The urban revival certainly isn’t slowing in New York City

Eighty-one percent of the American population is urban. Some folks have complained that a census definition lumps together both urban and suburban neighborhoods. They particularly want to separate the two now that, after five years of faster inner-city growth, suburban neighborhoods are again growing slightly faster than core cities. They want to know more about what’s happening to the urban revival transforming the American economic landscape in the past few years. Is it running out of steam?

“Researchers and official data sources sometimes treat the portion of a metropolitan area outside its largest city or cities as the suburbs, but this gets many neighborhoods wrong in both directions,” Jed Kolko, chief economist at Indeed, a job search company. He has argued, “just as big cities contain neighborhoods that feel suburban, some areas outside big-city boundaries — such as Hoboken, New Jersey and West Hollywood, California — feel more urban than parts of their neighboring big cities.”

Okay, so life can be complicated.

Some big cities are more densely populated than others. Only 63 percent of the population within the city limits of unfortunate Houston described the neighborhoods in which they live as urban, according to data gathered by Kolko. He described the fast-growing Texas city as “pretty suburban,” a conclusion based on his classification of ZIP codes based on housing density and other factors. A lot more building is possible within Houston city limits as well as outside it — once the flood waters have receded.

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In 2016, the estimated population of Houston-Galveston’s combined metropolitan statistical area, consisting of eight counties, was 6.8 million, up a dramatic 14.4 percent since 2010 (highest growth rate among the nation’s top 25 metro areas). Five sparsely populated contiguous counties add another 200,000 in population to the region.

Applying his criteria to the New York metro area, Kolko describes it as “super urban.” A hundred percent of New York City residents classify their neighborhoods as urban. New York City has about 8.6 million inhabitants, but the New York-Newark-Long Island-Westchester-Rockland-Orange-Dutchess combined metropolitan statistical area had more than 20 million residents in 2015. Add another 3.5 million people living in the larger New York combined statistical area in adjacent Connecticut, New Jersey, Pennsylvania and Ulster County in New York brings the total economically interconnected population of the New York megalopolis to 23.6 million, with the inclusion of Trenton in Gotham’s orbit. (The census considers the sprawling region contiguous to the Philadelphia metro region, eighth most populous in the nation.)

New York’s metropolitan population was up three percent in the same 2010-2015 period. That three per cent added about two-thirds as many people as Houston’s gaudy 14.4 percent growth.

In the economic sense, Ulster County meets the criteria of interconnectedness to the New York metro area, as do the other mid-Hudson counties, no matter whether they’re classified as urban, suburban or rural.

Kolko’s narrative hasn’t changed. “The suburbanization of America marches on,” he wrote recently. “Population growth in big cities slowed for the fifth straight year in 2016, according to new census data, while population growth accelerated in the more sprawling counties that surround them.” The fastest growth was in lower-density suburbs, he said.

On balance, Kotko seems no fan of the urban revival of recent years. “The revival is real,” he opined, “but it has mostly been for rich, educated people in particular hyper-urban neighborhoods rather than a broad-based return to city living.”

 

Picking up the cudgel in last Friday’s opinion page in The New York Times was the estimable Richard Florida, best known for his book The Rise of the Creative Class, which argued that concentrations of technology workers, artists and other knowledge workers in urban centers created a dynamic environment that led to accelerated economic development.

Though still a supporter of cities as critical to innovation, higher incomes and successful competition, Florida recognized in his op-ed that they have led to “runaway gentrification, soaring housing prices and a widening income gap between newcomers and longtime residents.” Thus far, he conceded, these flaws haven’t been dealt with. He thinks they should be, but warned that reversing the urban revival “would be a disaster for all of us.”

In his new book, The New Urban Crisis, Florida notes that the world’s 50 largest metro areas, with seven percent of the world’s population, are generating about 40 percent of its growth. But this insightful commentator on cultural trends struggles to explain why the job creation and raised living standards he predicted haven’t yet happened for many people.

A stimulating May 2017 working paper published by the National Bureau of Economic Research contains an explanation, and it is the most cogent one I have yet seen. It doesn’t blame cities for the failure of American living standards to rise. It’s the highly concentrated economic activity within them that seem to be causing the increasing economic disequilibrium among social classes.

The authors contend that concentrated “superstar firms,” the most productive in their industries and global in their market power, need only a limited labor force to dominate their markets. Relying on their frontier status in technological diffusion, the innovative superstar firms, particularly prevalent in high-tech industries, depend much less on labor to produce added value and sales than other firms use. They also gain an additional advantage by being more skilled in the offshoring of labor-intensive components, the authors say.

This combination of factors would explain why the share of labor in the national income has fallen and continues to fall. New explanations and more research are sure to follow.

Three of the five authors of “The fall of the labor share and the rise of the superstar firms,” David Autor, Christina Patterson and John Van Reenen, are economics professors at MIT. David Dorn teaches at the University of Zurich, and Lawrence F. Katz is an economics professor at Harvard.

 

Frankly, I don’t understand all this emphasis on growth of core population as the ultimate determinant of urban success. Sure, where people live is very important. But where people pick up their paychecks is just as important, if not more so.

Reasoning that any evolving decline would show up in the form of slowing employment numbers in the New York City economy, I took a glance at this July’s state labor figures. There were 4,068,200 people employed in Gotham. That was a robust 136,000 more jobs than last July, and almost double the average annual year-on-year jobs increase since 2010 of 70,000.

For the arithmetically challenged, the number of jobs in New York City has been on average increasing by the population of the City of Kingston (23,210) once every four months. And this past year New York City jobs increased by Kingston’s population almost every two months.

Moreover, the gap since the beginning of the year between last year’s Gotham job total and this year’s seems to have been accelerating. It has increased every month but one. Would it be doing that if this particular urban economic miracle were tanking? I very much doubt it.

If the national urban economy is indeed slowing, what conclusion should be drawn from this exercise? It’s that certain cities continue to do better than others, and New York City is in a phase where it’s still doing spectacularly well. The benefits of firms clustering near each other in the biggest cities (economists use the term agglomeration; see Enrico Moretti’s “The New Geography of Jobs,” 2013) seem alive and well in the biggest and densest American city of all.

But the pessimists need not worry. No boom lasts forever.

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