Job Growth Now Faster in City Centers, Shrinking in Suburbs

Commuters at Grand Central Station, NYC / CBS Local

In a reversal of recent trends, job growth is now faster in city centers than outlying suburban areas, according to a new report from City Observatory, a Portland-based think tank. According to their analysis, from 2002 to 2007, “job decentralization” — that is, the growth of jobs in suburbs — was in full force. During that time, city centers, which are defined as the central business district and a three-mile circle around the district, saw annual growth of just 0.1 percent, with growth in outlying areas “10 times as fast.” From 2007 to 2011, that trend was reversed, writes Joe Cortright. “The 41 metropolitan areas for which we have comparable data showed a 0.5 percent per year growth in city center employment and a 0.1 percent decrease in employment in the periphery.”

Cortright says city center job growth isn’t universally higher than in the suburbs but trends are moving in that direction. “While only 7 city centers outperformed their surrounding metros in the 2002-07 period, 21 outperformed the periphery in 2007-11.” Today, there is still sprawling suburban job growth in places like Houston, Kansas City, and Las Vegas, and other metropolitan regions.

City Report / City Laboratory

The Upshot at The New York Times writes that this kind of analysis adds needed depth to job figures. While we often focus on the total number of new jobs created, “the location of jobs is just as important — including for making decisions about employment, housing and transportation policies.”

It’s also worth noting that “the vast majority of jobs are still outside city centers.” The New York Times writes that jobs have been slowly moving to the suburbs since the beginning of the 20th century. “By the 1950s, most lived in suburbs and commuted to work in cities. In the decades that followed, employers decamped to the suburbs, too. By 1996, only 16 percent of metro area jobs were within a three-mile radius of downtowns, according to the economists Edward Glaeser and Matthew Kahn.”

But a number of trends have been at work to reduce suburban job growth. First, the recession hit the suburbs harder than cities. “Industries based outside cities, like construction and manufacturing, were hit much harder than urban ones like business services. Jobs disappeared everywhere, but more rapidly outside cities.” Second, people are increasingly finding cities attractive places to live again. “People increasingly desire to live, work, shop and play in the same place, and to commute shorter distances — particularly the young and educated, who are the most coveted employees. So in many cities, both policy makers and employers have been trying to make living and working there more attractive.” Third, “cities are also better able to hold on to jobs than they were before.”

Cortright concludes: “Our analysis of the industrial composition of this data suggests that city centers are both benefiting from a continuing shift to the kinds of industries that have historically preferred more centralized locations, and are also more competitive for jobs within industries. All of these changes are masked by the disruption of the Great Recession. While some of this effect is undoubtedly tied to the economic cycle, there are a number of longer-term, structural reasons to be optimistic about city center job growth.”

For example, he writes that young, well-educated adults are increasingly moving to city centers. And there is stronger demand for living near work in city centers. City centers are growing as “centers of consumption” — places for restaurants, nightlife, and entertainment. High-paying jobs in financial and professional services, education and healthcare remain in city centers. Entrepreneurs continue to prefer city center locations. Rising gas prices have meant lower spending in suburbs, where people drive more, and perhaps fewer jobs in those areas as a result.

Still, the worry is that the city center job growth will not benefit everyone equally. As The Upshot writes, “The jobs in the heart of cities tend to be highly skilled and high-paying ones, in industries like finance and tech. Working-class jobs, like retail or construction, are more likely to be suburban. So with the recent growth of downtown jobs, the risk is that cities will continue to become havens for the wealthy and inaccessible to the middle and working classes.”

Read the full report and see a useful table that outlines each metropolitan area’s job growth.

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