Amazon HQ2 could lead to uncharted waters

By Matt DeVeau, Project Manager

One morning this past September, I stepped out of the office for a few minutes, forgetting my cell phone at my desk. I came back to a screen full of disquieting text message notifications.

“Woah, can you believe this?!?” 

“Did not see this coming!”

…and a few unprintable variations thereof.

When I opened the first one to see the attached link, the reactions of my friends and colleagues made sense. Amazon had opened a search for a second headquarters – HQ2 – that would bring 50,000 jobs and $5 billion of investment to a city in North America. And this news was not a product of a leak but rather a press release; this search would be conducted at least somewhat within public view.

There was never a doubt that this would be massive, workflow-altering news for much of the economic development community, and that has indeed been the case. But it did not occur to me how much this would capture the attention of the general public. (Though maybe it should have been given the company’s consumer-facing stature.)

Without exaggeration, nearly everyone who knows me well has asked me what I think is going to happen with HQ2 or shared their own theory. This includes friends with whom I rarely if ever discuss work and people who have no idea what I do – rideshare drivers, travelers at airport bars, and so on. By contrast, I can’t recall a single conversation with someone outside of the economic development world about Foxconn’s planned manufacturing facility in Wisconsin that could receive $4.5 billion in public funds.

I have yet to come across an analysis of the extent to which HQ2 is being discussed in traditional and social media. But a quick look at Google Trends data suggests that HQ2 is a different animal. The following figure is an index with values between 0 and 100 showing the prevalence of Google searches for “Foxconn” in the United States between July 1, 2017 and February 8, 2018. There is a massive spike of interest around the announcement of the Wisconsin facility in late July with only small peaks since that time. Additionally, searches for the term have been heavily concentrated in Wisconsin.

Meanwhile, the following figure shows the search volume for “HQ2” using the same parameters as above. The announcement of the site selection process on September 7, 2017 is a small blip compared to the activity around the deadline for bid submissions in October and the announcement of 20 finalist communities in January. Additionally, searches have been far more evenly distributed from a geographic perspective. (It’s true that these two searches are not exactly apples-to-apples comparisons. There are of course major substantive differences between the projects, but searches for the term “Amazon” also seem to spike around the holidays and “Prime Days.”

Amazon’s HQ2 search is unprecedented. That much is obvious to everyone in economic development. But I think it’s important to acknowledge that the attention it has garnered could have broad implications. Both Amazon and local communities have used the process as an opportunity to learn about one another, and some economic developers have reported that it has helped foster regional collaborations that were previously elusive. The mere possibility of landing Amazon has also influenced public policy discussions in some communities.

But the HQ2 search has also been folded into conversations about housing affordability, congestion and transit connectivity, and the role of public incentives that are heating up in many of the nation’s most economically successful regions. Speculation has even begun about a potential backlash in some communities.

The above is presented without editorial comment merely as an illustration of how HQ2 could have wide-ranging impacts far beyond the community in which the project ultimately lands. And what these impacts will be is just as uncertain this point as which community Amazon will ultimately select.

The takeaway for people in the community and economic development world is to watch this situation closely and be prepared to adapt to how HQ2 could dramatically shift the conversation around economic development. This time around, everyone is paying attention.

Is the American Dream Just a Pipe Dream?

By Stephanie Allen, Project Assistant

In 1970, the percentage of American 30-year-olds who were earning more than their parents did at 30 was 92%. The percentage now is around 50%. That statistic hit me hard when I heard it on the Freakanomics podcast from January 18th (I got a bit behind in my podcast listening at the start of the year. I’ve been catching up during the last couple of weeks.).

In economic development, I think a lot about upward mobility and improving opportunities for prosperity. I wasn’t very surprised by that 50% number. What surprised me was the 92%. I was in college when the dot-com bubble burst and the job market wasn’t great when I graduated. When I was back on the job market again after my master’s degree in 2008, it was worse. I’ve been listening to people talk about the decline of the American dream my entire adult life. So, I didn’t find 50% surprising. What I found so surprising was that America actually used to be really good at this. Really, really good. Less than half a century ago 92% of 30-year-olds made more than their parents had! My jaw was on the floor. How did we lose so much ground so fast? And, more importantly, do we have any chance of regaining it?

Source: The Equality of Opportunity Project

The Equality of Opportunity Project addresses the first question in a paper from December of last year. They identify two important economic trends affecting incomes of people born in the 1980s relative to those of people born in the 1940s: lower growth rates in Gross Domestic Product and greater inequality in growth distribution. The paper concludes that while lower growth rates in the GDP play some role, it is the inequality in growth distribution that accounts for most of the drop. A smaller cohort of people benefit from growth today than benefited in the 1970s.

This suggests that in order to improve opportunities for prosperity we should focus not just on economic growth, but even more so on spreading the benefits of what growth there is around. 

The Equal Opportunity Project recently published work on the role of colleges in intergenerational mobility. There are some really interesting findings in this work, including their list of the top colleges by mobility rate—those who have large numbers of students who come from poor families and end up with high incomes. Topping the list is Cal State University – LA. Nine of the top ten are not-for-profit schools and of those only one is private (Pace University in New York). Four of the top ten are in the NYC metro; three are in southern California; three are in southern Texas. 

There is also a list of the top ten elite colleges that enroll the highest percentage of low- and middle-income students. UCLA tops that list, but is the only public school on the list. The data examined in this study confirm what most of us already presume, namely, that low- and middle-income students who attend top colleges end up earning almost as much rich students who attend the same college. Attending a top college seems to really boost an individuals’ chance at mobility. (For more on colleges and mobility, here are a couple articles from The New York Times: “Some Colleges Have More Students From the Top 1 Percent Than the Bottom 60,” “America’s Great Working-Class Colleges,” “Dreams Stall as CUNY, New York City’s Engine of Mobility, Sputters.”)

All this college data is interesting, but Raj Chetty, who is one of the principle investigators at The Equal Opportunity Project and who was interviewed on the aforementioned Freakanomics podcast, maintains that the biggest drivers of upward mobility have less to do with where we go to college and more to do with where we grow up. Chetty and his colleagues found that where you grow up plays a big role in your chances of upward mobility. They identified five significant factors that play a role in determining rates of upward mobility:

1) residential segregation – the more segregated a city, by income and by race, the lower the rates of upward mobility

2) income inequality – higher levels of inequality predict lower rates of upward mobility

3) family structure – growing up in a neighborhood with a lot of single parents is associated with lower rates of upward mobility (even for kids who grow up in two-parent households)

4) social capital – places with higher social capital have higher rates of upward mobility

5) school quality – places with better public schools have higher rates of upward mobility

Chetty is quick to point out that while there are significant correlations between the first four factors and rates of upward mobility, we’re still unsure about the causal mechanisms in those cases. But, that doesn’t mean that we can’t use this information to help us create policy that will lead to higher rates of upward mobility—that will help us recapture some of the American dream. And, we don’t need to create policy on the national level to do it. Many of these things can be addressed at the city, county, and state level. 

If you want to learn more about the findings, I suggest listening to the Freakanomics episode from January 18th “Is The American Dream Really Dead?” (or you can read the transcript of the podcast on the website). You can also check out these Equal Opportunity Project papers: 

• “The Impacts of Neighborhoods on Intergenerational Mobility: Childhood Exposure Effects and County-Level Estimates” 
• “Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Experiment”
• “Where Is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States.” 

And here are some articles from the New York Times based on the data from some of these papers: 

• “The American Dream, Quantified at Last” 
• “The Best and Worst Places to Grow Up: How Your Area Compares,” which has a great interactive tool that lets you look at data from any U.S. county
• “An Atlas of Upward Mobility Shows Paths Out of Poverty” 
• “Why the New Research on Mobility Matters: An Economist’s View”

You can also check out one of our past posts: “The Growing Threat of Economic Immobility.”

The Incalculable Benefit of Being “Major League”

By Alex Pearlstein, Principal, Vice President

Americans are famous for wanting things but not wanting to pay for them. New roads, world-class healthcare, online news, a handful of chocolate-covered peanuts in a supermarket bulk bin. I’d argue that you could add professional sports franchises to the list. Most local stakeholders love the idea of having a major league team in their community but balk at any public money being used to finance a new or upgraded stadium. There are exceptions, but recent history shows that voters time and again will reject proposals to bolster the fortunes of billionaires by building them free or heavily subsidized facilities.

Ironically, as soon as a franchise leaves for greener publically-funded pastures, it’s not long before the city is feverishly strategizing how to attract a new team to the market. Such is the case in Seattle, which lost the NBA’s Supersonics and now feels the stinging pain of that team’s success in Oklahoma City. Recent attempts to pursue a new stadium for a presumptive NBA franchise were shot down in flames by the Seattle City Council. Lesson being, it’s easier to keep a team than get a team, which is why “creative financing” and book-cooking is often used to finance new stadiums, as in recent successful efforts to fund facilities for the Minnesota Vikings, Los Angeles Rams, Milwaukee Bucks, and others.

The specter of a franchise relocation is often used as motivation for communities to fast-track new stadium proposals, rally the troops to resource them, and put them to a public vote (although to be avoided at all costs). St. Louis’ last-ditch attempt to keep the Rams and San Diego’s Sword-of-Damocles one year deadline to finance a new facility for the Chargers are two examples.

The bottom line question that’s always raised in discussions of the pros and cons of public financing for major league sports facilities is, “Are they worth it?” Ultimately, this is a subjective assessment because fiscal impacts rarely point to a positive outcome for communities either directly financing stadiums or on the hook for bond shortfalls. Certainly, the lack of a major league franchise doesn’t make or break local economic success. Austin, Texas is the largest U.S. city without a professional sports team, and they’ve done okay recently (read: top metro economy in the U.S. over the past decade). Of course, they also have putative pro teams at the University of Texas.

What potentially holds the most value for major league communities is perception – the internal and external validation that comes from being a “big league” town. Shared passions are cultivated among current residents and expats alike. A Buffalo-expat friend of mine still invests a seemingly bottomless well of emotional currency in the Bills and Sabres; his teams serve as a real and imagined link back to the city that helped define him. The sheer number of “expat bars” showing NFL games in Sun Belt metros across the country attests to the powerful bonds between people and their hometown teams (mostly, unfortunately, from Rust Belt metros like Cleveland, Pittsburgh, Detroit, and Buffalo). The brief rumored flirtation the Bills had with Toronto before committing to Buffalo under new ownership felt like a nail-in-the-coffin moment for many city boosters. “If we lose our pro franchise, we’re officially no longer relevant.”

In many of Market Street’s mid-sized client communities, when you ask stakeholders what – if money was no object – would take them to the next level of success, a surprising number of people say, “Getting an NFL team.” There just seems to be a confirmation of “arrival” of a city when it gets its first pro franchise. With global audiences in the tens and hundreds of millions routinely watching NFL, NBA, NHL, and MLB games, there’s an incalculable promotional benefit accrued to communities with pro teams. How many people in Latvia would know about Green Bay, Wisconsin if there wasn’t an NFL franchise there? Awareness might lead to interest, which might lead to investment.

So, as you can probably tell, my bias is that major league stadiums are worth public investment, within reason. That said, I’m a sports fan; ask someone whose life’s passion is the arts, and they might say using public money for a Sidney Opera House in Community X is a transformational move.

But every time I see the wellspring of immeasurable pride, passion, energy, and shared community that comes from a winning team – experiences that more than anything else seem to bind places together across racial, ethnic, age, and gender lines – I am convinced that you can’t put a price tag on it. Even losing teams connect people through shared misery (see Cleveland Browns). The below picture is from the Kansas City Royals’ public victory party after winning the World Series. ‘Nuff said.

Latest Population Estimates Show the Might of the Sun Belt

By Ryan Regan, Project Associate

The U.S. Census Bureau recently released the latest population estimates for localities in the United States, and in keeping with trends from recent years, metro areas across the Sun Belt continue to flourish. 

Given that everything is bigger in Texas; it is most appropriate that the Lone Star State is adding new residents in significant numbers, thanks primarily to the state’s metropolitan growth. The Houston, Dallas-Fort Worth, Austin, and San Antonio metro areas collectively added 412,467 people between 2014 and 2015. These metros by themselves added more people than any state in the country over the past year except for Texas itself. 

Below is a listing of the top-ten metros (out of 381) by one-year and five-year population growth rates. The Cape Coral-Fort Myers, FL metro unseated the Austin, TX metro as the fastest growing metro in the country. Austin previously occupied that position for each of the past four years.

 

Source: U.S. Census Bureau, Population Estimates

As indicated in the table, the fastest growing metro areas in the country are concentrated in Sun Belt states – namely Florida, Texas, and the Carolinas. Of the 20 fastest growing metro areas over the past year, a whopping 15 of them were in Texas, Florida, South Carolina, or North Carolina.

This dynamic is even more pronounced when one-year and five-year population growth rates are isolated to metro areas with at least 1 million residents.

Source: U.S. Census Bureau, Population Estimates

The population growth figures speak for themselves, but another additional layer of the population growth conversation is where these new residents are coming from. The U.S. Census Bureau tracks the components of population change in terms of natural growth (births minus deaths) and both international and domestic migration. 

Domestic migration is especially critical to track because it is indicative of how much more desirable certain places within the United States are over others. Domestic migration captures those people who have chosen to move from one city to another. People move between places for an assortment of reasons – job opportunity, retirement, military orders, etc. – but domestic migration is primarily an indicator of economic opportunity, since that is a central reason why and where people move. 

The following table again shows the dominance of the Sun Belt region as an increasingly attractive place to live and work. The top metros in the country over the past year and the past five years by measure of domestic migration is a who’s who list of some of the top-performing metro areas in the Sun Belt region. 

Source: U.S. Census Bureau, Population Estimates

The Sun Belt’s rise can be primarily attributed to the growth of industries like aerospace, defense, auto manufacturing, and oil & gas[1] all of which have thrived in the Sun Belt in recent years. Companies in these industries and others have taken advantage of the low involvement of labor unions in the region, as well as the robust portfolio of transportation assets – ports, railways, highways, and airports – that make many Sun Belt states attractive places for major manufacturing companies to invest. 

According to data from Economic Modeling Specialists Int’l (EMSI), 58.04 percent of the nation’s total job growth from 2005 to 2015 was captured by the following twelve Sun Belt states: North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana, Texas, New Mexico, Arizona, Nevada, and California. These states also accounted for 61.2 percent of the nation’s population growth over the same time period. 

The Sun Belt region’s rapid population growth has also led to the region’s increased political influence. Since 1970, Sun Belt states have gained over 25 electoral votes and many of the region’s states are evolving into ‘purple states’ as rapid diversification remakes the political landscape in the region. 

Much has been made about the declining populations of rural communities across the United States, many of which constitute a large portion of the Sun Belt region. However, as recent population estimates from the U.S. Census Bureau indicate, the region’s metropolitan areas are cementing themselves as booming population hubs that continue to attract new residents in droves. 

[1] The downturn in the oil & gas industry and its impact on major Sun Belt metros like Houston is not captured in the recent population estimates. It will be interesting to see if there is any evidence in coming years of the oil & gas industry’s downturn thwarting some of the significant population gains being experienced in that part of the country.

Revisiting The Minimum Wage

By Katie Thomas, Project Associate

Over the next year, it is likely that the topic of the minimum wage will continue to dominate debates at both the national and state levels and in the voting booths. Effective July 2009, the federal minimum wage remains $7.25 an hour. Currently 29 states and the District of Columbia have set minimum wages higher than the federally mandated minimum wage, and many of those increases have happened over the past two years, suggesting a growing demand and need for increased wages for workers at the lowest end of the wage spectrum. As of January 1, 2016, 14 states began this year with higher minimum wages, due either to new laws or to cost of living adjustments.

Today, $7.25 an hour does not go nearly as far as it once did. The real value of the minimum wage has been steadily decreasing since 1968 when the minimum wage was $1.60 an hour. According to the inflation calculator that the Bureau of Labor Statistics provides, $1.60 in 1968 had the same purchasing power as $10.91 in 2015.(1) Stagnant wages and rising prices have left millions of low-wage workers with less money to make ends meet. The nearby figure offers additional context and shows that not only has the minimum wage not kept up with inflation, the costs for basic survival (food, health care, etc.) have continued to rise at even faster rates. While the price for items like clothing and toys have fallen, the cost for goods and services that improve a person’s well-being have continued to outpace the inflation rate. Further exasperating the issue, many of the tools and services needed to lift oneself out of poverty, such as child care and higher education, have continued to become further and further out of reach.

Change in Prices for Certain Items Relative to The Change in Prices for All Items Since 2005 

Source: Bureau of Labor Statistics, Consumer Price Index

It’s common knowledge that individuals with higher levels of education typically earn more money over their lifetime. Yet for many Americans, especially parents, the child care costs coupled with rising tuition rates and stagnant wages make the possibility of attaining additional training and education, well, simply impossible. In 2014, 14.8 percent of the population was living in poverty in the United States, roughly 46.7 million people, and nearly one in five children was living in poverty. In single mother households, the poverty rate topped 30 percent. Further, contrary to some beliefs, the majority of minimum wage workers are not teenagers. In fact, nearly 80 percent of minimum wage workers are over the age of 20; 30 percent are over the age of 35.(2)

This information is not new, yet the way that some states and policymakers address the declining value of the minimum wage and the impact of low wages on our communities has begun to change in some areas. There are many opportunities to directly affect millions of low-wage workers through policy changes. I’m hopeful that in the coming year we will see more positive changes and continue to refuse to settle for status quo.

(1) Calculated by using the average Consumer Price Index for all goods and services purchased for consumption by urban households.
(2) “Characteristics of Minimum Wage Workers, 2014.” Bureau of Labor Statistics. April 2015.

Words

By Mike Gaymon, Senior Advisor

The Christian Recorder in March of 1862 published that a publication of the African Methodist Episcopal Church presented the adage of "Sticks and stones will break my bones but words will never harm me" for the first time in print. 

Most of us will never have sticks and stones thrown at us as was done during this time of our nation's history. It was a different time for sure but today we live in much different times as well.  But we will all experience words that are powerful, sharp and can be as beneficial as they are destructive.

 

Our team at Market Street focuses on using words (with lots of numbers) to tell a story of the past, the present, and glimpses of what the future may hold for cities, counties and states.  These words while always as accurate as possible can be well received or sometimes not welcomed.  After all, most communities don't want to hear the bad news about their previous decisions or future paths unless major changes are made.  Most want to hear about the successes and the great achievements that worked well.

However, in my opinion, one of the foundation blocks of MSS that has never been compromised is "telling it like it is....the good, the bad, the ugly."  Leaders need to be confronted with the reality of where they actually are and probably will be going in community and economic development.  The future workforce will reap the results of the current leadership facing the reality of their decisions.

Words, followed by a committed leadership to execute them into actions, will determine what the future community will become. They will challenge, empower and help to create a vision for the future.  It may be just words but they can be transforming.

Hancock County at a Bird's Eye View

By Ranada Robinson, Research Manager

In the first installment of our post about Hancock County, MS and its journey since Hurricane Katrina, we talked about the county’s success in bouncing back and rebuilding its community and economy. This installment takes a look at a few key indicators to begin to see the dynamics of that progress. This brief analysis is but a glimpse of the many data indicators we at Market Street explore during our strategy processes to understand a community’s story.

As shown in the following population table, Hancock County has not reached its population levels immediately before Hurricane Katrina hit, but it is very close and steadily growing. As shown clearly in the Population Index chart, which allows apples-to-apples comparison of growth rates despite geography size, Hancock County’s comparatively rapid population growth is catching up to the state’s steady growth over the time period.

In terms of age dynamics, in 2014, Hancock County has the same percentage of 25-44 year olds in its population (23.8 percent) as it did when Market Street developed the community’s Competitive Assessment in 2011, when the most recent age data available was 2009. The population of retirees (65+) has increased to 17.3 percent, while the proportion of children 17 and under has decreased to 22.1 percent.

POPULATION

Source: U.S. Census Bureau Population Estimates

POPULATION INDEX, 2001 = 100

Source: U.S. Census Population Estimates

In terms of employment, the county bounced back very quickly, then began a consistent incline until 2010. Since then, there has been a decrease in jobs, mostly in construction, administrative and support services, manufacturing, and transportation and warehousing. In the last four years, the greatest number of added jobs has been in retail trade, accommodation and food services, and healthcare and social assistance. Despite this shift, average annual wages have continued to rise, establishments are opening, and unemployment is still on the decline.

EMPLOYMENT

Source: Economic Modeling Specialists Intl. (EMSI)

EMPLOYMENT INDEX, 2001=100

Source: Economic Modeling Specialists Intl. (EMSI)

UNEMPLOYMENT

Source: U.S. Bureau of Labor Statistics

AVERAGE ANNUAL WAGES

Source: Economic Modeling Specialists Intl. (EMSI)

ESTABLISHMENTS

Source: U.S. Bureau of Labor Statistics

For resident well-being, I took a quick look at per capita income and poverty rates. Per capita income shot up after Hurricane Katrina, presumably due to government assistance and those who took advantage of dividends and interest income to help them through the rebuilding phases. Since then, the PCI has returned to pre-Katrina levels, closer to the state PCI. Poverty and youth poverty are gradually increasing over time, which is also a national and state trend. 

PER CAPITA INCOME, 2001-2013

Source: U.S. Bureau of Economic Analysis

COMPONENTS OF INCOME, HANCOCK COUNTY, 2001-2013

Source: U.S. Bureau of Economic Analysis

POVERTY

Source: SAIPE

YOUTH POVERTY

Source: SAIPE

Again, this is only a peek in the window of all the data that helps to tell Hancock County’s story. As with all communities, other indicators such as migration trends, educational attainment, racial and ethnic dynamics, economic structure analysis, and many quality of life indicators are instrumental in understanding how far a community has come and in what direction it’s going. Nevertheless, it is astounding the progress that Hancock County was able to make in just the couple of years following Hurricane Katrina. As it continues moving forward in the future, we at Market Street will continue rooting for them, and wishing them well in their efforts to increase their economic vitality, enhance their position as a community of choice, prepare a 21st Century workforce, and develop and support visionary leadership.

If Increasing Automation Becomes A Reality, The Impacts Will Be Broad

By Matt DeVeau, Project Manager 

Confession time: I get sucked into reading a lot of clickbait articles. I believe (or rationalize, anyway) that I am a victim of circumstance. I have a public transportation commute that typically involves about 25-30 minutes of standing on crowded train or waiting for one, and the best way to pass the time is on my phone. It happens. 

Lately I’ve been falling for “robots are going to take all the jobs!” headlines. On some level, these kinds of sensationalist pieces are understandable. Let’s say that within the next few decades, a huge portion of existing jobs are lost to automation or increasingly advanced algorithms and are not replaced by new kinds of work for whatever reason. In that scenario, it’s not hard to imagine that every facet of society – economy, culture, politics, and so on – will be radically altered. That’s scary! And that’s why it makes for good #content on certain websites. 

To be sure, there are plenty of serious and worthwhile pieces about the “future of work” in an increasingly automated world – Evan Robertson briefly touched on the topic in this post from September. It’s fun to think about the theoretical aspects of these articles and think through the long-range questions they raise. But as an economic development professional, I’m also drawn to some practical questions: what types of occupations are most at risk and how are these jobs distributed geographically? 

These are obviously enormous questions that can’t be adequately addressed in this space, but I took a quick initial look at the issue using findings from existing research and EMSI occupational data. The foundation for this brief analysis is a 2013 study from Oxford University titled “The Future of Employment: How Susceptible are Jobs to Computerization?” The authors, Carl Benedikt Frey and Michael A. Osborne, devised a methodology to estimate the probability that 702 occupations can be automated. Each occupation is ranked on a scale with a number between 0 and 1, with 1 representing the jobs that are most likely to be computerized. 

I looked specifically at the 171 occupations with a probability of 0.9 or higher. This “high-risk” category accounts for nearly 45 million jobs, roughly three out of every 10 positions in the United States. It includes the nation’s most common job – retail salesperson – and some of its most obscure. (Side note: there are apparently 3,774 bridge and lock tenders in the United States.) A large majority of these jobs, however, were clustered into four major occupational groupings: 

1. Office and Administrative Support Occupations (14.0 million) 
2. Sales and Related Occupations (9.9 million) 
3. Food Preparation and Serving Related Occupations (8.1 million) 
4. Production Occupations (4.5 million) 

The above categories all make sense in light of advancements in fields such as robotics, mobile payments technologies, big data, and machine learning. We might also add a fifth category based on another emerging technology, self-driving vehicles, but while many Material Moving occupations had high computerization probabilities, most fell below the 0.9 threshold. In any case, the diversity of the above categories indicates that no regional economy is completely immune from the threat of automation. In the nation’s 300 largest metro economies by total employment, the 171 “high-risk” occupations account for anywhere between 18.9 and 40.5 percent of local jobs. A further look at the regional economies in which these occupations are most concentrated also reveals a pattern. The following table shows the ten regions with the highest combined location quotient for the 171 occupations: 

Ten Regions With the Highest Proportion of Jobs at High Risk of Computerization Among the Top 300 MSAs by Total Employment 

Source: EMSI 

All of the above regions have a location quotient of 1.94 or higher in either the Team Assemblers or Waiters and Waitresses occupation, reflecting a heavy concentration of economic activity around manufacturing or travel and tourism, respectively. Conversely, the following table shows the communities with the lowest concentration of high-risk jobs: 

Ten Regions With the Lowest Proportion of Jobs at High Risk of Computerization Among the Top 300 MSAs by Total Employment 

Source: EMSI 

In most of these communities, there is a dominant industry that does not rely heavily on or more of the above 171 occupations: government in Washington, DC, destination healthcare in Rochester, the military in Clarksville, Fayetteville, Jacksonville, and Killeen-Temple, and agriculture in Bakersfield, Salinas, and Yuma. The outlier is San Jose, which has strong location quotients in occupational categories related to computers (4.05) and engineering (3.09). These occupational categories just so happen to contain many of the jobs (e.g. software developers) that are at a relatively low risk of computerization in the coming years. 

Silicon Valley is a completely unrealistic point of comparison for just about every other regional economy in the United States. But even in the nation’s premier technology and software hub, more than 275,000 jobs – roughly one in four positions in the region – are in occupations that have a high probability of computerization. Put another way, if impending automation is a concern for a full quarter of workers in the place where a lot of the software is actually being developed, it’s a concern for everyone.

Economic Outlook

By Katie Thomas, Project Associate

Last week I was able to attend Moody’s Analytics Economic and Consumer Credit Briefing here in Atlanta. This annual presentation by top economists covered U.S. macro, regional, and consumer credit outlooks. They presented on a wide range of topics, and while there are no guarantees for what the next year holds, economic modeling and forecasting provide greater context to current trends and what expectations are for the coming year. The following is a summary of just some of the topics that were discussed. 

Labor Market and Consumer Spending 

· Labor market indicators suggest that the U.S. is approaching full employment. Recent job growth has continued to outpace the growth in the labor force, as unemployed workers and marginally attached workers are absorbed and the labor market has tightened. The pool of workers is also unlikely to grow as baby boomers retire, which will put more pressure on the labor market.

· Underemployment – individuals that work part-time for economic reasons – is expected to decline as well. The most recent BLS report estimated that there were roughly six million individuals working part-time that would prefer to be working full-time but have been unable to secure such a position, also known as involuntary part-time employment. Another 2.5 million workers were marginally attached to the labor force. Both measurements have been declining over the past year and the underemployment gap has been shrinking.

· Wages are expected to increase as a result of a tighter labor market. Wage growth has been stagnant over the past five years, but as competition for talent and workers increases, additional upward pressure will be put on wages.

· With an increase in wages, consumer confidence will increase, and with it, we will see an increase in consumer spending.

Interest Rates and the Housing Market

· With the labor market approaching full employment, the Fed will want to begin raising interest rates in order to control inflation. Interest rate increases will likely happen relatively soon, possibly sometime between December and March.

· In early 2015, roughly 20.4 million young adults (18- to 34-year olds) were living with parents or relatives. As such, the multifamily housing sector is optimistic and predicts that there will be an increase in household formation over the next three years as millennials move in together.

· The median age of millennials is estimated to be 26, which is quickly approaching the average age of homebuyers – 32. They predict that the homeownership rate has bottomed out and will begin to increase as more millennials become homeowners which will create more demand for housing.

U.S. Regional Outlook

Much of the employment growth in the United States has occurred in the West and South, with both regions experiencing steady job gains. Meanwhile, employment growth in the Northeast has been modest but is improving. Employment in the Midwest and Great Lakes region is also improving, and it appears as though the worst is over for Detroit. Recovery will take a while, but its low business costs have spurred increased investment in the area. The labor market in the Midwest is very tight, and wages there will likely be among the first to be forced to increase due to the region’s slower than average growth to its labor force. The drop in oil prices has had a significantly negative effect on the western portion of the Southern states, though growth in the coastal southeastern states remains strong. In the housing market, residential construction permits have continued to increase across all regions, yet growth has also been strongest in the West and South regions.

While the overall outlook in the United States was positive, there are many uncertainties that could alter the projected course. The potential impact student loan debt could have, the risks associated with increased interest rates and its effect on investment, a possible financial crisis in emerging markets, and the recent Chinese stock market crash leave many questions in the air. Nevertheless, Moody’s was optimistic about the outlook for the upcoming year.