Tuesday, September 23, 2014

The myth of exports

There is an old fable that goes something like "exports are the key to prosperity.  America was much more prosperous and cities doing better when exports were higher."  I want to caution against such a thin reading of economic history, as it can cause embarrassing mistakes.  Take, for example, the assertion that everyone agrees that boosting exports is important and that building an export economy is more important for cities than building downtown apartments.

This fetishization of exports as a metric is pernicious because it can lead policy towards suboptimal goals.  Especially for cities.  Sometimes they are based on false assumptions as well.  For example the above links are based on the false notion that "exports include both goods and services".  This is false:

The OM-ZIP series can track export sales of states, metropolitan areas, and ZIP codes (at the three-digit level). Statistics are available for exports of merchandise only. No sub-national data currently exist on exports of services.

That's right, exports does not include services.  So high service metros like New York, San Francisco, or Los Angeles are penalized in the export section.  Metros that export manufactured goods and commodities like grains, oil, and machinery reflect well in the export section.  An oil producing port of origin like New Orleans will therefore score well, despite the relative poverty of the metro.  Especially because it is a port of origin for much of the goods that go down the Mississippi.

Generally, that person or entity is the U.S. seller, manufacturer, or order party, or the foreign entity while in the United States when purchasing or obtaining the goods for export

And yet this is the 21st century.  The success of the tech and financial industries in spurring growth in places like San Francisco and New York suggests that the information age is at hand, and that exports as a metric of economic health is not as important as it once was.  For many cities, building a downtown apartment IS more important than building up exports.

Good-bye commodities exports

Hello services

For cities like Chicago, where manufacturing exports have long waned, clinging to those remaining industries rather than fostering new 21st century industries is contraindicated.

Metro Area
1 New Orleans-Metairie-Kenner, LA 20209.1
2 Houston-Sugar Land-Baytown, TX 17778.0
3 Seattle-Tacoma-Bellevue, WA 14160.9
4 San Jose-Sunnyvale-Santa Clara, CA 14087.7
5 Salt Lake City, UT 13764.1
6 Detroit-Warren-Livonia, MI 12904.6
7 Cincinnati-Middletown, OH-KY-IN 9312.0
8 Portland-Vancouver-Hillsboro, OR-WA 8881.9
9 Memphis, TN-MS-AR 8522.5
10 Miami-Fort Lauderdale-Pompano Beach, FL 8304.9

This chart ranks things, but not per capita GDP, unemployment, purchasing power, or other relevant metrics of a metropolitan region's overall health.

Tuesday, September 2, 2014

The Downtown living era

The latest news comes from Cleveland.  Downtown development is taking off and people are flocking to the center of Cleveland, a city once derided as the "mistake on the Lake".

More people are moving downtown: Between 2000 and 2014, the city's downtown residential population increased 60% to about 13,000. Over 3,100 apartments were created over that same period, according to the Downtown Cleveland Alliance, a nonprofit that works with downtown property owners, with another 2,200 units either under construction or planned.

Detroit, despite bankruptcy and depopulation in the periphery, is seeing a replete core.

Vacant units appear to be getting snapped up quickly. As of 2012, occupancy rates for rental units in central downtown and Midtown stood at 97% and 95%, respectively.

The same old story in Milwaukee, where the downtown core is booming.

Driven by growth in neighborhoods around downtown, Milwaukee's population grew by nearly 4,000 residents in the last two years, according to figures released Thursday by the U.S. Census Bureau.

I have long covered Chicago's Loop development.

As you can see from this map the neighborhood of downtown Chicago adjacent to Grant Park increased population by over 300%. This neighborhood historically has had low population, hence the phenomenal growth. In fact much of the Loop has been sparely populated and only in the recent years has space been repurposed residential.

I hesitate to construct a single narrative, but instead will attempt to weave several.  One story is the tale of post-industrial cities repurposing the manufacturing core into residential districts.  Another story is the changing preferences for walkable environments.

This is a paradigm shift in America, where a preference for downtown living germinated and stretches its acrospire.  It happened first in New York, where Manhattan population declines reversed and eventually took hold in outer boroughs.  The Rust Belt, once the acme of withered city cores, is finding a new reservoir of growth.

Another thread to weave in the narrative is rising inequality and housing.  As inequality of income and wealth increases it does not surprise that inequality of housing concatenates.

In the Postwar era, the late 70s was a time of lower income inequality but also a time when many industrial cities experienced huge population losses.  Chicago's biggest population loss as a percentage of the whole was during the 70s when it dipped 10.7%.  The same story is true in Milwaukee, where the 1980 decennial showed a loss of 11.3%.

It is no surprise then, that demand for walkable neighborhoods has driven poverty out into the suburbs.

The number of suburban poor living in distressed neighborhoods grew by 139% since 2000, compared with a 50% jump in cities. Overall, the number of poor living in the suburbs has grown by 65% in the past 14 years—twice as much growth as in urban areas.

This is one reason why I avoid the "G" word.  I suspect that many of the economic conditions were sown decades ago when people's preferences were different.  Population and wealth moved to the suburbs.  Now population, and even greater wealth, is returning.  And so cities find themselves in a downtown development boom fueled by more money than that which built the postwar suburbs, and suburbs find themselves in a downturn as unprecedented as the mid-century decline of the American downtown.

Currently Chicago has plenty of empty real estate in and around downtown ripe for redevelopment.  The city and many of its suburbs can easily build walkable, transit oriented development that can cater to the shifting demand for more rail and less bus transit.  But eventually Chicago will exhaust its supply of this low hanging fruit of urbanism.

increasing demand for safe walkable neighborhoods is ineluctable