5 Diverse Economies That Supported Sustainable Growth

February 19, 2019

5 Diverse Economies That Supported Sustainable Growth

February 19, 2019

Comparing job sector growth and development trends across the two most recent boom cycles (2001-2006 and 2012-2017) sheds light on why some markets were successful in turning economic weaknesses into strengths. Many of these markets now enjoy positive, resilient fundamentals for multifamily. With members of the industry feeling cautious about the economy, now is the right time to look closer at key U.S. metros that recently benefited from increasingly diverse economies.

We decided to examine five metros (Phoenix, Columbus, Jacksonville, Atlanta, and Dallas) for this exercise. What do they all have in common?

  • All 5 metros experienced a shift in hiring from one cycle to the next that favored white-collar jobs
  • Each metro underwent a noticeable expansion in key employment sectors between boom cycles
  • The 5 cities selected currently rank among the country’s top 35 most economically diverse metros

So let’s see how each metro diversified the local economy and climbed up the ranks:

1. Phoenix, Arizona

Phoenix, once saddled with an economy dependent on leisure and real estate, is now better prepared to weather downturns with a more diverse workforce. Substantial population growth, an abundance of cheap land, and increasingly business-friendly policy changes have transformed the Valley of the Sun into a preferred destination for leading financial firms, tech companies, and health care providers.

New hospitals and expanding health research played an important role in diversifying the metro’s economy. By the end of the 2012-2017 cycle, the education and healthcare sector represented 15.2% of the metro’s workforce, compared to 10.7% at the end of the 2001-2006 cycle.

Likewise, the growing presence of major tech companies, ranging from Intel to Amazon, led to Phoenix being dubbed the “Silicon Desert” and supported Arizona’s evolving status as an alternative to increasingly crowded tech clusters in California. The Phoenix metro was considerably friendlier to hiring in the information sector during the most recent boom cycle. As a result, 3,500 new jobs came online between 2012-2017 in the same sector that lost 9,700 jobs between 2001-2006.

The Story Behind The Story
Arizona State University has greatly assisted the metro’s transition to a more tech-friendly economy. The university recently shifted academic goals to focus on innovation in research and toward graduating students ready to jump into the metro’s increasingly tech and health care-based workforce. The result has been an increase in hiring during the most recent boom cycle. Unemployment improved by 350 basis points, down to 4.3%, during 2012-2017, compared to shrinking by 80 basis points from 2001-2006.

2. Columbus, Ohio

Following the last recession, city and business leaders in Columbus, Ohio recognized the need to move away from depending on insurance and government jobs, instead working to draw new types of industry into the metro.

Hiring in the education and health care industry showed the biggest improvement between boom cycles. The sector made up 11.6% of the metro’s workforce by the end of 2006 but was up to 14.9% by the end of 2017, reflecting the city’s success in making its local talent pool more appealing to health care employers.

Success in this effort was supported by The Ohio State University. In addition to increasing enrollment at the Columbus campus (up 9.1% from Fall 2010), OSU made it a priority during the most recent boom cycle to graduate students prepared to fill local, high-paying positions. A recent analysis showed that 36% of OSU students now remain in the metro after they graduate.

The Story Behind The Story
Smart city planning and major tax incentives between boom cycles facilitated the transformation of Downtown Columbus into a proper urban core, one that now attracts attention from major employers like Amazon for relocation, as well as serious interest from multifamily investors. Not surprisingly, unemployment improved rapidly during the most recent boom cycle. From 2001-2006, unemployment in Columbus actually worsened, up 90 basis points from the start of the cycle to reach 4.8%. Thanks in large part to the impacts of a more flexible economy, unemployment improved dramatically from 2012-2017, shrinking by 240 basis points to 4.1%.

3. Jacksonville, Florida

Florida’s longtime reliance on tourism, which historically drove job growth in low-paying positions, did little to protect Jacksonville from feeling the widespread impacts of the previous recession. Local officials responded by making prudent investments into the city’s urban areas and port infrastructure during the most recent boom cycle. The goal? To make the local economy as resilient and diverse as possible.

The Jacksonville Port Authority received $27.5 million in federal and state funds for improvements in 2013, as part of a statewide initiative to boost the region’s business competitiveness. The strategy has been very effective at incentivizing financial firms from across the globe to consider the benefits of operating in Jacksonville. Overall, the metro saw the financial activities sector expand by over 7,000 new jobs between 2012-2017 compared to just over 500 new jobs coming online in the metro between 2001-2006.

Ongoing expansion in health care, particularly by the Mayo Clinic, has done much to transform the metro into a more diverse economy by expanding access to high-paying jobs.  Since 2013, over $200 million dollars was invested into rebuilding the Mayo Clinic’s emergency department and expanding the hospital’s cancer and neurological facilities. Across the board, the education and health care sector represented 15.1% of the economy’s total workforce in 2017, up from 12.1% in 2006.

The Story Behind The Story
Thanks to wider access to higher-paying positions in the metro, unemployment improved considerably from 2012-2017, down 430 basis points to 4.2%. This is a major contrast to the far less diverse economy of 2001-2006. During this period, a glut of low-paying opportunities in the hospitality sector kept unemployment low at 3.5%, but unemployment only improved by 100 basis points across the entire six-year cycle.

4. Atlanta, Georgia

Atlanta’s proximity to the East Coast, the presence of Hartsfield-Jackson International Airport, and a strong leisure and hospitality industry have long made up the backbone of the metro’s economy. However, the expansion of tech companies into Midtown Atlanta’s now bustling Technology Square has been a major step toward diversifying the region’s economy for long-term success.

A steady volume of technology-oriented graduates from Georgia Tech and Emory University has enticed several relevant industries to build up their presence in the Atlanta metro. The information sector was a major beneficiary of the workforce becoming more technically skilled. The industry expanded by 16,000 jobs in 2012-2017 compared to shrinking by 21,000 jobs in the preceding boom cycle.

The metro’s shift toward a more technology-oriented economy has also helped to drive job growth in the region’s historically strong aerospace sector, supporting the industry’s transition into the next generation of high-tech aviation. During the most recent boom cycle, the trade, transportation, and utilities sector expanded by more than 70,000 jobs, more than double the job growth experienced by same industries between 2001-2006. Unemployment during the most recent boom cycle went down by 390 basis points as well, compared to the 50 basis point increase in unemployment that occurred between 2001-2006.

The Story Behind The Story
Atlanta has further diversified its economy by becoming a hot spot for television and film production, driven by the success of major film franchises produced in the area like The Avengers and Fast & Furious. Major movie studios like Atlanta Filmworks and Eagle Rock have relocated operations into the area, proof of the entertainment industry’s role in improving the metro’s economic flexibility. Strengthened by a more diverse economy and wider access to high-paying jobs, the metro’s GDP improved by 32.3% in the most recent boom cycle, compared to the 24.2% GDP growth experienced by the metro between 2001-2006.

5. Dallas-Fort Worth, Texas

While the Dallas-Fort Worth metro has long been more diversified than many of its oil-dependent neighbor in the Lone Star State, city leaders have spent much of the previous boom cycle looking to diversify the metro’s economy even further. The result has been continued growth and expansion in one of the nation’s most stable economies.

By keeping business costs low and land available and cheap, city officials have made Dallas-Fort Worth an irresistible choice for office-using employment sectors. Dozens of major employers (including Toyota and Liberty Mutual Insurance) arrived in Dallas during the previous boom cycle, searching for a more affordable lease without sacrificing access to a strong work force and top-tier housing amenities for employees.

The influx of office-using employers has played a large role in making the Dallas-Fort Worth economy even more flexible. Between 2012-2017, the professional and business services sector expanded by 103,000 new jobs, compared to the 74,000 new employees hired during the previous boom cycle. Likewise, hiring in the financial activities sector expanded by 41,000 new hires, more than twice the number of employees hired in the metro from 2001-2006.

The Story Behind The Story
The evolution of Dallas-Fort Worth into one of the nation’s leading hubs for warehouse storage, transportation, and logistics has gone a long way toward supporting the metro’s increasingly diverse economy. Near the end of the previous cycle, much of the groundwork for this evolution was laid, with millions of square feet of industrial construction underway in the area now known as the International Inland Port of Dallas.

It wasn’t until the most recent boom cycle that this vision for growth came to fruition, however. From 2001-2006, when much of this construction was underway, the trade, transportation, and utilities sector shrank by 2,700 jobs. Fast forward to 2012-2017, when a huge influx of population and office-using companies created strong demand for the metro’s logistical advantages, and trade and transportation employers added 104,000 new jobs to their payrolls.

-Remy Albillar