Dreading the Census

The 2010 Census is provoking much angst in the Salt River Valley. Arizona's 40-percent population increase of the 1990s will almost certainly not be replicated over the decade just past, and some worry that at least certain cities could actually see population declines. Such is the damage from the great recession. Such has been the preeminent importance of adding people to the economy and psyche of metro Phoenix. Not growing scientists, corporate headquarters, diverse industries, incomes, high-wage jobs, quality schools, venture capital, the arts, public transit, shade, etc. -- just adding people.

A few predictions can be made without much fear: Phoenix will not rise higher than America's No. 5 most populous city, barring a holocaust hurricane hitting Houston. Indeed, Phoenix's population may well be flat or even have fallen since mid-decade. Its poverty will rise. It will move closer to becoming a Hispanic majority city, if the Census count is thorough and honest. The metro area as a whole will have gained, but not nearly as much as it did in some of the preceding decades. De-facto segregation by ethnic group, and especially class, will grow more rigid. The demographic and social changes brought by this first crash of the Great Disruption will be felt in the 2010 Census and continue to reverberate into the new decade. Among them: Americans are moving less.

Taken together, the message of the 2010 Census to Phoenix and Arizona: You'd better find a new gig.

Remember the triumphalism back in the 2000s, when Phoenix surpassed Philadelphia to become "the nation's fifth largest city"? As a homeboy, even I couldn't suppress some pride. Yet, in one of the columns that endeared me to the booster class, I pointed out the many measures of quality, competitiveness, social health, education and civic assets nationally -- and how Phoenix was nowhere near No. 5 on these. Few wanted to hear this. Serious people in positions of serious responsibilities talked about when Phoenix would surpass Chicago in population. As for any shortcomings, they were because Phoenix was a "young city."

With some 500 square miles, Phoenix was estimated to have 1.5 million people in 2006 (and its populousness is partly a function of half a century of debatable annexation -- Philly, slightly less populous, covers 135 square miles). Houston, the fourth most populous city, comes in at 2.1 million people in 579 square miles.

Simply put, there's no way Phoenix can surpass Houston to become No. 4. Why? Houston has a real economy. It is a world city because it still holds a large segment of the corporate assets, and perhaps the majority of intellectual assets, of the oil industry. In a globe dependent on oil, that's real power. Houston also has other major corporate headquarters, a port and massive logistical centers served by railroads, extensive international connections and the nation's largest complex of petrochemical plants and refineries. That latter provides huge numbers of well-paid, often union, blue-collar jobs. Houston has some of America's finest cultural assets, backed by years of oil money. It's a major university center, as well as a top international medical hub, anchored by the dense Texas Medical Center, with its hospitals, med schools and research all together. Federal money built much of Houston, from establishing the port as a major player to making the city a magnet for scientific talent at well-funded research centers and NASA. It booms with sprawl real estate, of course -- but that's a consequence of the larger, rich and diverse economy; it's not the economy itself.

Phoenix had housing, as well as call centers, service businesses tied to population growth, tourism and the remnant of the semiconductor and aerospace industries brought in decades ago and in long decline (and these artificially inflate the value of metro GDP). It's no contest. Indeed, the city of Phoenix could begin a slow slide downward in population, as the most valuable economic assets have moved to the affluent white suburbs. Soon it could be overtaken by San Antonio at No. 5 -- ironic payback considering S.A. is led by Sheryl Sculley, who was too obviously smart and too "pushy" to have a future at the insecure ole boy hangout called City Hall (Time Wounds All Heels). But a weakening Phoenix, with its linear slums and growing poverty, will not make for a stronger metro area.

Nothing lasts. In 1950, when Phoenix was ranked 99 among the 100 most populous cities, Detroit was No. 5. And what does mere population gain a place? In 1950, when Phoenix had 106,000 people in 17 square miles, Seattle boasted 467,591 in 70 square miles (this was before the automobile had completely ruined America). In 2006, when Phoenix became No. 5, Seattle had 582,000 in 83 square miles. No serious observer would wonder which is the real big city.

I know, I know...Phoenix is a "young city." That's a misleading distraction to take up on another day.

Comments

[koreyel]

Houston Jon? Really?
Nah. Forget all those Houston shout-outs.
Consider this instead:

Arizona has got something Texas can't come near. We've got Kyl and McCain. Young fellers with their best days ahead of them. And standing behind those two are a solid phalanx of Phoenicians who look and talk and think just like them. Kyl and McCain perfectly reflect the state's demograph: agile young minds restless for the future; up-and-comers, hot and horny to make good in the global marketplace...

Jon, you've got it all backwards. Arizona is on its way up. Out of the ashes and all that. Or "bear down Zona" as they say here in Tucson...

As proof consider this wonderful moment: Last night Kyl was down south near Tucson beating the drums of the future. Here is a link to the Arizona Daily Star story (probably behind a firewall for most):

http://www.azstarnet.com/metro/325210

And here are a few quotes to help those of you behind that firewall, hear and smell the sizzle of our roaring Arizona future:

"U.S. Sen. Jon Kyl repeatedly reminded a friendly audience of about 800 that elections have consequences, arguing that the administration is passing a bad health-care bill, hasn't tackled immigration and isn't doing what it needs to fight terrorism."

"Shoring up jobs and helping the economy recover should be the president's top priority, he told a crowd made up largely of Tea Party attendees at the Church of the Nazarene. Instead, he said, the president and Congress are busy passing a health-care bill that in his 23 years in Congress, he'd 'never seen a piece of legislation that will take more of our freedom.' Not only is he convinced it would add to the national debt, raise taxes and jack up insurance premiums, he said, but it would put government between patients and their doctors."

"Several of the questions during the 75-minute meeting hinged on how to stop the health-care bill. There were questions about whether its constitutionality can be challenged in court, and whether Congress can just cinch up the purse strings and refuse to fund any new costs associated with administering it.
In a reference to Nebraska Sen. Ben Nelson's agreement to vote for the bill in exchange for securing millions in federal Medicaid money for his state, one man wondered whether that might fall into the category of bribery — and if so, whether that was an impeachable offense.
Kyl demurred, saying while it may be morally wrong, it likely isn't actionable. "The answer is not to indict him. It's to defeat him. If you don't like a bill that's full of this stuff, what are you going to do about your representatives who voted for it?" He told the crowd that all isn't lost if the bill passes. "But if it passes, folks, we've got a big problem."
There were questions about impeaching the president..."

No Jon...
Arizona is on the move.
Why I bet we'll be the first state to repeal MLK day.
The future looks bright here!
Houston ain't got nothing on us...

[Emil Pulsifer]

Ironically, Arizona's best hope of returning to its old growth model of economic development -- and thus far nothing substantive has been proposed as an alternative -- is immigration reform.

Why? Arizona has long depended on population increase to grow its economy: as new residents move here, new housing is needed for them; this in turn gives retailers new opportunities in the communities where new housing and new workers earning new wages now live. The effect on the construction and retail sectors is direct, but the effect on the rest of the economy is just as real, as a chain reaction takes place when those new wages, received by merchants, are invested in capital equipment, spent on other goods and services, and made available to the local financial community.

As for immigrants taking jobs, it didn't seem to be the case at the height of the immigration wave back in 2005, when the state unemployment rate was 4.1 percent. Don't forget: the number of jobs isn't fixed, provided that the economy is growing. It isn't a zero-sum game where winners win only at the expense of losers.

Arizona previously relied for its population growth on three broad classes: (a) retirees from the midwest and back east; (b) undocumented immigrants; (c) citizen workers seeking a new start in sunny Arizona.

Now that the Great Recession has caused a housing glut and placed many mortgages underwater, many of the citizens who might have moved here from other states cannot afford to sell their house and move. Many of the retirees have seen their wealth, whether in the form of housing values or stock values, severely eroded. The weakness of the jobs market means that many workers will cling to jobs in their home states; many of the older ones will defer retirement and work part-time to supplement their Social Security income.

That leaves the immigrants.

Another point which should be remembered: citizens had been using their stock market wealth and their housing wealth to support consumerism (by means of capital gains and home-loan lines of credit) in the face of dwindling real earnings, as income gains (adjusted for inflation) became more and more highly concentrated in the top one-percent of the population.

Now that the stock-market has tanked and housing's recovery is likely to be even slower, many of these households, with record levels of debt to pay off and no way to continue doing so through the old models, have cut back on consumer spending (which accounts for 2/3 of the economy and powerfully influences growth) in order to pay down debt which is sapping their static earnings via interest payments.

The only class of individuals likely to move to Arizona who lack this debt burden is: immigrants from Mexico and elsewhere in Latin America. Credit lines are still possible for the gainfully employed who lack loads of outstanding debt.

I suggest that individuals who braved death in the burning desert, kidnapping, beatings and extortion from coyotes, and legal trouble from the authorities, in order to work, are what might be termed "motivated"; and provided they're properly educated about credit usage (a BIG if since many native citizens aren't) they'd likely be good credit risks from that standpoint. Whether their (generally) low income would qualify them is another question.

Of course, if Arizona isn't ready to shed its prejudices, or prefers to pander to extremists with ready political followings, it deserves what it gets...

[Emil Pulsifer]

P.S. "Nothing substantial has been proposed as an alternative" by local government; there have been a number of substantive proposals, some by Mr. Talton, but the state's leadership is unlikely to act upon them, since they would all require significant investment and the funds to support this. As it now stands, legislators won't even pass a tax increase despite the worst fiscal crisis in the state's history, and a prospective deficit of $3.4 billion next year.

[Michael]

If you want to to see what is happening to Phoenix, go take a look at Metrocenter.

[Emil Pulsifer]

Hi, tried to post a comment here yesterday but couldn't because the typepad software is defective. Too many links? Something else? Who knows?

[Emil Pulsifer]

Here's one more try, but without the documenting links. (Don't blame me: blame Typepad.)

According to the Arizona Republic, Metro Phoenix's population has been flat since 2007. The high point was at the height of the housing boom in 2005, when it increased by about 200,000 (a record). A difference between 1 percent population growth and 1 percent decline "could mean a swing of $1.5 billion in sales tax revenues and billions more in business revenues".

The share of employment in real-estate and construction in Metro Phoenix reached "a whopping 12.8 percent of non-farm jobs in 2006" -- 50 percent above the national average for metro areas; while foreclosures continued to rise to levels triple the national average at the end of 2009.

Office vacancies in Arizona are at 25 percent (they were at a 12 percent low during the boom); commercial real-estate accounts for a much larger share of the average bank-loan portfolio than in the nation (and commercial real-estate is about to take a big hit); write-offs on land loans in Arizona will continue and more community banks will fail.

Investors poured as many as 20,000 additional rental homes into the market in Phoenix in 2009, "a significant blow to apartment managers and owners", who, incidentally, benefitted for years from the steady business provided by undocumented immigrants, but no longer. (Many of the new owners are absentee landlords: business license data show that more than 80 percent of Surprise landlords don't live in the city. The rental collections cannot therefore be counted on to enrich the local economy but instead may constitute an additional drain.)

Phoenix area foreclosures were up in December 2009 (the lastest figures) at 4,060 compared to November's 2,985, an increase of about 1/3. Lenders foreclosed on 41,000 homes last year, a record; and these foreclosure actions accounted for 35 (or 41) percent of all existing-home transactions. (Note: the same source said 41 percent in an article dated 12-13-09. The difference may or may not be between "Phoenix Area" and the broader Maricopa County.)

Here's a startling fact which applies nationally but also has obvious application for real-estate and construction dependent Phoenix: during the boom, residential investment peaked to make up 6.3 percent of national GDP; by the third quarter of 2009 it was down to 2.5 percent.

[eclecticdog]

I guess AZ is planning on making up all the lost tax revenue by draconian enforcement of photo-radar tickets. Glad we have so many anti-government Republicans at every level of government to protect us... oops never mind, they are the ones who put in place!

[Emil Pulsifer]

Eclecticdog, the signs are mixed on that one. Governor Brewer is determined to let the contract lapse and not renew it. At the same time, there are legislative proposals to allow process service by mail rather than in person, which would certainly expedite default rulings against those cited.

Personally, I have nothing against photo-radar, provided it functions as claimed. It frees highway patrol officers to take care of more important matters than babysitting speeders. It allows far better enforcement because cameras are there 24/7 in multiple locations. And, yes, it is a revenue source.

I still don't understand why anyone would object, unless they simply want to speed and feel that the cameras get in the way. The argument that cameras cause more rear-end collisions is specious: speeders will also slam on the brakes when they see a motorcycle cop ahead with a radar gun. Shall we eliminate all highway patrol presence in order to reduce rear-end collisions? The photo-radar tickets are also less expensive than standard speeding tickets, you don't get points on your record from them, and, unlike a standard ticket, ignoring them doesn't necessarily result in a default judgment against you by a court.