Cities important for local economy’s future

city-sqThe emerging focus of the economic future of the Hudson Valley seems particularly to involve the role of the region’s cities and town centers. We all know that the past decade has seen a continued drift of both population and employment to America’s largest cities. New York City now has the largest population in its history, and its workforce has grown at a far higher rate than its population. Look at all the new construction. The city is booming.

It’s not just American cities that have enlarged their share of total national population. Cities everywhere have. A widely distributed statistic tells us that for the first time in human history a majority of the total world population now lives in cities.

The Hudson Valley is a region with numerous small cities to increasing degrees in orbit around the nation’s largest city. What will their economic futures be? What can the Hudson Valley’s different downtowns contribute to the region’s central core?

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The first ingredient to answering these questions consists of a reality check. What do policymakers think is happening on the ground? The answer comes from a speech given last Friday in Bridgeport, Connecticut last Friday morning by New York Federal Reserve president William C. Dudley. Dudley’s message that the strength of New York City’s economy “should be of significant help to Fairfield County” also applies to the Hudson Valley.

The second ingredient is how the planners think what’s happening is likely to play out over time in our part of the broader region. On that front, Regional Plan Association (RPA) is continuing with its detailed examination of the capacities and the infrastructure of the New York metropolitan region’s communities, particularly its varied downtowns. What is RPA coming up with?

The final ingredient is the theoretical economic underpinning: why what’s happening is happening. Academic economists Chang-Tai Hsieh of the University of Chicago and Enrico Moretti of Berkeley last year wrote a fascinating paper claiming that three of the nation’s cities with the strongest economies, including New York City, were contributing less to the nation’s growth than would have been expected. I think that the conclusion was a significant surprise. What might it mean?

 

“Why is New York City seeing so much stronger job growth than Fairfield County?” local Federal Reserve CEO Dudley asked. It wasn’t so long ago that Stamford was attracting financial-sector jobs out of Manhattan. Now financial and other large employers are reducing their Connecticut presence.

Dudley answered his own rhetorical question. New York City is adding jobs in technology, construction, retailing and advertising, he said, while Fairfield is not. He could’ve added tourism, health, education and the creative arts to the list of New York City job-gaining industries.

Fairfield County isn’t the only place in the metro region to see a sluggish recovery, Dudley said. “Notably, both northern New Jersey and the mid-Hudson Valley have yet to see employment return to their pre-recession levels.”

Dudley did not predict the gradual blotting out of smaller downtowns by the overwhelming gravitational force of the Big Apple, though. The suburbanization trend, “the steady and widespread migration from cities to suburbs,” seems to have given way to its opposite, again in Dudley’s words, the “gradual but broad-based shift of preferences to urban living, especially for younger generations.” There are signs, he continued cautiously, that “cities, especially major cities, have been gaining relative to their suburbs.” Assets like good transportation links and high population densities can accelerate this shift in preferences.

 

That’s where RPA comes in. In preparing its Fourth Regional Plan for the New York metropolitan area, the influential organization last year held roundtables on two subjects, the intersection of which is important to any region pondering its own likely evolution: the future of work and the future of downtowns.

“Some employees connect to work and workplaces in novel ways,” said the RPA overview of the work end of things, “while spaces to work, love and play are being joined, reconfigured and required to meet the needs of a changing economy and workforce.” Long known as a fierce opponent of suburban sprawl (“spread city”), RPA reasons that downtowns and other concentrations of infrastructure in the New York metro area will continue to play a vital role “because both the nature of work is changing and the region has settled into a pattern of distributed growth that is unlikely to be reversed.”

The cost of housing is increasing everywhere, but more in the RPA region than most other places. According to RPA, 45 percent of young New Yorkers who want to move prefer an urban area to a suburban one.

RPA categorizes its “downtowns” mostly by density: regional centers (like Newark), large downtowns (like White Plains), mid-size downtowns (Oyster Bay), small downtowns (New Paltz), and finally corridor downtowns (Route 7, Connecticut). All these clusterings provide economic opportunities, some enjoying greater success than others.

Within the RPA ambit, it might be useful to consider individual downtowns not only as economically balanced communities in their own right but the way guild towns were perceived in medieval times — that is, as specialized parts of a larger universe retaining their own unique character within a single interconnected marketplace. Think of the possibilities: New Paltz could specialize as a college town and engineering lab, say, Kingston as a tech and foodie center, Woodstock as an arts and music colony, Saugerties as a manufacturing hub and recreation site. And so on.

 

Due to higher population and especially higher rates of inbound commutation, New York City added about a million people to its labor force in the past 21 years (from 3,258,000 in February 1996 to 4,251,000 in February 2016). According to “Why do cities grow: Local growth and aggregate growth?” by Chang-Tai Hsieh and Enrico Moretti, three cities with the strongest rate of growth of gross domestic product, New York City, San Francisco and San Jose, contributed far less to aggregate growth than would have been expected. Why?

In economists’ language, the reason was because “A main impediment to a more efficient spatial allocation of labor are housing supply constraints.” Translated into English, that means that housing costs were so high that workers either had to commute or pay rents or mortgages sufficiently onerous significantly to cancel out their higher wages.

“Removing constraint to housing supply in cities like San Francisco and New York would allow more workers to move there and take advantage of their higher productivity,” the authors write. Lowering land-use regulation would increase output, and so would increasing housing supply by other methods.

Of course, these remedies are unlikely to happen. Instead, New York City has had to depend primarily on commutation to meet its labor needs. The census statistics show an increasing number of commuters to New York City from the upper Hudson Valley, where a generation ago more workers worked in the counties in which they lived. Now a greater number commute to work outside their home county.

Another possibility exists. What if the work rather than the workers commuted? That’s the meaning of “some employees connecting to work and workplaces in novel ways,” in RPA’s phrase.

The phrase “reverse commuters” is used to describe people living in the city but working outside it. What of the people who live and work outside the city but whose work is obtained in the city? Or the people who go in one or two days a week. Are they “reverse workers”?

Talk with the young people from New York City who are considering a move up to the Hudson Valley. Housing is very expensive in Gotham, they will tell you, and you don’t get much for your money. And unless you have a lot of money it’s no place to raise a family.

Though Gotham continues to be an exciting place with lots of attractions, the slower pace and more attractive environment of exurbia has its virtues, too. People always seem to be looking for the best of both worlds.

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