2014 10-14 portland conference - portland, or

Metropolitan Policy Programat BROOKINGS

CHARTING A NEW PATH TO GROWTH AND PROSPERITYImplications for a Blueprint for the Regional Economy

Portland, OR • October 14, 2014Metropolitan Policy Programat BROOKINGS

@BrookingsMetro@Amy_Liuw

1


-10,000,000

-5,000,000

0

5,000,000

2007 2009 2014

Post-Recession U.S. Jobs Gap Since start of recession

On the Surface, the Economy Has Recovered from the Great Recession

Source: Current Employment Statistics.

+865,000 jobs

2


-10,000,000

-5,000,000

0

5,000,000

2007 2009 2014

However, We Still Face a Growth Problem

Source: The Hamilton Project analysis of Congressional Budget Office and Current Employment Statistics data.

5.6 millionmissing jobs

Payroll Count Jobs Gap Growth-Based Jobs Gap

Post-Recession U.S. Jobs Gap Since start of recession

3


-5%

40%

1990 2000 2012

0%

10%

20%

30%

40%

0%

36%

0%

-4%

We Also Face a Wealth Problem

Change in Output Per Capita and Median Household IncomeSince 1990

Output Per Capita Median Household Income

Source: Current Population Statistics, BLS Consumer Price Index, Census Population Estimates, Moody’s Analytics.

Output per capita: +$14,589

Median income: -$2,120

4


Finally, We Face an Inclusion Problem

Source: Current Population Statistics.

Unemployment Rate by AgeRecession through 2013

23%

16%

16 to 19years old

2007 2012

6%4%

0.4%

31.4%

Top 1 Percent Bottom 99 Percent

Income Growth During Recovery2009-2012

Source: Saez and Piketty, “ The Evolution of Top Incomes in the United States,” 2013.

13%

8%

20 to 24years old

2007 2012

25 and Older2007 2012

5


Regions will be key to delivering inclusive growth and opportunity

The U.S. needs a new model of economic growth

Regional leaders must embrace new “habits” of economic development to improve prosperity

1 2

1

2

3

3

6


1 22 33

The U.S. needs a new model of economic growth1

7


CONSUMPTION

DEBTSPECULATION

DEBTDEBTCONSUMPTION

SPECULATION DEBTDEBT

CONSUMPTIONDEBT

Pre-Recession Economy

HUMAN CAPITALINNOVATION

MANUFACTURING

INFRASTRUCTURE

STEM

ADVANCED ENERGY

EXPORTS

R&DOPPORTUNITY

Next Economy

We Need New Growth Strategies

8


Globalization DemographyTechnology

At the Same Time, We Need to Adapt to Macro Forces

9


5.9%North America

53.2%China & India

Global Competition Is Fierce, with Growth Shifting Away from the United States

2050

Middle Class Consumption

Source: Homi Kharas, “The Emerging Middle Class in Developing Countries,” OECD, 2010.

US Canada Mexico

20.2%US

2013 – 2019

Share of Global Economic Growth

30.1%BIC Countries

Source: International Monetary Fund, World Economic Outlook Database, October 2014.10


$33 trillion/YEAR

McKinsey & Company:

maximum estimated global economic impact of 12 technology platforms through 2025

Technological Advances Are Rapidly Disrupting Labor Markets

Source: James Manyika and others, “Disruptive Technologies,” McKinsey & Co., 2013

Share of U.S. Jobs at Risk of Automation

2013 – 2033

47%

Source: Carl Benedikt Frey and Michael A. Osborne, “The Future of Employment,” 2013.11


The United States Is in the Midst of a Huge Demographic Shift

24.5%

minority population share of U.S. workforce by 2038

Source: Brookings/William Frey analysis of U.S. Census 2010 data.

53.7%

today’s U.S. workforce that will reach retirement age by 2030

12


Bachelor’s Degree Attainment2012

Rapid Diversification Currently Comes with Wide Educational Achievement Gaps

Source: Brookings analysis of American Community Survey data.

29.1%

Total Asian

50.5%

32.5%

18.7%13.8%

White Black Hispanic


13


TalentTrade Innovation

Leaders will invest in the drivers of growth and prosperity.

14


Trade Supports Jobs in Non-Traded Sectors

Traded-Sector Job

=Local-Serving

Jobs

Source: Ezell, Stephen and Robert Atkinson, 2012, “Fifty Ways to Leave Your Competitiveness Woes Behind,” ITIF.


15


29.9%

8.1%

Share of GDP Growth

‘09-‘13

Share of Job Growth

‘09-‘13

Global Trade Creates Jobs, Generates Income, and Supports High Wages


International Exports’ Economic Impact

Sources: Moody’s Analytics; Brookings “Export Nation”; J. Bradford Jensen, “Global Trade in Services,” Petersen Institute for International Economics, 2011; David Riker, “Do Jobs in Export Industries Still Pay More?” ITA, 2010.

17.0%

Manuf. Trade Wage

Premium

Services Trade Wage

Premium

20.0%


16


Portland


Metropolitan Policy Programat BROOKINGS Sources: Moody’s Analytics; Brookings “Export Nation”; J. Bradford Jensen, “Global Trade in Services,” Petersen

Institute for International Economics, 2011; David Riker, “Do Jobs in Export Industries Still Pay More?” ITA, 2010.

32.0%

Export Growth‘09 – ’12

Export Job Growth‘09 – ’12

14.9%


14.1%

25.9%

ExportGrowth‘09 – ’12

Exports Job Growth‘09 – ’12


17


4.4%

13.2%

24.4%

8.6%

Share of Output

Share of Jobs




Sources: Moody’s Analytics; Brookings “Export Nation”; J. Bradford Jensen, “Global Trade in Services,” Petersen Institute for International Economics, 2011; David Riker, “Do Jobs in Export Industries Still Pay More?” ITA, 2010.


Share of Output

Share of Jobs

Portland

18


Innovative Industries Drive Value Creation and Productivity Growth

60.0%

PatentsGDP

Advanced IndustriesShare of U.S. Totals

37.9%

Share of GDP Growth

’09 – ’13

14.5%

Share Job Growth

’09 – ’13

81.3%

R&D

8.8%

Jobs

17.8%

Engineers

30.3%

*Advanced Industries spend over $450 on R&D per job annually and over 20 percent of jobs are in STEM occupations. Source: Brookings Institution forthcoming.


19


Innovative Industries Drive Value Creation and Productivity Growth

Advanced IndustriesShare of U.S. Totals

*Advanced Industries spend over $450 on R&D per job annually and over 20 percent of jobs are in STEM occupations. Source: Brookings Institution forthcoming.


10.9%

39.5%

74.9%

19.3%

81.3%

60.0%

30.3%

GDPJobs Share Job Growth

’09 – ’13

Share of GDP Growth

’09 – ’13

R&DPatentsEngineers

Portland

20


$57$50

$70

$29

$74

$53

$93

$45

Talent Drives Prosperity and Fuels Innovation and Productivity Growth

High schoolor equivalent

Associatesor some college

Bachelors Graduate

Non-STEM STEM

Source: Jonathan Rothwell, “The Hidden STEM Economy,” Brookings, 2012

Median Annual Wages by Education and OccupationIn 1,000s


21


Jobs in STEM Fields Are Growing and Accessible


20%

50%

STEM Jobs as a Share of All Jobs

Share of STEM JobsRequiring 4-Year Degree


26 millionSTEM Jobs

22


Jobs in STEM Fields Are Growing and Accessible


21%

54%

STEM Jobs as a Share of All Jobs

Share of STEM JobsRequiring 4-Year Degree


201,820STEM Jobs

Portland

23


Infrastructure and Governance Enable Economic Growth and Prosperity

Infrastructure Governance

24

Infrastructure Should Enable Economic and Social Outcomes

Trade Accessibility Connectivity

25


Governance

Infrastructure

TalentInnovation

Trade

ProsperityEnablers

Together These Key Drivers Create Opportunity, Productivity, and Prosperity

Source: Brookings Institution, RW Ventures, and McKinsey and Company.26


1 21

2

33

Regions will be key to delivering inclusive growth and opportunity

27



The U.S. Economy Is Made Up of a Network of Diverse Metro Economies


28


Post-Recession Jobs Recovery by Metro AreaPre-Recession Peak to 2014Q2

RecoveredNot recovered

Denver+5.5%

Grand Junction-8.8%

Portland+1.6%

Detroit-9.0%

Cleveland-3.8%

The Economic Challenges Vary

29


Change in Employment Ratio of Working-Age Population2007 to 2013

IncreasedDecreased 0 - 3 pointsDecreased 3 or more points

Denver-1.21

Portland-2.31

Detroit+0.4

Cleveland-1.65

The Economic Challenges Vary

30



The Largest 100 Metro Areas Concentrate Our National Assets


31


75%GDP

66%population

12%land area

The Largest 100 Metro Areas Concentrate Our National Assets

32


Bachelor’sDegrees

74%

92%

PatentsPopulation

66%75%

GraduateDegrees

90%

AdvancedIndustries

*The 100 largest U.S. metropolitan areas.Source: Brookings analysis of US Census Bureau, FAA, BLS, and BEA data.

Largest Metros’ Share of U.S. Market Assets*

The Nation’s Key Economic Drivers Are Concentrated in Metro Areas

Air Freight

82%

ServicesExports

72%

33


“Something has gone terribly wrong when the biggest threat to our American economy is the American Congress.”

Senator Joe Manchin III“I am embarrassed and ashamed of Congress and the unnecessary harm that is being inflicted on our citizens and country.”

Senator Joe Manchin III

34


Cities and Metros

Feds

States

35


1 21 2 3

3 Regional leaders must embrace new “habits” of economic development to improve prosperity

36


“Without economic development, economic growth is limited.”

— Dr. Maryann Feldman Heninger Professor of Public Policy at UNC Chapel Hill

Source: Maryann Feldman and others, “Economic Development: A Definition and Model for Investment,” Working paper, 2014.37


Traditional Approaches to Local and Regional Development Are Insufficient

Starbucks Stadia Stealing Businesses


38


Local Economic Developers Need to Focus on the Real Sources of Job Growth

Source: Jed Kolko, “Business Relocation and Homegrown Jobs, 1992-2006,” Public Policy Institute of California, 2010.

56.3%job creation from startups

1.9%job creation from attraction

41.8%job creation from firm expansion

39


Dozens of Metro Areas Are Pursuing Transformative Approaches

PortlandExport Plan

Los AngelesLA 30/10

HoustonNeighborhoodCenters

New York CityApplied Sciences

Northeast OhioManufacturing

Network

DenverFasTracks

ChicagoBusiness Plan

DetroitInnovation District

40


7 Habitsof Highly Effective Regional Leaders

41

Value TradeRegion People Networks Outcomes


AssetsRegion

Habit 1: Embrace Regional Markets

20thlargest metropolitan economy in the United States

Portland:


2 states

2 satellite cities

7 counties

110 communities

42



Assets

Habit 2: Compete on Value, Not Cost

Value


43



Assets

Habit 3: Prioritize People, Not Just Profits

People


“Leaders with longer perspectives understand that companies can’t thrive

for long while their workers and their communities struggle.”

“Unless you have the right skilled people, you’re just wasting your money

on technology and equipment.”

— Michael Porter

— GE Executive

44



Assets

Habit 4: Invest in Market Assets, Do Not Just Recruit Them

Assets

15,536

23,158

Source: Brookings and research partners’ analysis of NETS data on inter-metropolitan firm relocations in a large name-withheld midwest metropolitan area.

Impact of Relocating Firms*2004 – 2009

$146,488$127,654

IN OUT IN OUTMove-related Jobs Sales Per Job

800,000 sq ftintegrated research, development, prototyping and educational facilities

$1 billionfrom State of New York

$13 billioninvested by 300+ affiliated firms

2,600 R&D jobs on siteFocus on nanotechnology “cluster” is building a base of manufacturers, suppliers and engineering facilities - including a $4.6 billion investment from Global Foundaries in Saratoga County


Albany Nano-Tech

45



Assets

Habit 5: Invest in Trade, Not Consumption

Trade

2%tradable sectors’ share of net job growth in the U.S. between 1990-2008

Michael Spence, “The Evolving Structure of the American Economy,” CFR, 2011


46



Assets

Habit 6: Build Networks Instead of “Going Alone”

Government Economy

Networks

47



Assets

Habit 7: Track Long-Term Outcomes, Not Just Short-Term Tactics

Outcomes

Track What MattersObjective: Improve economic and governance capacities to move regional economies onto a faster, more sustainable long-term growth trajectory.

Performance Metrics: • Economic Growth

• Jobs, Output, Startups• Wealth and Income

• Productivity, Output per capita, Wages, Income• Equity and Inclusion

• Labor Force Participation, Unemployment, Socio-Economic Disparities

vs. Traditional Metrics

Source: withheld.

“High performance economic development is the dedicated pursuit of any objective, no matter what the current objective may be, coupled with measured progress along the way.”

Performance Metrics: • website unique visits• conversations with companies that are relocating

or expanding• jobs announcements• investment announcements • jobs created per week

48


“Begin with the end in mind.”

— Dr. Stephen R. Covey Author, “Seven Habits of Highly Effective People”

49


ECONOMIC DEVELOPMENT IN THE NEXT ECONOMYCharting a New Path to Growth and Prosperity

Portland, OR • October 14, 2014Metropolitan Policy Programat BROOKINGS

@BrookingsMetro@Amy_Liuw

50

2014 10-14 portland conference - portland, or

Economy & Finance