When Your Kid Moves Out West, She Takes the U.S. Economy With Her

The Texas State Capitol building stands beyond construction cranes at the University of Texas at Austin campus in Austin, Texas, on April 4, 2015. About 900,000 people live in the city of Austin and that number is expected to reach nearly 1.3 million by 2040, a 40 percent increase, according to city figures. More than 100 people move to the city a day, according to the city's demographer.

The Texas State Capitol building stands beyond construction cranes at the University of Texas at Austin campus in Austin, Texas, on April 4, 2015. About 900,000 people live in the city of Austin and that number is expected to reach nearly 1.3 million by 2040, a 40 percent increase, according to city figures. More than 100 people move to the city a day, according to the city's demographer.

Photographer: Matthew Busch/Bloomberg

Cranes punctuate Austin’s skyline. Startups skip Boston for Denver’s downtown, where silver boom-era warehouses are transformed into offices. In San Francisco, technology engineers revive long-blighted Market Street.

Cities in the West and Southwest are experiencing economic growth exceeding records set before the financial crisis, with young, educated workers creating housing shortages and traffic jams as they drive up wages.

“The decline in manufacturing in the East, combined with an increase in service and technology jobs, is moving the country’s economic gravity westward,” said Kenan Fikri, a researcher at Washington’s Brookings Institution. “Compared to eastern cities, those in the West don’t have the economic baggage that comes from an industrial legacy.”

The center of U.S. population is moving steadily — it’s now in Texas County, Missouri, farthest west since the U.S. Census Bureau began tracking it in 1790. The movement is accelerating as workers from 25 to 34 move that way in disproportionate numbers.

Corporations are migrating, too. In the past two decades, the number of Fortune 400 companies based in Texas grew to 50 from 15. During the same period, New York lost 50.

Nine of the 10 large metropolitan areas with the highest rates of gross domestic product growth since 2008 are in the West or Southwest, led by Portland, Oregon, at 22.8 percent, according to the U.S. Bureau of Economic Analysis. New York saw GDP growth of only 6.3 percent.

The region’s ascendancy began in the 1990s as industries such as aerospace and automotive manufacturing, computer system and software design and energy extraction multiplied, Fikri said. Trend-setters such as Apple Inc. and Google Inc. created products that reshaped life, and U.S. policy makers funded development of new drilling techniques that led to an unprecedented energy boom.

Resulting employment growth propelled metro areas west of the Mississippi to lead the U.S. in job gains since 2009, with Austin in the No. 1 spot with 20 percent employment growth, according to Bureau of Labor Statistics data. The New York metro area posted a 2.9 percent employment gain over the same period, ranking it 32nd.

The Northeast, of course, remains a bastion of economic, political and cultural power, with stock trading volume on New York exchanges more than five times that of Tokyo.

In the 2014 election cycle, about $411.5 million, or 25 percent, of campaign contributions from individuals who gave $200 or more to federal candidates, parties and political action committees came from people in New York City and Washington, according to the Washington-based Center for Responsive Politics, almost twice the $212.7 million given by San Franciscans and Angelenos.

“Boston, New York and Washington together support a $3 trillion economy with 50 million people,” said Richard Florida, a Miami-based founder of the Creative Class Group, which advises companies on location strategies. “Maybe it’s not growing as fast, but wages are extremely high.”

So-called millennials, though, overwhelmingly prefer western cities such as Houston and Denver, according to William H. Frey. a demographer at Brookings. The New York City region lost 20,369 millennials from 2010 to 2012, Census Bureau data show.

Access to such workers prompted Layer3 TV Inc., a two-year-old cable company, to choose Denver over Boston in 2014 for its headquarters. The company is working on a product that combines television, social and digital media and plans to fill 312 jobs paying an average salary of $92,083.

“The driving decision to move to any location is the people,” said Eric Kuhn, the firm’s marketing director.

Throughout the West, the boom hasn’t come without pain. It faces headwinds from the collapse of oil prices and California’s record drought. Housing prices depressed by foreclosures in the mid-2000s are rising, causing a shortage of single-family homes and driving up rents.

“Any place where you really get your economy going fast, you also begin to see this dramatic increase in housing prices,” Colorado Governor John Hickenlooper said in an interview.

Metro Denver charted the greatest one-year rise in home-resale prices in January of the 20 U.S. markets on the S&P/Case-Shiller index, with the average price up 8.4 percent from a year earlier. Christopher Gomez, a 35-year-old business-development specialist, said condos in the mid-$200,000s price range garner cash offers after mere hours on the market, leaving him unable to compete after an eight-month search.

“I don’t know how this housing market is sustainable for the young professionals that are moving here,” Gomez said.

Income inequality is rising, along with crime and resentment among groups left out of the economic surge.

In Austin, millennials have been migrating to the East Side to escape soaring housing prices downtown, displacing black families, said Bo McCarver, board chair of the Blackland Community Development Corporation, which builds low-income housing.

“We’re inundated with speculators,” McCarver said. “A lot of the new shops aren’t affordable to low-income families.”

Such challenges won’t stop the region’s ascendancy, said David Albouy, an associate professor of economics at the University of Illinois at Chicago.

“The momentum is there,” he said. “We are going to see ups and downs in this trend, but it’s going to continue on an upward trajectory.”

With assistance from Alexandre Tanzi in Washington and Wei Lu and Shin Pei in New York.

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