National Job Growth Remains Strong, but Geographically Imbalanced
Three U.S. growth sectors (The Top 3): Education/Health, Leisure/Hospitality and Professional/Business Services each added over 3 million jobs between November 2007 and August 2019. The combined 12.5 million positions these rapidly expanding sectors added surpasses the 12.1 million net total employment growth over the same period. Additionaly, these sectors currently account for approximately 23% of economic output, up from 21% prior to the recession.
Historically, the Top 3 have always clustered in densely-populated urban areas where there are high concentrations of well-educated residents, historical and cultural resources, and educational and healthcare institutions. Therefore, it comes as no surprise that it’s the country’s major cities that have been most prosperous in the recovery period, but other areas are being left behind. Rural communities and small towns, where 20% of Americans reside, as a group have yet to reach pre-recession employment levels, while the nation’s major metropolitan areas have enjoyed the bulk of economic growth.
Between 2010 and 2018, the population of the nation’s 30 most populous metro areas grew 8.1%, or approximately twice the pace of the rest of the nation. Since the start of the recession, the top-30 metro areas have increased their job base by 8.7%, compared to 5.8% for the rest of the U.S. In terms of economic output, GDP grew 36.3% in the top-30 metros versus 29.2% in the rest of the U.S. between 2007 and 2017. Generally, the nation’s major activity centers outperformed the rest of the country in virtually every meaningful economic metric.
Nowhere is this disparity between the haves and the have-nots more evident than the tech sector (a component of the Profressional/Business Serviecs sector), where the concentration of job growth in a few select regions is even more extreme. According to a recent report published by the Brookings Institution, just five metro areas—Boston, San Francisco, San Jose, Seattle, and San Diego—accounted for more than 90% of the innovation sector’s growth between 2005 and 2017. These regions increased their share of the nation’s total innovation employment from 17.6% to 22.8%, while the bottom 90% of metro areas lost share. One-third of the nation’s innovation jobs now reside in just 16 counties.
San Jose, CA
Image credit: “the_tahoe_guy” via flickr
That said, even with the tech sector’s solid growth propelling the economy forward, there are concerns over the long-term viability of many newer startups that are burning through cash and have yet to generate a profit. The unfolding WeWork IPO saga is a prime example. Many of these firms have yet to experience an economic downturn, and a wave of tech insolvencies in the next downcycle could severely hammer many of the nation’s large metro areas, as the dot-com bust did to the West Coast in 2000.