Where Are the New Jobs Going?

A year has passed since the U.S. Bureau of Labor Statistics announced that the economy had finally recovered all 8.7 million jobs lost during the 2007-2009 recession.

Since that news last June, the employment picture has continued to brighten. The nation added 2.7 million more jobs between May 2014 and March 2015 and unemployment fell to 5.5 percent from 6.3 percent — a dramatic improvement over the peak jobless rate of 10 percent in October 2009.

Yet everything is not back to normal.

• Low-wage jobs account for most job growth even though they weren’t the majority of jobs lost during the recession, according to a report from the National Employment Law Project.
• More people have stopped looking for work (which makes the true unemployment rate higher) and job growth has merely matched recent population growth without regaining any lost ground, according to the Bureau of Labor Statistics.
• Sixty percent of the country’s largest metro areas still had not fully recovered from the recession as of 2014, according to a study by the Brookings Institution, which uses job growth and gross domestic product growth as indicators.

That doesn’t mean the economy hasn’t made headway, but it does mean headwinds continue to blow, creating a fitful recovery in which the dynamics of economic competitiveness are changing.

In today’s environment, the association between job growth and smart growth is coming more and more into focus. Where you find the features of smart growth — walkability, access to transit, a mix of uses, compact development — you often find job growth. The opposite is also true. How communities respond to the choices and opportunities created by this dynamic can make a big difference in their ability to compete in a new and challenging economy.

Many hallmarks of smart growth are found naturally in city centers — and now so is job growth. A study published earlier this year by City Observatory found that after decades of lagging the suburbs in job growth, the city centers of 41 of the nation’s largest metropolitan areas experienced faster job growth from 2007 to 2011 than the areas surrounding city centers.

The study, “Surging City Center Job Growth,” was inspired by the parade of companies that have announced they are moving to city centers or expanding operations within them. Joe Cortright, director of City Observatory and author of the study, analyzed Census Bureau data to learn whether those anecdotal examples represent fundamental change in employment patterns or are just splashy headlines.

Cortright found that aggregate employment in the city centers (the areas within three miles of each metro area’s central business district) grew at an annual rate of 0.5 percent between 2007-2011 while aggregate employment in the surrounding areas declined by an annual rate of 0.1 percent.

“I don’t know if the results are a surprise, but they are a confirmation that the anecdotes were actually leading to something,” Cortright said.

The Census Bureau data Cortright based his study on was only available through 2011 — a turbulent period that spanned the recession and the beginning of the recovery. He plans to follow up as new data is released to confirm the persistence of the trend under more stable conditions. “We really could use a couple of more years of data to know what’s going on (in the long run),” he said.

The surge in city center job growth between 2007-2011 reversed decades of decentralization — a.k.a. job sprawl — in which employment followed the population as people streamed away from city centers to the suburbs. As recently as 2002-2007, job growth in surrounding areas was much faster (1.2 percent annually) than in city centers (0.1 percent annually), according to the study.

Make no mistake. The vast majority of jobs remain outside the city center and city center job growth was not surging in every metro area Cortright studied. However, the pendulum is swinging inward as more and more city centers are outperforming their outlying areas (either adding jobs faster or losing them more slowly).

Between 2002-2007, only seven of the 41 city centers Cortright studied outperformed their outlying areas, but between 2007-2011, he found that 21 outperformed their outlying areas.

City centers owe some of their relative strength to the recent economic cycle in which industries that tend to cluster in city centers (professional, technical and creative services) weathered the recession better than industries that are typically decentralized (manufacturing, construction, warehousing).

However, when Cortright adjusted for that effect, he found that city centers still improved their competitive position relative to outlying areas based on their market share of metro-wide employment. Only four cities increased their market share of metro employment between 2002-2007, but 14 increased their share between 2007-2011 and 38 reduced their rate of loss.

“It’s not just the usual suspects ... the San Franciscos and New Yorks,” Cortright says. “It’s a diverse array of cities around the country where you’re seeing these patterns.”

Milwaukee is a good example. Between 2002-2007, employment in the city center grew by just 0.2 percent a year compared to 0.8 percent in the surrounding areas. Then the numbers flip-flopped.

City center employment grew by 1.4 percent between 2007-2011 while employment in the surrounding areas shrank by 1.3 percent. That propelled the city center from a 4.7 percent loss of market share to a 6.2 percent gain.

“There was a long period of time where you started worrying about the downtown (but) we are definitely seeing a huge surge in business in the city now,” says Tamara Maddente, executive vice president of First Weber Group, a Wisconsin real estate services company.

The big news in Milwaukee these days is that the city’s basketball team, the Bucks, chose a city center site for their new arena with plans to surround it with office, retail and residential development.

In addition, Northwestern Mutual Insurance began construction on a 32-story tower that will replace a smaller existing office building, keeping 1,000 jobs in the city center and adding 1,900 new ones, according to the company.

The job growth coming to the city center of Milwaukee is not unlike what’s happening in many cities, Maddente says. Millennials — “the generation of walkables and Ubers” — started moving to the city center for the live/work/play lifestyle and employers eventually followed, she said.

“The business community finally had to take a good look around and say if people are moving downtown, why aren’t we ahead of that curve?” Maddente says.

Amanda Buss lives in Denver and belongs to the generation Maddente so colorfully described. “Most people I know who are my age choose to live in (the city center of) Denver, close to social activities,” says Buss, 25.

While Denver was not one of the metro areas where employment grew faster in the city center than the outlying areas from 2007-2011, it did reduce its rate of market share loss to 3.9 percent, down from 6.4 percent between 2002-2007.

Buss commutes to Boulder for her job as a financial services manager at the University of Colorado but is also pursuing an MBA at the University of Colorado Denver, which is within walking distance of her downtown apartment.

Buss lived in Boulder for a year, but eventually “followed my friend base” to Denver. “This is the time to live downtown in the hustle and bustle while we have the energy for it,” she says.

The nature of recent recessions has been that size doesn’t always matter when it comes to recovering jobs. With the exception of the late 1990s, big city employment has tended to grow at a rate similar to other areas of the country.

But that’s not true of the last recession. Metro areas with populations of one million or more gained jobs faster through 2013 than smaller metros and especially nonmetro areas, according to an analysis of BLS data by Joshua Lehner, an economist with the Oregon Office of Economic Analysis.

Two likely causes: large metros benefit from diverse employment bases while smaller metros and non-metros tend to rely disproportionately on the housing and government sectors, which have been slow to recover this time around.

Employment growth in large metro areas — especially in city centers — drives home the need to add affordable housing near jobs and transit through increased density rather than continued sprawl. “That all fits in with the smart growth narrative,” Lehner says.

Brad Broberg is a Seattle-based freelance writer specializing in business and development issues. His work appears regularly in the Puget Sound Business Journal and the Seattle Daily Journal of Commerce.