The Center-City Job Resurgence

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by James A. Bacon

After decades of losing jobs to the metropolitan periphery, the nation’s downtown employment centers have been recording faster job growth since the recession than areas located further from the city center, according to a new report, “Surging Center Job Growth,” by Joe Cortright, president and principal economist of Impresa, a consulting firm specializing in regional economic analysis.

Cortright compared job growth between city centers (defined as within three miles of the center of a metropolitan region’s central business district) and outlying areas. During the go-go years of the 2000s-era real estate boom (2002-2007), the periphery enjoyed rapid job growth while city centers stagnated. Since the recession (2007-2011), city centers have gained jobs while the periphery has lost them.

Those  numbers represent a composite of 41 of the nation’s largest metropolitan regions for which Cortright could find comparable data. The national trend does not apply to all metropolitan regions. Indeed in two of Virginia’s largest metro areas — Hampton Roads and Richmond — the periphery continued to out-perform the city centers.

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What’s going on? The big-picture story is that the industry mix of the national economy is changing, and that shift increasingly favors central business districts.

In general, knowledge-oriented industries that require considerable face-to-face interaction are clustered in city centers, while goods producing and moving industries are more decentralized. Knowledge-oriented industries tend to use land much more intensively than goods producing and distribution centers.

The biggest construction declines occurred in the construction and manufacturing sectors, which tend to be located on the periphery. Those sectors have been slow to rebound during the recession, but if and when they do, Cortright said, the compositional disadvantage of the periphery might diminish. (By “compositional,” he means the advantage of disadvantage conferred by industry mix.) However, he argues that center cities will continue to enjoy generalized “competitive” advantage.

These factors — the growing preference of well-educated  young adults for urban living, the shift of companies to city centers to tap this labor pool, the growing pull of the “consumer city,” the growth of “eds and meds,” the continuing relative decline of manufacturing and distribution, and the waning of major investments in new highway infrastructure — all give us reason to believe that the shift toward city center growth is not a temporary anomaly.

A closer look at Virginia metros. How do we explain the departure of Hampton Roads and Richmond from the larger, national trend? Remember that the “national” trend is derived from composite numbers that include a lot of variability. The trend does not apply equally everywhere.

Hampton Roads is a special case because its economy is so dominated by military spending, and military employment is concentrated in military bases. The military makes its decisions where to grow and contract based on different factors than the civilian economy.

As for Richmond, my sense is that downtown living and employment has surged since 2011, the most recent years cited by Cortright. The competitive advantages of central business districts apply to the Richmond region as well, and we’ll see the proof in more recent numbers. Another possibility is that the three-mile definition of “center city” does not fit Richmond, one of the smaller metros surveyed. The economic vitality of central districts like Shockoe Bottom and Manchester may be offset by declining employment in the 2- to 3-mile band, which are really aging suburbs.

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9 responses to “The Center-City Job Resurgence

  1. ooh ooh LOOK! The inner city is outgrowing the suburbs. All those millennials living in refurbished rat traps are starting to pay off.

    All we have been hearing about for the past twenty years is how great the upscale places like Seattle and Denver are. They have all the bells and whistles and yet, they don’t fit this garbage report’s scenario. Why is that? And even more, the inner city of Detroit has been a reported job magnet AND THEY aren’t even on the list.

    http://money.cnn.com/gallery/technology/2014/10/07/most-innovative-cities/5.html

    http://www.mlive.com/business/detroit/index.ssf/2013/08/cnn_money_says_hottest_downtow.html

    Look, according to this report’s Table 6 there was a 6.2 percent increase in periphery job growth from 2002 to 2007. The inner city growth during that time was .3 percent. By now there should have been over 60 million periphery jobs if the growth rate had maintained its course. Which way overshadows the 200k jobs the core has managed to gain.

    The truth it seems is that the only thing this report is highlighting are the massive loss of jobs sent overseas from suburbia, and the free giveaways the city core has been using to get someone, anyone, to provide them with the miniscule jobs that are left.

  2. There’s something squishy here.

    When I look at the chart in the paper on employment growth, Richmond had negative 2.5 percent in the center over the time span while the outer areas had a negative 0.8 percent level. Does that suggest that the periphery areas are more resilient?

    There’s anecdotal evidence that millenials are starting out inside city limits, but how different is that from previous generations?

    Another troublesome thing about the comments here is the idea of the “knowledge” economy. That sounds so, like 20 years ago.

    Training now pushes high level blue collar jobs like advanced manufacturing. IT is supported, of course, but experience shows that those jobs have been commoditized and replaceable. Even more so as cloud computing makes some IT workers unneeded because their tasks can be outplaced piecemeal.

    As the Richmond’s Shockoe Bottom and Manchester undergoing some kind of boom — maybe the author might actually drive there. I am in Manchester at least once a week and aside from a few new apartment buildings, I haven’t seen any boom.

    What’s more — the big new jobs-creating companies are NOT in the RIchmond center. They are at Amazon in CHesterfield and will be at the Shandong-Tranlin paper mill (2,000 also in Chesterfield) and at Cap ONe, which is way out in Henrico.

    Can you name me one, new firm that employees more than a couple hundred people downtown?

    • Yes, the data shows that between 2007 and 2011, Richmond’s periphery was more resilient than its downtown. I’m just speculating that the trend might have tipped back in favor of downtown in the past four years. OK, Amazon.com created a bunch of new jobs, and that Chinese paper plant will, too. As for Capital One, is it creating *new* jobs, or are you referring to jobs that have been out in West Creek for a long time? My sense is that they fire, they hire, and the numbers have been fluctuating around the same level a long time. Otherwise, I don’t see a lot of vitality in the periphery.

      As for jobs downtown, a lot of them may be invisible in the sense that they come from smaller enterprises that don’t leave a big footprint. There is no question that a lot of people have moved back downtown to live, or that the cultural-lifestyle scene is more vibrant than ever. I don’t know — we’ll just have to see what the numbers say.

  3. Amazon and Shandong will have 4,000 to 5,000 jobs in the ‘burbs. Does downtown have any job growth like this? The idea that “they may be invisible” suggests you have no data but if you had, say 4,000 new jobs downtown, I think we’d have heard about it.By saying the alleged jobs may be “invisible” undermines your point. The jobs are there are not there.

    • Peter, you are making multiple conceptual errors here.

      (1) Yes, Amazon.com and Shandong will create lots of jobs in the burbs. But we need to look at *net* job creation. What’s happening to other businesses in the periphery? Are other peripheral businesses expanding or contracting? You can’t just cherry pick the two biggest expansions and say that is illustrative of the broader trend.

      (2) You’re looking at absolute numbers. The report is looking at percentages. There are lots more jobs in the periphery than there are in the central city, so the numbers, negative or positive, will be bigger. The point of the report, and my post, is to look at the percentage change. It will take many years of higher-percentage growth for center cities to be creating as many jobs as the periphery in absolute numbers. But after decades of a *shrinking* share of the job market, it is a big deal if the center city starts *gaining* share.

      (3) I’m not saying that downtown Richmond has surpassed the burbs in terms of percentage increase, much less absolute numbers, I’m just pointing to the possibility that it has rebounded strongly since 2011. I’m waiting to see the data. Sounds like you don’t need no stinkin’ data.

  4. Smartie pants,

    I checked Va. Employment Commission. From Mach 2013 to March 2014, Chesterfield had a 2 percent increase in jobs; Henrico –0.9 percent; and Richmond, 0.7 percent.

    These are percentages, Boss.

  5. On the day that Leonard Nimoy dies I fell compelled to inject some logic here.

    Virginia’s cities are not cities. Arlington County has a much, much higher population density than the City of Richmond (3,400 per sq mi vs 8,300 per sq mi). Hampton Roads is not a city nor a county. More of a concept I guess. What is the “city center” of Hampton Roads? And what are the “cities” in Hampton Roads? The “city” of Virginia Beach? C’mon. 902 people per sq mi? That’s a city? Prince William County has 1,200+ per sq mi.

    Your theory that youngsters are looking for high density urban areas doesn’t work in Virginia. If the youngsters want city style density they should move to the County of Arlington.

    Virginia is The Island of Misfit Toys. No normal analysis can be applied here.

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