years since the Great Recession officially began in December 2007, even while most other large cities – and sizable swaths of rural America – have managed only modest recoveries. Some cities are still struggling.

In Las Vegas, half-finished housing developments, relics of the housing boom, pockmark the surrounding desert. Families there earn nearly 20 percent less, adjusted for inflation, than in 2007.

In the decade since the recession began, the nation as a whole has staged a heartening comeback: The unemployment rate is at a 17-year low of 4.1 percent, down from 10 percent in 2009. Employers have added jobs for 86 straight months, a record streak. And last year, income for a typical U.S. household, adjusted for inflation, finally regained its 1999 peak.

Yet the rebound has been uneven. It’s failed to narrow the country’s deep regional economic disparities – in fact, has worsened them, according to data analyzed for The Associated Press. A few cities have grown much richer, thanks to their grip on an outsize share of lucrative tech jobs and soaring home prices. Others have thrived because of surging oil and gas production.

But many Southern and Midwestern cities – from Greensboro, N.C., to Janesville, Wis. – have yet to recover from the loss of manufacturing jobs that have been automated or lost to competition from China. Like others, they have fewer jobs and lower household incomes than before the downturn. Those disparities complicate the rosy picture painted by most economic data. With the nation enduring a widening wealth gap, an overall robust U.S. economy doesn’t translate into widely shared prosperity.

“There’s definitely a pattern of the coasts pulling away from the middle of the country on income,” said Alan Berube, an expert on metro U.S. economies at the Brookings Institution. “There are a large number of places around the country that haven’t gotten back to where they were 15 years ago, never mind ten years ago.”

That said, for all the economic might top-flight cities gained in the past decade, many city officials and business leaders have become concerned that their success is running up against limits. Surging home prices and rents have made housing unaffordable for many. With cities like Seattle and San Francisco choked with traffic, engulfed by homeless people, and requiring ever-larger incomes to live comfortably, quality of life may be at risk.

In the Western U.S., inflation reached nearly 3 percent in October compared with a year earlier, according to government data. By contrast, inflation rose just 1.5 percent in the Midwest and New England.

“It’s the first time I have noticed a persistent spread between inflation in one area and the rest of the country,” says Steve Cochrane, an economist at Moody’s Analytics who has studied regional economics for 25 years.

Among the nation’s 100 largest metro areas, San Francisco experienced the biggest gain in median household income in the decade after the recession began. Adjusted for inflation, it jumped 13.2 percent, according to data compiled by Moody’s Analytics. San Jose, which is part of Silicon Valley, enjoyed the second-largest increase, at 12.7 percent, followed by Austin, Texas, with 8.8 percent.

By comparison, median household income in the 100 largest metro areas actually fell 2.7 percent, on average. And the income gap between the 10 richest and 10 poorest metro areas widened in the past decade, Moody’s data shows.

Eight of the 10 cities with the largest income gains are “tech hubs,” with heavy concentrations of software architects, data analysts and cloud-computing engineers. They include Denver, Portland, Ore.; Provo, Utah; and Raleigh, N.C.

Pittsburgh has experienced the ninth-largest income gain, thanks to increased tech and health care jobs. Oklahoma City, where inflation-adjusted incomes are up 5.5 percent, has benefited from the oil and gas boom.

Most Americans haven’t received raises anywhere near that large. Data compiled by Brookings shows that 65 percent of Americans who live in urban areas – defined as cities with populations above 65,000 – live where the typical household income is still below its 1999 level.

The divergence between the richest and poorest U.S. cities predates the Great Recession. But it is historically unusual. For a period of 100 years ending in the 1980s, income gaps between richer and poorer cities narrowed steadily.

Economists cite three reasons why such convergence ended. The nature of high-tech work makes it productive for higher-skilled workers to cluster in the same cities.

A second factor is swelling home prices and rents, particularly where regulations make it harder to build more. People in poorer areas used to move to wealthier cities to find better opportunities. Now, that option is increasingly available only to those with advanced skills or education.

Public policy experts Peter Ganong and Daniel Shoag concluded in a paper last year that both janitors and lawyers used to fare better financially in New York City than in poorer cities, even accounting for the higher cost of living.

Now, because of rocketing home prices in richer areas, that’s no longer true. Lawyers can still come out ahead. But janitors and other lower-skilled workers don’t.

“Skilled workers move to high cost, high productivity areas, and unskilled workers move out,” Ganong and Shoag wrote.

A final factor behind the diversion is that industries and occupations in slower-growing regions were leveled by the recession. Manufacturing and mining are disproportionately located in red states. So are retail jobs. All those sectors have endured weak growth since the recession.

Despite the persistence of regional inequality, some positive trends have emerged: More tech jobs are moving out of the tech hubs and spreading around the country. Software programming jobs have migrated to Dallas, Detroit and Charlotte, among other cities, according to Brookings data. Software increasingly plays a vital role in banking and finance, auto manufacturing and retail.

 

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