Earlier this month, the New York Times published a story, most of which could have been written by the chamber of commerce, under the headline, "Bay Area Start-Ups Find Low-Cost Outposts in Arizona."
It rubbed me the wrong way from the start, because the story is not about Show Low or Why, Kingman, or even Tucson, but metropolitan Phoenix. I will never understand why one of the most magical city names in America is banished for the amorphous and sometimes inaccurate "Arizona." Anyway, riding with that burr under my saddle, I tried to approach the article with an open mind.
Unfortunately, it had all of the weaknesses of "parachute journalism." The writer, based in the Bay Area, parachutes into a little-known burg with an angle, assembles a few anecdotes, talks to a local economic development expert, adds some data from Moody's, widens the lens a bit to make the story about a broader trend, and presto! This is not easy stuff, particularly if you're not armed with history and skepticism. The only good parachute journalist I ever personally knew was Leah Beth Ward, my colleague from the Cincinnati Enquirer and Charlotte Observer.
It's not that I don't want success for Phoenix. Far from it. I was the Arizona Republic columnist who wiped out forests and digital space writing about Michael Crow and ASU, Jeff Trent and T-Gen, and Bill Harris and Science Foundation Arizona, the efforts to elevate the economy under Gov. Janet Napolitano and Phoenix Mayors Skip Rimsza, Phil Gordon, and Greg Stanton. I rarely felt that the brightsiders had my back. It is about time to see some payoff.
The story had none of this context and lacked much more. The reporter did not even avail himself of the readily available journalism about Arizona's crippling problems. Which is too bad for those of us who want to know the real score. So Homey did some digging.
I was struck by how the story was built around tiny firms. We have no sense of their viability — most startups fail and most app designers don't make much money.
Speaking of small, around the same time I saw a story in the Phoenix Business Journal labeled, "EXCLUSIVE: Tempe lands technology division of California." This seemed to fit the thesis of the NYT story. But reading deeper, I discovered that the win is from "a back-office technology company for movies, television and commercial productions field accounting and services." A dozen employees are involved. (At least it's in downtown Tempe).
Many of the jobs mentioned in the New York Times story were back office and support positions, easy to automate or move offshore. It let GPEC's Chris Comacho say that better-paying jobs will follow, when the evidence of Phoenix wages and incomes compared with peer metros contradicts it. No mention of the perpetually weak venture capital showing or the failure of past cluster efforts.
The story conceded, "for technology companies, which hire people from all kinds of backgrounds, Arizona’s socially conservative politics can be a form of cultural baggage."
The reality is that the most coveted Bay Area tech relocations and branch operations are coming to Seattle and Portland — in June, house prices rose at twice the national rate, yet these cities are still more affordable than San Francisco or Silicon Valley. They also have what top technology talent wants: vibrant, authentic downtowns and urban neighborhoods, dense innovation districts, abundant cultural assets, and progressive values. They have what the companies want: a high concentration of talent, skills, and high levels of education. San Diego, Denver, Austin, and even Salt Lake City are also doing well in catching some of the "exodus."
Phoenix is not in this league. Cheap is not good enough. Sprawl is inefficient economically and offputting to talented millennials. Sunshine and championship golf may draw retirees but not many young software engineers. Sadly, even light rail (WBIYB) doesn't close the deal because the region is too spread out. One must own a car to reach most of the better jobs, which are in north Scottsdale and the so-called Price Corridor.
Cold War defense spending booted Phoenix's first technology economy, which became much more consequential as a proportion of the local economy than today. Being drunk on growth, as Ioanna Morfessis, first president of GPEC put it, kept the metro and state from staying focused and investing in the cluster strategy after the 1990 recession (North Carolina invested in Research Triangle Park for decades before it really took off, and had three major research universities nearby). Legacy industries faded and were not replaced, certainly not on the scale needed for such a large metropolitan area.
But let's see where Phoenix does stand.
According to federal data, employment in the broad information sector has recovered to more than 38,000. This is the best it's done since the swoon of the 2000 recession, before which it peaked at 42,600. Still, this is about 2 percent of the entire metro workforce. Professional, scientific and technical services are a larger cohort (102,200 in July) but have been growing more slowly. This second classification is also not necessarily the cream of STEM jobs.
Only 29,600 jobs were in computer and electronics manufacturing, a shocking drop from the 1998 peak of more than 56,000, and low for such a large metro whose backbone is semiconductors. In Portland, by contrast (and a smaller metro), more than 37,000 worked in this sector. Portland is also an Intel town — but much more now with the Silicon Forest startup scene and high-end Bay Area engineering operations. Aerospace manufacturing in metro Phoenix stood at 13,800, down from nearly 19,000 in 1990 (when Phoenix was much smaller).
It's impossible to tease out the high-end tech jobs from these broad categories. The number of workers in software publishing in Phoenix is so small that the St. Louis Fed doesn't even track them (it was about 54,000 in Seattle in 2015.
According to Mark Muro of the Brookings Institution (and formerly of the Morrison Institute), one promising field for Phoenix and other second- and third-tier cities is computer systems design. "The 'rich' dense metros are getting richer and denser on tech, but meanwhile more places are also seeing growth as the industry grows."
The Brookings Metropolitan Studies program recently produced an update on advanced industries. Phoenix ranked No. 54 out of the 100th largest metros. By Brookings' measures, advanced sectors employed 155,775 full-time workers, or 8.2 percent of all jobs. They supported another 127,000 indirect jobs. The average pay was $95,000. Twenty-five advanced sectors were represented. (Seattle ranked No. 10 nationally).
As far as startups, Phoenix didn't crack the top 20 metros in 2015, according to the National Venture Capital Association (and this is in line with other surveys). Peer metros Seattle, San Diego, Pittsburgh, Austin, and Denver did.
As I read the article, Phoenix still sees its biggest advantages as cheap land and inexpensive housing, rather than an emphasis on quality and understanding what makes cities successful today. Unless that changes, it will be fortunate to stay merely in the middle of the pack of 100 metro areas. Even Alaska sees "tech" as the "solution" to its economic woes from low oil prices. At least Phoenix is close to California and has ASU. But don't count on Silicon Valley refugees, or even "positive" New York Times articles, to move the needle much.