During this election and in fact, since the onset of the Great Recession, the nation has been fighting over two job creation philosophies. Conservatives say that we if cut taxes—or keep them low enough—the captains of industry will cause a jillion jobs to bloom. Liberals insist that government should stimulate the economy with public goods like roads and sewers, which would directly create jobs and also boost demand from consumers for goods and services.
We've done some of both; yet the unemployment rate remains stubbornly high. Some metropolitan areas, moreover, have prospered while others continue to shed jobs. There are some obvious explanations. Bismark, N.D., has become a boomtown, thanks to fracking. And cities in Florida and California saw growth crater with the bursting of the housing bubble. But in most cases we have no idea which metros are doing well nor why.
Into this fog of ignorance comes an analysis by Economic Modeling Specialists International (EMSI), a Moscow, Idaho, economics and labor market data firm, now owned by CareerBuilder.com. It uses a technique called "shift share" to figure out to what degree job growth (or shrinkage) in the 100 largest cities is attributable to the national economy and how much to local competitive factors.
Using data gathered from 90 sources, both government and private, as well as projections and estimates, says Joshua Wright, senior editor at EMSI, "we teased out what was happening beyond the national trends for the last two years."
The company's number crunchers went deep into each industry to see where a city's new jobs were popping up or disappearing, how those industries compared to national trends in them and ultimately how a particular city was outperforming (or underperforming) the nation. The analysis shows that in a sense, job growth can be local, at least somewhat independent of what happens with the tax-cut-vs.-stimulus dispute.
Top of the list
Heading the list is San Jose-Sunnyvale-Santa Clara, Calif., aka Silicon Valley, which created 35,803 jobs or 3.5 percent more than what would have occurred due to the nation's growth in the last two years. EMSI attributed San Jose's outperformance to Internet and software publishing and broadcasting. Those big-time national and international businesses in turn spurred the growth of local enterprises, warehouse clubs and supercenters and private elementary and secondary schools.
The worst performing metro in the country was Augusta, Ga. After taking into account national job growth, the metro lost 9,000 jobs in the last two years. Declines in waste treatment, employment services and other areas are what EMSI sees as contributors to its lag.
So how we doing?
The answer is—ennh. The Twin Cities outperformed the national economy but not by much. In the last two years, we added 5,256 more jobs than would be expected from national economic growth, an increment in local competitiveness of only 0.3 percent.
Where were the bright spots? Well, a table provided to MinnPost by EMSI shows that the top job growth category is a vague one that includes administrative work (routine caretaker functions: office administration, hiring and placing of personnel, document preparation and similar clerical services, solicitation, collection, security and surveillance, cleaning, and waste disposal). A big part of the category's growth has been in call-center jobs. Average annual pay: $36,640. The second locally competitive industry is health care with the most growth occurring in home health-care, which “has very low-paying jobs," says Wright.
Twin Cities metro job growth: Industries that outpaced the nation
| Industry | % Job Growth (or Decrease) in Sector | % Job Increase (or Decrease) Due to Local Competitiveness | Average Annual Salary |
|---|---|---|---|
| Administrative and Support | 17 | 7.85 | $38,603 |
| Health Care and Social Assistance | 6 | 2.22 | $52,110 |
| Finance and Insurance | 4 | 3.24 | $106,057 |
| Construction | 4 | 4 | $60,048 |
| Professional, Scientific and Technical Services | 7 | 1.35 | $88,462 |
| Manufacturing | 5 | 0.88 | $82,889 |
| Other Services (except Public Administration) | 4 | 1.64 | $27,897 |
| Information | -1 | -1.04 | $87,128 |
| Unclassified Industry* | 119 | 48.18 | $42,922 |
| Utilities | -1 | -1.9 | $135,674 |
| Agriculture, Forestry, Fishing and Hunting | -2 | -1.44 | $24,239 |
| Mining, Quarrying and Oil and Gas Extraction | -42 | -110.7 | $127,728 |
| Wholesale Trade | 2 | -0.78 | $88,183 |
| Real Estate and Rental and Leasing | -3 | -4.3 | $55,866 |
| Retail Trade | 1 | -1.1 | $31,796 |
| Transportation and Warehousing | 0 | -3.74 | $58,193 |
| Educational Services (Private) | 1 | -4.51 | $34,863 |
| Management of Companies and Enterprises | 1 | -3.94 | $136,205 |
| Accommodation and Food Services | 2 | -2.35 | $19,099 |
| Government | -3 | -1.32 | $61,983 |
| Arts Entertainment and Recreation | -11 | -14.09 | $39,171 |
| Total | 3 | 0.28 |
I suppose it's not horrible that we are growing low-paying jobs, especially since the Metropolitan Council estimates that over the next 30 years, the Twin Cities will attract about 463,000 immigrants. Those lower level jobs may give newcomers a foothold in an economy that might otherwise demand high skills and proficiency in English.
But in industries offering higher pay, only finance and insurance have shown a local competitive edge—3.4 percent over a national trend of 4 percent. In others, we have mostly held even with the rest of the nation.
Higher-paying jobs
How we foster creation of those higher-paying jobs is a question that every economic development department and every chamber of commerce in every city wants to know. Lee Munnich, a senior fellow at the Humphrey School of Public Affairs at the University of Minnesota, along with his colleagues, is in the middle of a study trying to answer that question for the Twin Cities.
Their analysis will zero in on so-called trading clusters. What are they? Briefly, clusters are groupings of companies in similar industries that have common needs for talent, technology and infrastructure. "They could be anywhere," says Munnich, "but they tend to clump together."
Think medical devices. Companies in the industry locate here because the presence of other firms—say, St. Jude Medical, Medtronic and 3M—allows them to recruit qualified people immediately. And local support services, patent attorneys, attorneys familiar with the Food and Drug Administration and so on are already in place.
"Trading" means that the cluster produces something that can be sold beyond the immediate area. "Future wealth will come from traded industries," says Munnich.
A metro that produces goods and services only for its own residents is on a treadmill going nowhere. Take Phoenix, for example. It capitalized on climate to attract new residents, and a huge portion of its economy was devoted to building houses for them and providing them with groceries, dry cleaners, health care and so on. But when the housing bubble burst, erasing thousands of jobs, Phoenix had almost nothing to fall back on.
Munnich and his team are not only looking at industry data for the past 14 years but also plan to interview trading cluster companies to try to figure out how they can become stronger. He's hoping that the study, due out in mid-2013, will answer some big questions. For example, are our schools producing graduates with the necessary skills?
Once we have some answers, local governments, chambers of commerce and industry leaders can try out different ideas that will strengthen those industry hubs and attract new trading clusters—maybe with expanded transportation and housing choices, tax policies, worker retraining and who knows what else. Eventually, cities, ours included, will lead us out of our economic trough.