The Cities Where African Americans are Doing the Best Economically 2018

This article originally appeared at Forbes.

The 2007 housing crisis was particularly tough on African-Americans, as well as Hispanics, extinguishing much of their already miniscule wealth. Industrial layoffs, particularly in the Midwest, made things worse.

However the rising economic tide of the past few years has started to lift more boats. The African-American unemployment rate fell to 6.8% in December, the lowest level since the government started keeping tabs in 1972. Although that’s 3.1 percentage points worse than whites, the gap is the slimmest on record. A tightening labor market since 2015 has also driven up wages of black workers, many of whom are employed in manufacturing and other historically middle and lower-wage service industries.

There’s still much room for economic improvement for the nation’s black community — the income gap with whites remains considerably higher than it was in 2000, with the median black household earning 35.5% less — but as we pay homage to Martin Luther King this week, the record low unemployment rate is a cause for celebration.

President Trump has predictably taken credit for the good news, but kudos more likely should go to those states and metropolitan areas that have created the conditions for black progress.

The gains have not been evenly spread. To determine where African-Americans are faring the best economically, we evaluated America’s 53 largest metropolitan statistical areas based on three critical factors that we believe are indicators of middle-class success: the home ownership rate as of 2016; entrepreneurship, as measured by the self-employment rate in 2017; and 2016 median household income. In addition, we added a fourth category, demographic trends, measuring the change in the African-American population from 2010 to 2016 in these metro areas, to judge how the community is “voting with its feet.” Each factor was given equal weight.

The South Also Rises

One of the great ironies of our time is that the best opportunities for African-Americans now lie in the South, from which so many fled throughout much of the 20th century. In the past few decades, many good jobs have moved South and blacks, like many whites and Hispanics, have followed.

The South dominated the previous version of this ranking, developed through the Center for Opportunity Urbanism, three years ago, and still does. All of the top 10 metro areas are in the South, led in a tie for the No. 1 spot by Washington, DC-VA-MD-WV and Atlanta, which was our previous leader.

Washington, with its ample supply of well-paid federal jobs, is the metro area where blacks have the highest median household income in the nation: $69,246. Amid rising home prices, the black home ownership rate has dipped to 48.3% from 49.2%, but that’s still fourth highest among the largest metro areas.

Atlanta, with its historically black universities and strong middle class, has long been described as the black capital of America, and its thriving entertainment scene has given rise to claims that it’s become a cultural capital as well. Entrepreneurship is strong, with some 20% of the metro area’s black working population self-employed, the highest proportion in the nation, and though median black household income is quite a bit lower than in the D.C. area at $48,161, costs are lower too. In-migration has slowed since the financial crisis, but the black population is still up 14.7% since 2010.

Atlanta and Washington are followed in our ranking by Austin, Texas, Baltimore and Raleigh, N.C., with the rest of the top 20 rounded out exclusively by Southern cities, except for Boston in 19th place.

Two key determinants seem to be driving these rankings: homeownership and self-employment, traditional benchmarks of entering the middle class. All of the top 10 boast homeownership rates that match or well exceed the black national average of 41 percent. (It should be noted that the national average is a full third lower than the national average for all ethnicities.)

These patterns hold up as well for income. Black incomes have been rising most rapidly since 2010 in largely fast-growing Sun Belt locales, as analyst and Forbes contributor Pete Saunders has found, such as Nashville, Raleigh and Austin. It appears as if the fastest income gains are generally being made in the places where other ethnic groups are advancing as well. After Washington, the metro areas where blacks have the highest annual household incomes are San Jose ($65,400), the capital of Silicon Valley, and No. 4 Baltimore ($53,200), which like Washington has a huge federal employment base.

The New Great Migration

Perhaps the most persuasive indicator of African-American trends lies in population growth. During the period of the Great Migration out of the south in the early 20th century, an estimated 6 million blacks headed north and west to cities such as New York, Los Angeles, Chicago and St. Louis. But now the tide is reversing, with the African-American population dropping in the latter three over the past six years, as well as in San Francisco and cities with fading industrial cores like Pittsburgh, Cleveland, Detroit and Milwaukee.

In contrast the metro areas whose African-American populations have expanded the most since 2010 are the South and Sun Belt: Las Vegas, Dallas-Fort Worth, Austin, Phoenix.

In some cases it’s clear that blacks are leaving for better economic opportunities. In others, high housing prices may play a role: In Los Angeles and San Francisco the black homeownership rate is about 9 percentage points lower than the major metro average.

In San Francisco the black community seems headed toward irrelevance and extinction as tech workers have driven up home prices to unprecedented levels; the metropolitan area’s African-American population has dropped 6.3% from 2010.

The situation is particularly dire in California where strict land-use and housing regulations have been associated with increases in home prices relative to income of 3.5 times the rest of the nation since 1995. In coastal California, African-Americans face prices from more than two to nine times their annual incomes than non-Hispanic whites. African-American homeownership rates in California are down 17% in the Golden State compared to a decline of 11% for Hispanics and 6% for non-Hispanic whites. Asian homeownership rates have stayed the same.

Blacks, like many other Americans, are likely to continue to move, as Pete Saunders notes, to cities that are both high growth and relatively low cost. In these cities, housing and land use policies generally allow the market to function, resulting in lower home prices and greater housing choice. Business investment and job creation are also strongly backed. Blacks, like others, are moving to these places for opportunity.

In many cases this means a reversal of the Great Migration and a return trip to parts of the country now far more accommodating to black aspirations than those places which once provided the greatest opportunities.

Homepage photo credit: Ryan Quick via Flickr under CC 2.0 License

Tech’s New Hotbeds: Cities With Fastest Growth in STEM Jobs Are Far From Silicon Valley

This piece originally on Forbes.com.

The conventional wisdom sees tech concentrating in a handful of places, many dense urban cores that offer the best jobs and draw talented young people. These places are seen as so powerful that, as The New York Times recently put it, they have little need to relate to other, less fashionable cities.

To a considerable extent, that was true – until it wasn’t. The most recent data on STEM jobs – in science, technology, engineering or mathematics – suggests that tech jobs, with some exceptions, are shifting to smaller, generally more affordable places.

What we may be witnessing, in fact, is a third turning in the tech world. The initial phase, in the 1950s, was mostly suburban – dominated by the still-powerful Bay Area, Boston and Southern California – and was heavily tied to aerospace and defense. The second phase, now coming to a close, refocused tech growth in two hot spots, the Bay Area and Washington’s Puget Sound, and largely involved social media, search and digital applications for business services.

The third tech turning, now in its infancy, promises greater dispersion to other markets, some with strong tech backgrounds, some with far less. In the last two years, according to numbers for the country’s 53 largest metros compiled by Praxis Strategy Group’s Mark Schill based on federal data and EMSI’s fourth-quarter 2017 data set, the STEM growth leader has been Orlando, at 8%, three times the national average. Next are San Francisco and Charlotte (each at 7%); Grand Rapids, Michigan (6%); and then Salt Lake City, Tampa, Seattle, Raleigh, Miami and Las Vegas (5%).

Why Are New Players Rising?

Silicon Valley, along with its urban annex, San Francisco, seems likely to remain the tech center for the foreseeable future. The area accounted for 44% of the country’s venture capital funding in 2014, according to a Brookings analysis of Pitchbook data, and the San Jose and San Francisco regions’ STEM employment – more than 440,000 jobs – is larger than that of greater New York, which has more than twice the population. The highest location quotient, essentially the percentage of STEM jobs per capita, can be found in the Valley – a remarkable 3.38 in 2017 – while the San Francisco area comes in at roughly half that rate, with an LQ of 1.76, just behind the figures for Seattle and Washington, DC.

But recently there have been signs that the tech sector’s growth in the region is slowing, despite the presence of Google, Facebook and Apple, three of the world’s most highly valued companies. From 2006 to 2016, the Valley saw a remarkable 33% growth rate in STEM jobs – roughly 3% per year. But in the last two years, that rate has fallen to 2% annually. In some recent months in parts of the Bay Area, The San Jose Mercury reports, the tech job count has actually declined.

One limiting factor could be high housing costs. A recent report from the state Legislative Analyst’s Office showed that many CEOs, particularly in Silicon Valley, regard severe housing unaffordability – where you need to earn more than $200,000 annually to buy a median-priced house – as their biggest business challenge.

The effects can be seen in domestic migration, which despite the boom has been declining since 2012. Old-time Silicon Valley residents can celebrate the rapid appreciation of their homes, but for new entrants the prospects are bleak. If millennials continue their current rate of savings, notes one study, it would take them 28 years to qualify for a median-priced house in the San Francisco area – compared with five years in Charlotte, or three years in Atlanta. This may be one reason that, according to a recent ULI report, 74% of Bay Area millennials are considering a move out of the region in the next five years.

Who Are These New Players?

If the Valley is slowing, one might expect the slack to be picked up in places that are heralded – at least by their boosters – as tech havens, places like Chicago, New York and Los Angeles. Instead, the fastest STEM growth is occurring in somewhat less ballyhooed places that have far lower housing costs and typically have less onerous tax and regulatory regimes.

Several factors may be in play. In the early part of the decade, notes a 2016 Brookings study, software focused on such things as search, social media and systems design; now, much of the impetus is coming from manufacturing-related industries, such as autos and industrial products, which may help explain the strong growth experienced by places like Grand Rapids.

That metro is also home to 17 universities and colleges, which guarantee a steady flow of tech workers. Low housing costs are certainly a potential allure; Trulia recently ranked the region as the housing market best “poised for growth” in 2018. The area boasts successful firms like Open Systems Technologies, a provider of IT services that employs about 140 people in its headquarters near downtown.

Charlotte, another new high-flier, also takes advantage of lower costs, a revived downtown area and ties to the financial service industries. The real estate firm CBRE named the city its top “momentum market” in 2016 based on its tech-talent growth rate from 2010 to 2015 (74.7%). It was followed by Nashville, with a 67.9% rate; both outpaced the Bay Area, at 61.5%.

Finally, there’s our fastest grower, Orlando, a city better known for Mickey Mouse than high-tech. Like Charlotte, Grand Rapids and Nashville, the city benefits from a combination of lower housing costs and enough amenities to attract millennials. Some companies, like Arrow Sky Media LLC, which specializes in animation and game development operations, and Finexio, a financial technology company, have recently relocated to Orlando, the latter firm from Silicon Valley. These decisions follow recent moves to Orlando by ADP and Deloitte, with 2,850 employees hired between the two companies, a majority of them tech workers.

For many of these emerging markets, the tech boom has accompanied growth in their central cores. But locating in a downtown or adjacent area in a smaller city is not the same as doing so in a megacity like New York, Los Angeles or Chicago: Tech workers can find affordable environments in the relatively dense areas but, as they age, can also settle in affordable, leafy suburbs, many of which are just a short commute away.

These options are not so readily available in our largest metros: Chicago, New York and Los Angeles. Although journalists and local boosters have claimed all three places are “the next Silicon Valley,” their tech growth from 2006 to 2016 was below average, and all now have location quotients below the national average (New York’s, for example, was 0.89 for 2016).

While these regions’ cost of living may pose the biggest threat, millennials, the fuel for tech firms, also may not be as urban-centric as some have predicted. Their numbers have recently dropped or plateaued in the much-celebrated core cities of Boston, Chicago, Los Angeles and New York after rising earlier in the decade. In contrast, many Sun Belt areas – Nashville, Charlotte, Houston, Dallas-Fort Worth, Austin, Orlando – enjoy stronger net population growth in those between 25 and 34 than coastal California and the Northeast.

A recent downturn in the energy industry – a major source of STEM employment – has led to a decrease in jobs in such places as Houston, Oklahoma City and New Orleans.

What Will The Third Turning Tech Environment Look Like?

Of course, none of this is to suggest that anyone will challenge Silicon Valley/San Francisco or even Seattle, clearly following in the Bay Area’s path, at the top of the tech pyramid. But Seattle, once relatively cheap, has become more and more expensive, with the nation’s fifth-highest rents; already, some 45% of local millennials are considering leaving because of the high prices. Even rising Denver is facing a price squeeze, and a mounting exodus.

Cutbacks in H-1B visas could create labor shortages in particularly immigrant-dependent places like the Valley, where most tech workers are foreign born. To appeal more to domestic workers, tech giants will have to accommodate them in lower-cost places. Apple already has more than 6,000 employees in less costly Austin – roughly half the size of the company’s spaceship headquarters in Cupertino – including a hardware engineering division. The tech giant has very few openings in Southern California, but 10 times as many in Texas. Rapidly expanding Amazon is looking for a second headquarters, presumably in a lower-cost area, and has held many of its recent job fairs far from the West Coast. Google has been expanding most robustly in Colorado and Austin, as well as downtown San Jose. Facebook is expanding in lower-cost areas like Ohio.

So contrary to popular belief, growing dispersal, not consolidation, represents the future of STEM employment. Not every smaller city will win, but some may well become serious players in the tech game. As costs intrude and tech itself morphs, competition for STEM jobs will spread, and other regions will begin to impose themselves on the nation’s high-tech map.

In the New Year, Worry-Free California Has a Lot to Worry About

This article first appeared at The Orange County Register.

Propped up by media idolatry, California is moving from denial to delusion. Case in point: A recent AP story claimed that the state “flush with cash from an expanding economy” would consider spending an additional billion dollars on health care for the undocumented, as well as a raft of new subsidies for housing and the working poor.

All this wishful thinking and noble intentions ignores a slowing state economy, and a structural deficit, keyed largely to state worker pensions, that may now be headed towards a trillion dollars. Perhaps the widely celebrated, although poorly distributed “good times” of the past few years, have clouded Sacramento’s judgement.

Jerry Brown, repeatedly lionized in the national press, finally leaves office after next year, he will likely leave his successor both a totally out of control legislature and looming fiscal crisis. Brown’s replacement will also have to deal with a state that, according to the Social Science Research Council, suffers the greatest income inequality in the nation and the third worst economic environment for middle class families. Worse yet — upwards of one-third of the state population subsists near or in poverty.

Read the entire piece at The Orange County Register.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of NewGeography.com and lives in Orange County, CA.

Photo: Daniel Schwen (Own work) CC BY-SA 2.5, via Wikimedia Commons

The Cities Where a Paycheck Stretches the Furthest 2017

This article first appeared at Forbes.

We often conflate high salaries with prosperity, but that can be deceptive. Someone who lives in New York or San Francisco might make more money than a counterpart in the same profession in Houston or Dallas-Fort Worth, but when the cost of living is factored in, their Southern colleagues may actually come out ahead.

At the Center for Opportunity Urbanism, we developed a Standard of Living Index to get a better sense of where workers are getting the most for their paychecks. We began with the Bureau of Economic Analysis regional price parities for the 107 metropolitan statistical areas with more than 500,000 residents, added the costs for purchasing the average house and weighted the index based on the national distribution of renting and owning (63 percent owning, 37 percent renting). Housing plays a disproportionate role in the difference in costs between the most and least expensive metro areas, as we will detail later.

The picture that emerges is one of a very varied set of regional economies, all seeking to boost pay and the standard of living faster than costs. Some do this well, while others are getting left behind.

The Top 10

As the world capital of technological innovation, the San Jose metropolitan area, which includes much of Silicon Valley, has by far the highest average salary — $116,000 — among the 107 largest metropolitan areas. That‘s more than twice the national average, and $31,000 more than the metro area with the second-highest average pay, Bridgeport-Stamford, Conn.

The cost of living in the San Jose area is also impressively high, nearly 60% above the national average, driven by outrageous real estate prices. Factoring that in, the average paycheck there is worth $67,485– much lower than nominal pay, but still high enough to rank first in the nation.

Three other tech-oriented metro areas rank in the top 10: Boston (seventh) and Seattle (ninth), where high salaries compensate for prohibitive costs, and Durham, N.C., in third place, where costs are slightly above average. In all three, the cost of living adjusted pay varies from around 10% to 18% above the national average.

Houston retains its second-place rank from last year, with a cost of living 9% above the national average, but with pay that’s nearly 20% above. The nominal average pay there of $64,000 pencils out to $58,400 when adjusted for cost of living.

Fourth place Atlanta has a cost of living 2% above the national average but with pay 14% above. The rest of the top 10 is rounded out by Detroit (eighth), Hartford (ninth) and Dallas-Ft. Worth (10th), which are not on the minds of most venture capitalists, but offer relatively higher salaries and reasonable costs that benefit residents.

The metro area where a paycheck buys the least: Honolulu, where the high costs of all the necessities shipped in from the mainland, not to mention high housing costs, erodes the value of the average $50,200 wage to $32,500.

California’s Conundrum

One thing that screams out to anyone looking at the numbers: the preponderance of California metro areas that inhabit the bottom rungs of the survey.

California’s recovery has been driven largely by the Bay Area, which includes San Francisco and San Jose.

Yet the rest of state, whose growth rate has now slowed to the national average after several years playing above par, is not keeping up as well. The clear culprit: housing costs so high that San Francisco’s wages are not nearly high enough to cover the costs. San Francisco, ranks 19th, second best among California metropolitan areas. It shares prohibitive costs that are almost as high as San Jose — some 50% above average — but with pay nearly $16,000 lower, barely 6% above the national average.

A remarkable five of the bottom 10 metro areas on our rankings are from the Golden State. These include both interior metropolitan areas — No. 101 Fresno and No. 104 San Bernardino-Riverside — that suffer from rising house prices and California’s draconian regulatory and tax regime but without the benefit of above average salaries. Other interior areas hurting include Modesto, ranked 91st, and Stockton,95th. Both have seen home prices rise as newcomers, fleeing the Bay Area’s insane costs, have settled in for long commutes but still working there. Indeed, Stockton has now been included in the Bay Area combined statistical area by the Office of Management and Budget.

Yet the coast is not in the clear either, as No. 102 Oxnard’s ranking suggests. But perhaps more surprising is the poor showing by No. 92 San Diego, which has a strong technology economy, and even worse the massive Los Angeles area, home to Hollywood, which ranks 100th, by far the worst among the 10 largest metropolitan areas on our list. The reason? An average salary that is barely above the national average but with a cost of living, driven by high housing prices that drops the value of the paycheck to 20% below the national average.

Full List: The Cities Where A Paycheck Stretches The Most And Least

What The Future Holds

The widening divergence in housing costs — an issue which has occupied much of the recent tax reform debate — is becoming an increasingly determinative factor in the evolution of metropolitan economies. The largest cost difference in goods and services other than rents among the 107 metropolitan areas is 35%. The spread from lowest to highest in rents is 255%. The biggest gap, however, is in the cost differences for purchasing the average-priced house – a whopping 624%, nearly 2.5 times the differences in rents. This drives the overall cost of living difference up to 124% between the least and most expensive metropolitan areas.

As we have seen some areas — notably San Jose, Boston and Seattle — have been able to cope with higher costs because industries there are able to offer relatively fat paychecks. But even these storied areas may face challenges as the cost gaps rise. Already growth has slowed, and even gone into reverse in the Bay Area, a downturn at least somewhat tied to bloated housing costs. A 2015 survey found some 74 percent of millennials in the area were contemplating leaving, largely due to high rents and home prices.

These issues will become larger as millennials begin to look to buy houses for their young families. We have calculated the difficulty of transitioning from renting to purchasing, by comparing annual average housing costs for renters to average housing costs for a newly purchased house. The gaps tend to be much wider in places like the Bay Area, Los Angeles and New York, than for example, in Chattanooga, Tampa-St. Petersburg, Indianapolis, Orlando, San Antonio, Atlanta or Birmingham.

Some people are moving in large numbers from the more expensive areas to areas where costs are lower.. The 10 most expensive metropolitan areas (including San Jose), where the cost of living is 25% or higher than average, exported 1.4 million domestic migrants to other parts of the country from 2010 to 2016. In contrast, the 77 metropolitan areas with costs of living below average attracted more than 2,000,000 net domestic migrants. This could also accelerate the flow of business investment to these places, as skilled labor becomes more constrained, or the demands for compensation more extreme, as people struggle to meet costs.

The Future of America’s Suburbs Looks Infinite

This article first appeared at The Orange County Register.

Just a decade ago, in the midst of the financial crisis, suburbia’s future seemed perilous, with experts claiming that many suburban tracks were about to become “the next slums.” The head of the Department of Housing and Urban Development proclaimed that “sprawl” was now doomed, and people were “headed back to the city.”

This story reflected strong revivals of many core cities, and deep-seated pain in many suburban markets. Yet today, less than a decade later, as we argue in the new book that we co-edited, “Infinite Suburbia,” the periphery remains the dominant, and fastest growing, part of the American landscape.

This is not just occurring in the United States. In many other countries, as NYU’s Solly Angel has pointed out, growth inevitably means “spreading out” toward the periphery, with lower densities, where housing is often cheaper, and, in many cases, families find a better option than those presented by even the most dynamic core cities.

Reality check: What the numbers say

Less than a decade since the housing crisis, notes demographer Wendell Cox, barely 1.3 percent of metropolitan regions live in the urban cores we associate with places like New York City, Boston, Washington or San Francisco.

Counting the inner ring communities built largely before 1950, the urban total rises to some 15 percent, leaving the vast majority of the population out in the periphery. More important still, the suburban areas have continued to grow faster than the more inner-city areas. Since 2010, the urban core has accounted for .8 percent of all population growth and the entire inner ring roughly 10 percent; all other growth has occurred in suburban and exurban areas.

Much of this has been driven by migration patterns. In 2016, core counties lost roughly over 300,000 net domestic migrants while outlying areas gained roughly 250,000. Increasingly, millennials seek out single-family homes; rather than the predicted glut of such homes, there’s a severe shortage. Geographer Ali Modarres notes that minorities, the primary drivers of American population growth in the new century, now live in suburbs. The immigrant-rich San Gabriel Valley, the Inland Empire, Orange County and their analogues elsewhere, Modarres suggests, now represents “the quintessential urban form” for the 21st century.

Read the entire piece at The Orange County Register.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of NewGeography.com and lives in Orange County, CA.

Alan Berger is Professor of Landscape Architecture and Urban Design at Massachusetts Institute of Technology where he teaches courses open to the entire student body. He is founding director of P-REX lab, at MIT, a research lab focused on environmental problems caused by urbanization, including the design, remediation, and reuse of waste landscapes worldwide. He is also Co-Director of Norman B. Leventhal Center for Advanced Urbanism at MIT (LCAU).

Photo: Laurie Avocado, via Flickr, using CC License.

The Bottom Line of the Culture Wars

This article first appeared at The Orange County Register.

America’s seemingly unceasing culture wars are not good for business, particularly for a region like Southern California. As we see Hollywood movie stars, professional athletes and the mainstream media types line up along uniform ideological lines, a substantial portion of the American ticket and TV watching population are turning them off, sometimes taking hundreds of millions of dollars from the bottom line. Read more

California’s Coming Youth Deficit

This article first appeared in The Orange County Register

Images of California, particularly the southern coast, are embedded with those associated with youthfulness — surfers, actors, models, glamorous entrepreneurs. Yet, in reality, the state — and the region — are falling well behind in the growth of their youthful population, which carries significant implications for our future economic trajectory and the nature of our society.

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Forget the Urban Stereotypes: What Millennial America Really Looks Like

Perhaps no generation has been more spoken for than millennials. In the mainstream press, they are almost universally portrayed as aspiring urbanistas, waiting to move into the nation’s dense and expensive core cities. Read more

Is California Anti-family?

This article first appeared in The Orange County Register.

In its race against rapidly aging Europe and East Asia, America’s relatively vibrant nurseries have provided some welcome demographic dynamism. Yet, in recent years, notably since the Great Recession and the weak recovery that followed, America’s birthrate has continued to drop, and is now at a record low. Read more

The Cities Creating the Most High-Wage Jobs

This piece first appeared on Forbes.

As the country moves toward full employment, at least as economists define it, the quality of jobs has replaced joblessness as the primary concern. With wages still stagnant, rising an anemic 2.5% in the year to May, the biggest challenge for most parts of the U.S. is not getting more people into the workforce but rather driving the creation of the types of jobs that can sustain a middle-class quality of life.

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