In the doldrums

Back in the 2000s, Phoenix was always at or near the top of the Milken Institute's list of best-performing cities. The local-yokel boosters made much of this. In reality, the metric was based on job growth and Phoenix looked pretty good, powered by the housing boom.

What a difference does the housing crash, Great Recession, and better measurements make. A few years ago, Milken retooled its survey. Now Milken uses a wide variety of yardsticks to present a more accurate and comprehensive look at how metropolitan areas are doing. In the new 2016 Best Performing Cities, metro Phoenix comes in at 46th.

Going deeper, Phoenix's five-year job growth ranked 40th; five-year wage and salary growth 63rd; short-term growth 76th; five-year high-tech GDP growth 56th (one-year was 110th); high-tech location quotient 56th, and the number of highly concentrated tech industries 63rd. It's not a pretty picture, especially when we're talking about the sixth-largest city and 13th most populous metropolitan area

At the top were Silicon Valley, Provo-Orem, Utah, Austin, San Francisco and Dallas. Among other Western peers was Seattle No. 10, Denver No. 13, and Portland No. 14. Blue "socialist" California won six of the top 25 spots among major metros. By comparison, Tucson was No. 155. Among small metros, Prescott was No. 33, Flagstaff 81, and Yuma 146. Bend, Ore., led the small metros.

Milken's emphasis on high-tech is important because this has been the sweet spot of the long recovery from the Great Recession. Cities at the headwaters of talent, innovation, and tech headquarters have done very well. For example, the hottest residential real-estate market is not in the Sun Belt but Seattle.

Another area of high performance in today's economy has been the "back to the city" phenomenon, with companies moving to vibrant downtowns to attract talented millennials and others who want a car-free lifestyle and the choices of a dense, lively city. While downtown Phoenix has made more progress, it has largely missed this gravy train. Most economic activity, and most of it low-end, is in the suburbs.

Phoenix continues to play its old game — largely without the Cold War tech industries that helped diversify the economy in the decades after World War II. Add population, build tract houses, put up spec commercial and industrial space, sell sunshine. It's not a path to prosperity or success for such a large metropolitan area. Particularly one sitting at ground zero for climate change. Even the occasional headline about "another" Silicon Valley company setting up shop "in the Valley" reveals a back-office operation seeking cheap, low-skilled workers.

So much for the performance of low-tax, little-regulation Duceynomics.

Even by Phoenix-centered metrics, the bird falls short. In the latest Emerging Trends in Real Estate, another gold-standard survey, the top cities are Austin, Dallas, Portland, Seattle, and Los Angeles. Places with, you know, real economies to support real estate. Phoenix comes in a middling 21st (Tucson 62nd).

The devastation of the housing crash was so severe that it took until 2015 for Phoenix to recover to its pre-recession peak in jobs. But there's a big difference: Job growth has been much more restrained than in previous expansions. Only about 20,000 worked in construction as of October, compared with a peak of 33,800 in the go-go years of the 2000s.

This is the recovery. All Phoenix got was a lousy T-shirt.

 

 

Comments

[Poppa Zao]

Do you still follow Kunstler? He figured the Southwest would endure great hardship in the Long Emergency.

[wkg in bham`]

I’m really in no position to offer opinions on the economic performance of Phoenix – I’ve never been there. I am surprised that it is as good as the numbers indicate. Intuition would surmise that Phoenix should be a lot more like El Paso or Albuquerque than Seattle or San Francisco. In fact that five million people live there (on purpose) is mystifying.

In ranking the economic desirability of metro areas I prefer the cost-adjusted wage scale to the raw income numbers. Using this metric the top twenty metros (greater than one million population) are:

Rank
(of
106) Metro Area Adjusted Pay
1 San Jose, CA $68,855
2 Houston, TX $62,305
3 Durham, NC $59,526
4 Bdgpt-Stmfd, CT $58,704
5 Hartford, CT $57,050
6 Boston, MA-NH $56,979
7 Atlanta, GA $56,647
8 Detroit, MI $56,421
9 Dallas-FW, TX $55,529
10 Seattle, WA $55,123
11 Charlo, NC-SC $55,122
12 Washington $54,525
13 Cincinnati, $54,265
14 Birmingham, AL $54,256
15 Pittsburgh, PA $54,168
16 Cleveland, OH $54,059
17 Minneapolis-SP $53,668
18 Denver, CO $53,526
19 St. Louis,, $53,519
20 Nashville, TN $53,144

Note that most of the top twenty are slow growing. It’s hard to maintain high incomes and high population growth. Most of the new arrivals are poor – even those who are highly credentialed.

IMO tech is over weighted in the Milken index.

[wkg in bham`]

FYI other Western metros:
28 San Francisco, CA $51
42 Phoenix, AZ $49,403
43 Sacramento, CA $49,323
44 Portland, OR-WA $49
62 Salt Lake City, UT $47
74 Colorado Springs, CO $45,
80 Las Vegas, NV $44,265
81 Spokane, WA $43,770
82 Albuquerque, NM $43,486
83 Tucson, AZ $43,484
84 Bakersfield, CA $43,464
85 Boise, ID $43,
89 San Diego, CA $42,
91 Modesto, CA $42,
94 Stockton, CA $40,512
95 Provo, UT $40,473
97 Los Angeles, CA $40,432
98 Fresno, CA $40,226
99 El Paso, TX $40,074
100 Oxnard, CA $40,049
101 Ogden, UT $39,966
102 Riverside-San Bern, CA $38,598
105 Santa Rosa, CA $35,370

[wkg in bham`]

Details can be found at

http://www.newgeography.com/content/005437-the-cities-where-your-salary-will-stretch-the-furthest-2016

[Rogue Columnist]

New Geography is a brainchild of pro-sprawl apologists like Joel Kotkin. Caveat lector. Man, the comments section is going to be tiresome if it's only the ones who I don't even understand why they read Rogue.

P.s. El Paso isn't the nation's sixth largest city with big carrying costs and competitive stakes.

[DavidA]

I guess this is what happens when you have bad leadership at the state level. I cannot begin to fathom what is going to happen at the national level with that Trumpster clown car arriving in Washington. God (or whatever) help us all.

The best I can muster about Governor Ducey is that he is no Arpaio or "Sheriff Underpants" Babeu or that former blonde Republican governor whose face has seen better days. Unfortunately, the current guy keeps making blunders like underfunding our children's public education, which is making it harder for people who value education (like me) to want to stay here. What is Ducey thinking? And, along a similar vein, what are these other Republican governors like Brownback in Kansas thinking? Are they all too blinded by ideology to see that, sometimes, their ideas just plain suck?

For now, I guess I'll just keep renting nice places until it's time to move, probably further West since that's where a real biotech sector exists. :(

[Bradley Dranka]

Basically, when a metro area like Phoenix comes to depend on "transplants" to drive its growth, there is no real incentive or desire to "homegrow" talent.

This shows up in the chronic and intentional underfunding of schools. Because the powerholders doggedly hold onto the idea that Arizona is paradise, they feel the transplants will always be there to supply businesses' talent requirements.

This is akin to a baseball team always relying on trades to keep itself competitive. The team never develops a "farm system."

It is likely that, in moving as far to the right as possible, Arizona's powerholders believe that ultra-conservatives will continue to flock to the state to avoid being around lefties, socialists, and "communists."

I couldn't stand the conservatives self-serving and avaricious greed (for wealth, power, social control, etc.), so I moved out.

[Bradley Dranka]

As a coda to the overbearing and suffocating far-right presence in Arizona, when I factored in the conservatives hyped-up "religiousness,"
the hypocrisy was overwhelming.

When I asked myself if Jesus would really act like or condone the behaviors I witnessed in Arizona, the answer was crystal clear to me.

And because I believe in God, I had to get away from the mass heresy abundant in Arizona.

[AWinter]

Re: carrying costs. Solution: a public firesale aka private equity scam.

http://www.nytimes.com/2016/12/24/business/dealbook/private-equity-water.html?_r=0

[blaxabbath]

I like Bradley Dranka's comment comparing AZ to a baseball team without a farm system. We look to transplants and immigrants to provide the supply and demand in our economy and long time Phoenicians, I guess, are making their livings on the vig.

I don't want to go into the rabbit hole of debating how the stimulus/recovery was handled BUT -- the entire country has gone back to what they knew before 2008. Arizona is still in construction, mining (when prices allow it), and service. Silicon Valley is still Silicon Valley. The Rust Belt is still the Rust Belt. It's a huge undertaking, regardless of the economy, to change the economic focus of your community unless you are an early adapter (see: Detroit - auto; Silicon Valley - tech; Houston - energy; AZ - Spring Training). Look at Tucson - they have Raytheon, Davis-Monthan AFB, and the U of A. That is their economy. Aerospace outfits and tech outfits in Tucson choose Tucson because they are (or want to be) part of the Raytheon supply chain. If, say, Reno wanted to become an aerospace hub then they'd have to do so by building or importing a Raytheon (or Boeing, etc). That means big handouts to get them to move -- versus big handouts by their current locales to get them to stay.

This is the reason for all the investment in university towns. Like picking up a David Johnson-style stud RB in the 3rd round, generating a tech hub or "_____ Capital of America" from your local research institution is a bargain compared to looking for Bradley's free agents from Silicon Valley or Seattle (which, as Rogue mentioned, typically don't pan out in the valley to be anything more than a support hub anyways).

Phoenix is, effectively, an early innovator on solar because of our climate and space. Unfortunately, especially in the Valley, solar installation lags terribly. Why? Cronyism. APS packing the corporation commission w/anti-solar reps. If we'd get out of our own way here and stop putting publicly-protected monopolies ahead of our own interests, we'd see a solar boom.

I don't fault Arizona for construction and service growth. We have a lot space. Enough for people who want to live in the big suburbs with strip malls to do so and for people who want to live in a population-dense downtown or Tempe to do so. Prescott is 90 mins out of town for the mountain folk and Maricopa is 35 mins from Phoenix for the real desert dwellers. I do fault Arizona for not capitalizing on solar -- but that's not unique to Arizona. That's modern American government where C.R.E.A.M.

[Bob Mungovan]

It seems the only tech companies coming to AZ are failures coming out of California due to regulation. The prominent examples are the scam known as Theranos and Uber's dangerous self-driving cars. Gov. Ducey claims these as successes, but they don't pay off here.

[Cal Lash]

AZ has been the king of scams since the arrival of white Europeans.

[Ruben Perez]

As one of the ones who shouldn't be here, I thank you for broadening my knowledge. It was the natural progression for me to follow you from the Republic to here. Thanks to the blog I am able to call you, Cal, Michael and Jerry my friends.

I'm guessing civilization has a better chance of surviving around a table filled with coffee mugs versus a conversation on a blog. Just my opinion.

[Jerry McKenzie]

Coffee sounds good! Tastes even better with good conversation and friends.

[Cal Lash]

I'm up for coffee. But we got to dig Ruben out of that White Mountain snowman. Maybe by melting it with the heat of blue hazy weed burning spligs.

Ruben. To quote Robert Redford, "you come here like everyone else. To get sick."
Except me I come har to get ed ju cated.
So to escape the Doldrums maybe we could do coffee in Mesa, near where the light rail stops. We built it U sons of a guns.

To Phoenix citizens who did a good thing by Denying The Donald a Trump tower.

[B.Franklin]

Many, many years ago there was a local talk radio guy named John Sage. I recall him saying that Phoenix was a place that "glorified bankers and vilified teachers."

Nothing much has changed.

Until it does, we can expect to be governed by the Duceys, McCains, Flakes, Gosars, and Franks of the world.

People of limited vision cannot create a vital, modern economy. It is well beyond their capabilities.

[Bradley Dranka]

B.Franklin:

People who see only their side and agenda as relevant by subtraction are predisposed to a limited visual horizon. The conservatives, having vilified anything and everything even remotely centrist or (heaven forbid) liberal, are suffocated by their own orthodoxy. It is the thought process becoming inbred because new ways of thinking are frowned upon.

Stagnation results.

[Bradley Dranka]

With regard to "growth," I have concluded the Republicans in Arizona want only companies and growth that shares their ideology of far-right, reactionary conservatism.

To put it bluntly, the Republicans prefer ideological "purity" over growth. This explains the continuing political shift to the far right field corner (to use a baseball term).

I believe the Republicans' calculation is that most of the people who move to Arizona will espouse their conservative politics above any and all other considerations--including their pocketbooks.

Whether they continue to come when the drought deepens remains to be seen.

[Cal Lash]

2017 "Lights Out"?

[Sanjeev Ramchandra]

Restructure the Arizona University System to provide greater accessibility, affordability, and accountability to a public university education for many more Arizonans:

http://PSUandAzTech.blogspot.com