Creative Class

It’s clear that the economic crisis is having uneven impacts on different types of workers and different kinds of communities. Highly educated people and highly educated places are holding up much better than others.

But among the most stable places in the current downturn are college towns.

Using data from the Bureau of Labor Statistics for March 2009, Martin Prosperity Institute researcher Patrick Adler put together the following graph which plots the unemployment rate for various states, major commercial cities, and college towns. The results speak for themselves.

The U.S. lost 563,000 jobs in April, down 100,000 or so from the 663,000 jobs lost in March. But the unemployment rate continued to rise, increasing from 8.5 percent in March to 8.9 percent last month. according to the Bureau of Labor Statistics (BLS). This brings total job loss to 5.7 million since the onset of the recession in December 2007. (Yesterday, the Wall Street Journal reported reported that unemployment was “less bad” in April as private companies cut 491,000 jobs, compared to 708,000 in March, according to data from payroll processor Automatic Data Processing and forecasting firm Macroeconomic Advisers.)

But the real unemployment rate is as high as 15.8 percent according to the BLS U6 measure which includes marginally attached and discouraged workers.

The impact of the recession continues to be extremely uneven by gender, race, class, and occupation.

Race: The unemployment rate for whites was eight percent compared to 11.3 percent for Hispanics, 15 percent for blacks, and 17.2 percent for black men.

Gender: Men continue to experience higher rates of unemployment than women – 10 percent vs. 7.6 percent (for those over 16 years of age) – due to the concentration of men in manufacturing jobs. BusinessWeek’s Michael Mandel notes that the unemployment rate among men is now “at or near the post-war high,” causing him to worry that, “The difference in the pain being absorbed by men and women is astonishing, and may have long-term social and political implications.”

Education/ Human Capital: Unemployment is even more uneven by education or human capital level. The unemployment rate for college graduates is 4.4 percent, half that for high school (only) graduates (9.3 percent), and one-third of the 14.8 percent rate facing those without a high school diploma.

Class and Occupation: And there remain huge differences in unemployment by class or occupation (PDF). The highest rates of unemployment remain concentrated in working class occupations – production workers (14.7 percent), movers and transportation workers (12.5 percent), and construction and extraction jobs (19.7 percent). For service class workers the unemployment rate is 8.7 percent. Unemployment is significantly lower for the creative class. For management and business occupations – including hard-fit financial jobs – the unemployment rate is 4.4 percent; and for professional and technical occupations, it remains less than four percent (3.6 percent).

Unemployment continued to rise in March. The unemployment rate increased from 8.1 percent to 8.5 percent, according to the Bureau of Labor Statistics (BLS). Some 663,000 Americans lost their jobs in March, and overall 5.1 million Americans have been put out of work since the onset of the recession in December 2007.

But the real unemployment rate is as high 15.6 percent according to the BLS U6 measure which includes marginally attached and discouraged workers.

The impact of the recession continues to be extremely uneven by gender, race, class, and occupation.

• Men continue to experience higher rates of unemployment than women – 8.8 percent vs. 7.0 percent – due to the concentration of men in manufacturing jobs.
• The unemployment rate for whites was was 7.9 percent compared to 11.4 percent for Hispanics and 13.4 percent for blacks, and 6.4 percent for Asians.

Unemployment is even more uneven by education or human capital level.

• The unemployment rate for college graduates is 4.3 percent, half that for high school (only) graduates (9 percent) and one third of the 13.3 percent rate facing those without a high school degree.

And there remain huge differences in unemployment by class and occupation.

• The highest rates of unemployment remain concentrated in working class occupations – production workers (14.9 percent), and transportation (12.7 percent) as well as construction and extraction jobs (22.7 percent) and farming, fishing and forestry (21.7 percent).
• For service class workers the unmeployment rate is 9.4 percent.
• Unemployment is significantly lower for the creative class. For management and business occupations – including hard fit financial jobs – the unemployment rate is 4.5 percent. For professional and scientific occupations, it remains less than 4 percent (3.9 percent).

UPDATE: This chart, from Ryan Avent, shows occupation by class/ major occupational grouping for the past three months.

Avent writes:

As the economy begins to recover, the lines for these categories are going to shrink, but they’re not going to shrink at the same rate. In particular, production occupations may see very little movement in their line at all — many of the manufaturing jobs lost during this recession (in the auto industry say) won’t be coming back. Even if construction employment improves, it will be a long time before the construction labor market is anything resembling tight … Recovery from this recession, in other words, is intimately connected to facilitation of long-term sectoral shifts in the economy. The hard part is how to facilitate those shifts.

(Graphic from the Wall Street Journal).

College town economies are among the most resilient according to the Wall Street Journal.

Of the six metropolitan areas with unemployment below 4% as of January, three of them are considered college towns. One is Morgantown. The other two are Logan, Utah, home of Utah State University, and Ames, Iowa, home of Iowa State University. Both have just 3.8% unemployment, based on Labor Department figures that are not seasonally adjusted. The pattern holds true for many other big college towns, such as Gainesville, Fla., Ann Arbor, Mich., Manhattan, Kan., and Boulder, Colo. In stark contrast, the unadjusted national unemployment rate is 8.5%

Andrew Sullivan points to Ed Glaeser’s Economix  post on the geography of unemployment and finds a common thread: “Edward Glaeser compares city to city unemployment numbers and affirms Richard Florida’s thesis.” Glaeser writes:

While the disparity in unemployment rates is enormous, it isn’t random. Some areas aren’t just miraculously better able to handle the downturn. Long-standing features of the urban landscape can explain the bulk of the variation in today’s unemployment rates.

Given the enormous gap in unemployment between skilled and unskilled workers, it isn’t surprising that skills best explain today’s metropolitan unemployment rates. The share of adults with college degrees in 2000 can, on its own, explain about one-half of the variation in the unemployment rate.Somewhat remarkably, the educational level of the metropolitan area before World War II can do almost as well.

Here’s his scatter-plot.

Source: Edward L. Glaeser, via Economix

Glaeser also finds that regional unemployment is “strongly linked to manufacturing.” Here’s his plot of the correlation between current unemployment and manufacturing’s share of the labor force in manufacturing in 1970.

Source: Edward L. Glaeser via Economix

Regional unemployment is also related to density, finding that “unemployment is lowest in those areas that are most centralized.” Sprawling places appear less resilient economically.

Source: Edward L. Glaeser via Economix

His conclusions: invest in skills and human capital; “beware industrial policies aimed at keeping America tied to heavy industry;” stop trying to breathe life back into declining regions; and encourage mobility.

While the regional diversity within the United States might prompt politicians to pursue policies that target aid to distressed regions, that seems likely to be counterproductive. America has always dealt with regional economic disparities through migration. … Today’s recession will also prompt mobility, probably toward more skilled, more centralized cities with less historical commitment to manufacturing.”

I could not agree more. Our urban policy, such that it is, is decidedly backward looking. It’s high time urban policy focus on leveraging the three key things – mobility, density, and human capital accumulation – that are real engines of prosperity.

From the New York Times Economix:

Click here for an interactive map of unemployment by county (via the New York Times).

The crisis is having uneven effects on jobs. The table below from the Bureau of Labor Statistics (via Michael Mandel) shows the change in employment for 2008. Massive losses are concentrated in what Mandel calls the “tangible sector” – production, construction, and farming and fishing. Health care and education have help up reasonably well, along with management. The intangible sector and creative sector jobs – arts, design, and entertainment; architecture and engineering; computer science and mathematics; and life and physical sciences – are starting to register losses. I’d love to know where in terms of geography these losses are concentrated. But the bigger point is that if this continues the U.S. economy may start to look like the meds-and-eds dependent economies of old rustbelt city-regions. That said, the job losses in the creative or intangible sector are in range of 3-5 percent, while tangible sector losses are in the double digits.

The new unemployment numbers in both the U.S. and Canada are legitimate cause for concern. But as BusinessWeek’s Michael Mandel notes, those job losses are concentrated in the routine-oriented, tangible economy. The intangible or creative economy continues to fare much better:

This morning’s employment report was absolutely horrible, with the unemployment rate rising to 7.6% and almost six hundred thousand jobs lost, in just one month.

But in the midst of the gloom, it’s essential to point out that the damage is still concentrated in the ‘tangible sector’—that is, those industries which either produce,move, or distribute physical goods. In January the percentage of job losses coming from the tangible sector fall somewhere in the range of 75%-85%. (The exact number depends on how many of the temporary help layoffs are in manufacturing, construction, and retail—there’s no way to tell).

Meanwhile, the jobs losses in the intangible sector are much more moderate. Education and healthcare are still growing, and other intangible-producing industries have relatively small losses.

The housing bubble essentially propped up the tangible sector, badly distorting the “real economy” and biasing investment toward it and away from the more rapidly growing and more stable intangible sector. We’ll only begin to get toward recovery when we stop unnecessarily propping up the tangible sector and allow housing prices to fall to more realistic levels, essentially freeing up demand for the goods and services of the still growing intangible sector.

I’ve been examining the Statistics Canada employment data released on Friday. And while I’m not an economist (although I have a background in economic history), some observations are troubling me in relation to the doom and gloom being peddled by the media and some top Canadian economists.

Overall, employment was down 34,000 jobs in December. (Canada’s population  is roughly 1/10 the size of the U.S., for comparison purposes). That places Canadian employment at June 2008 levels – hardly worth panicking about.

Manufacturing jobs are down in Canada, particularly in Ontario. But this trend has been happening since the 1990s. The economic downturn may just be accelerating a process that was inevitable.

Construction jobs are down, too. But this should hardly be surprising given that many residential and non-residential developers cannot obtain the credit needed to finance construction.

Elsewhere, things look okay, too. Management, professional, engineering, finance, and administrative occupations are generally showing stability if not employment increases over the past few months, and year on year. (Indeed the Martin Prosperity Institute issued an Insights report on this phenomenon in Ontario last month)

Canadian firms – so far – have not been shedding workers, generally speaking. This may be because Canada’s economic downturn did not begin until approximately late September 2008 (in contrast to the U.S. downturn that began almost a year earlier) – and the job losses are still to come.

Or, this may be because of the demographic deficit in Canada and directly related talent shortage – generations x and y are far smaller proportionally than the baby boomers (again in contrast to the U.S.).  Employers may fear that if they cut too many talented people, they’ll never be able to hire the same caliber of people – or that their competitors will quickly absorb them.

Perhaps in time the doom and gloom will become a (self?) fulfilled prophecy – in the meantime, I eagerly await your thoughts.

Although many firms in Canada are not hiring, they are not firing either – yet. This has implications for the workplace that we can discuss below and I’ll raise in subsequent posts.

(And Happy New Year!)