As millennials come of age, they often leave their hometown in the hot pursuit of a career in job friendly cities where most of today’s job growth is concentrated. Millennial migration to certain cities has become completely normalized in today’s culture.
Now, a recent study of business trends in the United States is confirming what many of us already suspected: Prosperity has become extremely concentrated in a few metro areas.
In fact, the study, called Dynamism in Retreat, points out that half of all new businesses opened from 2010-2014 opened in five metro areas: New York, Miami, Dallas, Houston, and Los Angeles. That means those metro areas alone had as many startups as the rest of the country combined.
You would think that with the rise of Silicon Valley and tech innovation that startup culture is alive and well in America today. Nevertheless, a brief look at some basic statistics suggests otherwise. In fact, the San Francisco area is notably absent from the cities where the majority of business are being born today.
Before we get into why the bulk of job growth is occurring in these five metro areas, let’s talk about how the American jobs machine is deeply broken.
America’s job problem
As a general theme, the study’s authors concluded that the “The U.S. economy has become less innovative and entrepreneurial,” and as a result, few businesses are getting off the ground in today’s world. In fact, in most metro areas (80 percent), more businesses are closing that are opening right now. Even several years after the Great Recession, new business creation is sluggish and touching historic lows.
This is really bad news for job seekers because new business creation is an engine of job growth. In the past, new businesses needed legions of workers just to get off the ground. While we’re still seeing economic growth, the study points out that most of the gains in today’s economy are going to established companies, who usually swallow up growth without expanding their payrolls.
Just how harmful is this trend to job growth? Consider that the authors concluded that “the economy would have produced 924,000 additional jobs in new companies in 2014 alone had the startup rate been as high as in 2006.” For anyone who knows anything about job growth, nearly a million extra jobs is a mammoth number that can affect the overall national unemployment rate.
Unequal prosperity: Two Americas
New York, Miami, Dallas, Houston, and Los Angeles don’t have stellar startup rates either, they’re just weathering the slump in business dynamism better than other areas. In the new economy, startups huddle around a small number of hubs where they benefit from being in close proximity doing business with other important players.
The gap between these newly minted economic hubs and everyone else is changing the fabric of American society. Metro areas that were already encountering economic malaise before the Great Recession are “suffering the most from the national slowdown.”
In fact, the number of business establishments dove in the most distressed zip codes, while the most prosperous zip codes saw massive expansions in business establishments and employment.
The study concludes that the economic recovery that’s occurred since the Great Recession has made rich areas richer, and poor areas poorer.
Takeaway: The politics of economic despair
The damning conclusion of this study is: “In essentially every measurable respect, the storied dynamism of the U.S. economy is fading.”
This slump in business formation and job creation is creating some yawning gaps in prosperity, and the effects of this new political economy is beginning to greatly affect our national politics.
As some areas in the United States continue to prosper wildly while others fall into economic despair, there’s little need to wonder why the nation is divided politically more than ever.