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Decade since recession: Thriving cities leave others behind

By CHRISTOPHER RUGABER
AP Economics Writer

Although the common sight of construction cranes in Milwaukee’s downtown no doubt has led many observers to conclude the city is well on its way to recovering from the Great Recession, other cities have got off to much more of a head start in this regard.

Take Seattle.  Even as most places in the U.S. were still reeling from the body blow of the Great Recession, this Washington State city was about to take off.

Amazon opened a headquarters in 2010 in the city’s 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, high-priced restaurants filled with diners.

Construction cranes seen i a block across from an Amazon building in Seattle on Oct. 11. Seattle is among a handful 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. (AP Photo/Elaine Thompson, File)

Construction cranes seen in a block across from an Amazon building in Seattle on Oct. 11. Seattle is among a handful 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. (AP Photo/Elaine Thompson, File)

Seattle is among a handful 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.

In the decade since the recession began, the country 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. And last year, income for a typical U.S. household, adjusted for inflation, finally returned to the same level it was at during its last peak, in 1999.

Yet the rebound has failed to narrow the country’s deep regional economic differences and, in fact, has worsened them, according to data analyzed exclusively for The Associated Press.

“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.”

Among the nation’s 100 largest metro areas, San Francisco has seen the biggest gains in median household income in the decade since 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, at 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 has widened in the past decade, Moody’s data show.

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 differences between richer and poorer cities narrowed steadily.

Economists cite three reasons why that convergence ended. The nature of high-tech work, for one thing, makes it more likely for higher-skilled workers to cluster in the same cities.

Elisa Giannone, an economist at the University of Chicago, notes that in past decades, highly paid professionals — doctors, say — might congregate in cities with fewer physicians to take advantage of the lack of competition and earn more.

Yet professionals with advanced levels of schooling typically become more productive when they cluster together and exchange ideas.

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

This chart shows changes in employment for various metro areas.

This chart shows changes in employment for various metro areas.

Two 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 is no longer true. Lawyers can still come out ahead, but janitors — and other low-skilled workers — don’t.

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

In the 10 cities with the fastest income growth, housing prices have soared by an average of 31.1 percent in the past decade, Trulia found. That compares with a national average increase of just 5.1 percent.

A final contributor to the differences is the harmful effect the recession had on industries and occupations in slower-growing regions.

Manufacturing and mining are disproportionately found in red states. So are retail jobs. All those sectors have endured weak growth since the recession.

Robin Brooks, an economist at the Institute of International Finance, a trade group, says those job losses have exacerbated the differences between so-called “red” states, which voted for Donald Trump in 2016, and “blue” states.

About 61 percent of blue-state residents have jobs, compared with roughly 59 percent in red states, Brooks found. That cuts against recent historical patterns: From the 1990s through the mild recession of 2001, there was no difference at all.

Despite the persistence of regional inequality, some good signs have emerged: More tech jobs are moving out of the tech hubs and spreading around the country.

But many of those tech jobs are lower- or mid-level positions, such as technical-support and help-desk jobs, rather than higher-paying, cutting-edge positions.

“There’s a spreading out of the tech economy, but it remains a different tech economy in the middle of the country than what you find in the Bay Area, Boston, New York and Austin,” Berube said.

When it comes to inventing new software, “that is still a phenomenon you find in only four of five places in the United States.”

Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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