VOL. 41 | NO. 49 | Friday, December 08, 2017
Decade since recession: Thriving cities leave others behind
WASHINGTON (AP) — As the nation's economy was still reeling from the body blow of 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.
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. And last year, income for a typical U.S. household, adjusted for inflation, finally regained its 1999 peak.
Yet the rebound has failed to narrow the country's deep regional economic disparities 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 experienced the biggest gain 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, 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 has widened in the past decade, Moody's data shows.
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 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 capitalize on the lack of competition and earn more.
Yet higher educated employees 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 move to wealthier cities to find better opportunities. Now, that option is increasingly available only to those with advanced skills or education.
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 lower-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 factor behind the diversion is that the 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.
Robin Brooks, an economist at the Institute of International Finance, a trade group, says those job losses have opened a gap 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 gap at all.
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.
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."
Contact Chris Rugaber on Twitter at http://Twitter.com/ChrisRugaber .
AP Writers Gene Johnson in Seattle and Matt O'Brien in Boston contributed to this report.