The stutter-step economic rebound taking shape in the aftermath of the 2008 financial crisis is creating a patchwork-quilt pattern of employment across the country that could heighten regional economic disparities, several new reports show.
Overall job growth remains painfully slow, experts say. But areas dependent on oil and gas, military spending, high-end business services, agriculture, health care and education are doing better than average, while areas heavily dependent on manufacturing or state and local government services lag behind.
Meanwhile, many metropolitan areas in Sunbelt states like Florida, Arizona and Nevada that soared during the housing boom remain severely depressed because of underwater mortgages and foreclosures, which show few signs of abating. However, even some of these hard-hit areas are showing signs of life as their non-housing-related economies begin to recover.
This recovery is extremely slow almost everywhere,” said Howard Wial, a fellow at the Brookings Institute Metropolitan Policy Program, which will publish its quarterly report on metro areas later this week. “The areas rebounding best overall are generally places that gained government jobs, while those doing the worst are those that lost government jobs.”
A good example of an area doing better than average coming out of this recession is Texas, where nearly every major metropolitan area is experiencing better-than-average growth and a state unemployment rate of 8 percent is more than one percentage point below the national average. Soaring oil prices over the past year have given a boost to local drillers and refiners, while higher military spending amid an overall slowdown in government outlays has benefited areas like San Antonio and El Paso.
“Dallas, McAllen, Houston – they’re all on our list of 20 metro areas with the strongest economic recoveries,” said Wial. “One thing they all have in common is they have gained government jobs, although local officials there may not want to say that.” The full report from Brookings is due out Wednesday.
Other areas doing better than average include the upper Midwest centered in Minneapolis, where a recession-proof health care technology sector, food processing, and mining continue to add jobs. Unemployment in the six-state region in March was 6.7 percent, substantially below the national average and 1.5 percentage points below its peak unemployment rate of 8.2 percent in July 2009.
“The Minnesota economy is doing pretty well, up 3.2 percent in the last year compared to 2.6 percent nationally,” said Toby Madden, a regional economist at the Federal Reserve Bank of Minneapolis. “We have an educated population, a fairly stable economy and we didn’t boom as much during the housing boom so we didn’t bust as bad, either.”
But a new report released Monday by the U.S. Conference of Mayors predicted that 50 of the nation’s 363 metropolitan regions were unlikely to recreate all the jobs lost during the recent downturn until 2020. Areas like Detroit, which lost 323,400 jobs in the recession and Reno, Nevada, which lost 36,000 jobs, will take even longer to come back.
“Michigan’s unemployment rate is coming down, but it was a basket case a year ago,” said Harry Holzer, a former Labor Department top economist who is now at George Washington University. “So while its rate of improvement is probably a lot better than some areas, it has a lot further to go.”
One policy response for hard-hit areas of Michigan and Ohio with stubbornly high unemployment rates would be to figure out a way to help people relocate to areas where employment is growing more rapidly. However, that would require selling a house, in some cases, for less than the value of the loan. If nothing else, mobility has taken one of the biggest hits coming out of this recession, which is far below historic averages.
"It's time for Congress to get on with the serious business of legislating short and long-term solutions to our jobs crisis,” said Los Angeles Mayor Antonio Villaraigosa in a prepared statement accompanying the Conference report.
The nation’s mayors are pushing for a stepped up infrastructure spending program, financed in part by a new infrastructure bank. “We need to stand for a new world order in federal spending. It's time to bring our investments back home,” Villaraigosa said. “We can't be building roads and bridges in Baghdad and Kandahar, and not Baltimore and Kansas City.”
The Far West is a study in contrasts, according to Robert Valletta, a research advisor at the Federal Reserve Board of San Francisco. Silicon Valley is booming again as a new class of internet-related initial public offerings come to market, consumers resume their fascination with high-tech gadgets and businesses focus their capital investment in productivity-enhancing information technologies. Yet manufacturing-dependent Oregon still has unemployment at about 9.3 percent, down from 11 percent at the peak of the recession.
Even Las Vegas is starting to come back, although the collapse of its housing market dragged unemployment to 15 percent during the worst of the downturn. It’s now slightly above 12 percent. “We’re seeing a pick-up in the leisure and tourism and the convention business in Vegas,” said Valletta. “But they’re still struggling to get out of the huge hole that got dug during the housing bust.”
The uneven recovery will complicate next year’s political map. A recent analysis by a Republican strategist showed that among swing states, 10 states with 106 electoral votes have unemployment rates below the national average, while four states with 66 electoral votes have unemployment rates above the national average.
But what matters most is where those unemployment rates are and which directions they are moving in the months leading up to November 2012 when President Obama will face a Republican challenger sure to make the economy the number one issue in the campaign. According to the Conference of Mayors report, which used projections by IHS Global Insight, an estimated 173 metropolitan areas or less than half of the nation’s 363 metro areas by the end of 2012 will have unemployment rates above 8 percent, which is 1.1 percentage points below the current national rate and would be considered positive sign for the president’s re-election.
At the end of 2009, there were 271 metro areas with unemployment rates over 8 percent. The number of metro areas with unemployment rates over 10 percent is projected to drop to just 69 in 2012 from 141 at the end of 2009.