One of the past shining lights at the AZ Republic paper was Jon Talton. He left a few years ago for Seattle and writes a blog: Rogue Columnist where he turns (more than occasionally), a skeptical eye toward Arizona and Phoenix in particular. A recent article (24 Apr 2009) about the Phoenix real estate boom specifically and job growth in general, outlined troubles in urban planning for the Valley of the Sun.



How’d that boom work out for you? – Jon Talton

The data are in and most Phoenicians have to show for the Great Real Estate Boom…not much. The federal Bureau of Economic Analysis this week released its comprehensive survey of per-capita personal income for metro areas and counties in 2007. It’s the gold standard yardstick for measuring how the average person was actually doing after the Bush “boom” and as the nation prepared to slide into recession.

In metro Phoenix, per-capita personal income totaled $35,185, an increase of 1 percent from 2006 vs. the national average of 4.9 percent. From 1997 to 2007, income growth was 3.9 percent, vs. 4.3 percent nationally. More context: Phoenix’s 2007 income was only 91 percent of the national average. Although Phoenix is the nation’s 13th most populous metro area, it ranks 134th among metros in per-capita personal income. In 1997, it ranked 126th. This should be astonishing, if any one takes note.

Let’s drill down deeper. Phoenix doesn’t compete for talent and capital against the national average that includes Mississippi and Alabama. It competes against other big cities (here and abroad), whether it wants to or not. How did its competitors do?

–Seattle: $49,401, 128 percent of the national average, up 7.3 percent from 2006, and 5 percent over 10 years.

–Denver: $46,682, 121 percent of the national average, up 3.6 percent from 2006, and 4.6 percent over 10 years.

–San Diego: $44,430, 115 percent of the national average, up 4.0 percent from 2006, and 5.4 percent over 10 years. (And this in notoriously poor paying, “sunshine dollars” SD!)

–Portland: $38,842, 101 percent of the national average, up 4.5 percent from 2006, and 3.4 percent over the decade (the 2001 tech bush was especially hard on the Silicon Forest).

Now I know if this information is even reported in Phoenix, the “Goldwater” Institute and/or its sock puppet on the Republic opinion page will come out with some waterboarded stats to say “not so!” (A favorite trick back in the boom years was to use quarterly income growth percentages, distorted by heavy in-migration and a low baseline, as a sign that “everything’s fine” — even though every year per-capita income lagged). But these data are reality and they convey what ought to be sobering lessons for Phoenix.

First, population growth doesn’t translate into higher living standards, especially for the people already living in a place. The better performing places saw some population increases, but where they really grew was in such areas as attracting top talent, launching cutting-edge companies, luring venture capital, creating high-wage jobs, looking outward to the global economy, etc. All those are areas Phoenix ignored. It measured population growth and housing starts. Yet it’s per-capita income that economists agree is the best measure of how people are doing. Tragically, Phoenix and Arizona did much better in the 1960s and 1970s, when the economy was more diverse. That started to change in the ’80s.

Second, Phoenix couldn’t create broad prosperity in the biggest boom in history that played to its much-touted, one-and-only economic strength: real estate. That’s not to say that the elite of developers, lawyers, land bankers, etc. didn’t make out. But the general limited, low-wage economy remained — and most people failed to attain incomes or income growth even at the national average. Now they’re really screwed, by half of their 401(k)s looted — if they have them — and foreclosures on those houses they dreamed of flipping.

The great god Real Estate Industrial Complex turns out to be a rich old guy behind the curtain in north Snottsdale, pulling the levers on a failed machine.

Third, the most disturbing report nobody in Phoenix power read this week showed that Americans were less mobile last year than at any time since 1962, when the nation had 120 million fewer people. This will have immediate effects on the Phoenix economy, where every business plan is geared to huge in-migration. But the longer-term consequences will be more profound. The old system is not coming back, for reasons we often discuss on this blog. Yet Phoenix has nothing to replace the endless building of crapola subdivisions. Too bad the Meds and Eds strategy was tossed aside, and now the Kooks are totally in charge. Bottom line: Buckeye’s not going to have 1 million people — and if it did, you’d still be lagging behind. Metro Phoenix is not competitive and not ready for the reset of the future.

Now the lurkers and trolls who don’t have the guts or ability to post non-obscene counter-arguments on Rogue are thinking: It’s all the fault of the Mexicans. If this is true, it does not give absolution. It means that metro Phoenix has such a gigantic underclass that it is pulling down the otherwise stellar performance of all the Anglos. And that underclass is, at best, a huge waste of human capital — and at worst the brew for a future of lethal instability in the Appalachia of the Southwest. And any sane region would react with vigor to turn this underclass into an educated, talent-activated mainstream population.

But it’s not “all the fault of the Mexicans.” Years of digging into the real data and seeing life on the ground make it clear to me that the economic problem is color blind. And it’s not going away.

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