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A Tale of 6 Cities

In previous posts we have discussed the Great Separation where the largest metros in the U.S. seem to have grouped themselves into six very divergent economic growth categories. In this post we will take a closer look at 6 metros, one from each group, to see to see what a more detailed look tells us.

We stayed near the middle of the country in selecting our metros.

Economic growth (GDP) tracks as we would expect for these 6 metros. Notice that while there is some separation among the metros between 2001 and 2010 the gaps widen considerably after 2010. Nashville is in the highest performing group (the Great 8). Its economy grew 129 percent since 2001, followed by Charlotte who grew 114 percent. The economies in Columbus, Kansas City and St. Louis grew 90 percent, 69 percent and 56 percent respectively. Memphis, our representative from the poorest performing group saw its economy grow just 48 percent since 2001.

Attract and Retain Talent

In terms of educational attainment there is little difference between the first five metros. In each about 35 to 36 percent of the adult population has at least a bachelor’s degree. Memphis lags in this measure at 27.8 percent.

Source: U.S. Census Bureau, ACS 2017 1-Year

We do see some variance when we look at the net domestic migration of adults with at least a bachelor’s degree (below). Both Nashville and Charlotte are currently magnets for educated adults as both see significant net domestic migration of this population between 2016 and 2017. Columbus had a modest level of net in-migration of educated adults while the other three metros were “brain drain” metros, losing more educated adults to out-migration than they gained via in-migration.

Source: U.S. Census Bureau, ACS 2017 1-Year

Our metros can also attract talent internationally as well. The chart below shows the international in-migration of adults with at least a bachelor’s degree. Since we do not get international out-migration data from the Census Bureau, we cannot calculate a net, but it is important to know that the ability to attract talent internationally can be a boost for a metro.

Source: U.S. Census Bureau, ACS 2017 1-Year

Growth in Key Sectors

Having a deep pool of talented workers is not going to help a metro if there are not enough jobs demanding high valued talent. In a previous post we saw that the highest performing metros had higher levels of specialization in four occupation groups (computer and math occupations, architecture and engineering occupations, business and finance occupations and arts-design-media occupations). This does not seem to hold up very well for our 6 selected metros. The following charts show the location quotients for our metros in each of these occupation groups. A location quotient over 1 indicates a higher level of specialization than the norm.

Source: U.S. Bureau of Labor Statistics, Occupation Employment Statistics 2017

What is interesting about this analysis is that our top two performing metros, Nashville and Charlotte, do not have particularly strong location quotients in these key areas. Memphis lags in all of these areas but Columbus, Kansas City and St. Louis are (at least) as competitive as Nashville and Charlotte. So, if these occupations are essential to regional growth, how are Nashville and Charlotte separating themselves from the pack? We may get an answer by performing another type of analysis, shift share.

Shift share analysis breaks down employment into three buckets. The first is growth due to national employment growth. If the national economy is growing and adding jobs, we would expect a similar level of growth in a given metro area. In this analysis we are looking at the 2010 to 2017 time period. U.S. employment grew 12.2 percent over this time period so essentially, the first 12.2 percent of employment growth in a given metro and in a given occupation group is attributed to national employment growth.

The second bucket factors in the national employment growth by occupation group. Obviously, some occupations are growing faster than others. This bucket accounts for that. For example, computer and math occupations grew 29.8 percent between 2010 and 2017. Subtracting out the 12.2 percent growth attributed to overall economic growth, we get an occupation growth rate of 17.6 percent for computer and math occupations.

The third bucket includes the local influence which is essentially what we have left after the national and occupation factors are accounted for. In Nashville for instance, national growth and computer and math sector growth suggested they should have added about 4,200 jobs in that sector between 2010 and 2017. They actually added to over 10,500. The 6,000 plus jobs are attributed to local factors unique to Nashville. The first chart below shows the shift share analysis for computer and math occupations. The total height of the bar tells us how many computer and math occupation jobs were added in each metro between 2010 and 2017. The different colors represent the 3 sources of employment growth (national, occupation and local). Pay special attention to the blue segment the following charts. This shows us the job growth attributed to local factors. Local factors were positive for Nashville, Charlotte and Kansas City and negative for Columbus, St. Louis and Memphis. In those metros, they did not see as much employment growth in these occupations as national growth and computer and math occupations suggest they should.

Source: U.S. Bureau of Labor Statistics, Occupation Employment Statistics 2017

The following charts show the shift share for other key occupations. Again, notice the blue segments (local share). They are a much larger share for Nashville and Charlotte.

Source: U.S. Bureau of Labor Statistics, Occupation Employment Statistics 2017

The local share is also strong for Nashville and Charlotte in production and management occupations.

Source: U.S. Bureau of Labor Statistics, Occupation Employment Statistics 2017

This analysis would seem to suggest that real metro economic vitality is less about having an established strength (location quotient) and more about recent growth in key sectors. This should be encouraging. A metro's current economic makeup does not have to determine its economic future. Intentional efforts to build capacity, even where little exist, can make a difference and put a metro economy on a new trajectory.

The same story could be told on having an educated workforce. We showed that current levels of educational attainment were largely the same across our metros, but the top performers did much better in attracting new talent from the outside.

In today’s idea economy, it’s not about where your metro is but where it is going.

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