FILE - In this Wednesday, Oct. 11, 2017, file photo,
construction cranes fill a block across from an Amazon
building in Seattle. Seattle is among a fistful of
cities that have flourished in the 10 years since the
Great Recession officially began in December 2007, even
while most other large cities, and sizable swaths of
rural America, have managed only modest recoveries.
As the nation's economy was still
reeling from the body blow of the Great Recession,
Seattle's was about to take off.
In 2010, Amazon opened a headquarters
in the little-known South Lake Union district — and then
expanded eight-fold over the next seven years to fill 36
buildings. Everywhere you look, there are signs of a
thriving city: Building cranes looming over streets,
hotels crammed with business travelers, tony restaurants
filled with diners.
Seattle is among a fistful of cities
that have flourished in the 10 years since the Great
Recession officially began in December 2007, even while
most other large cities — and sizable swaths of rural
America — have managed only modest recoveries. Some
cities are still struggling to shed the scars of
In Las Vegas, half-finished housing
developments, relics of the housing boom, pockmark the
surrounding desert. Families there earn nearly 20
percent less, adjusted for inflation, than in 2007.
In the decade since the recession
began, the nation as a whole has staged a heartening
comeback: The unemployment rate is at a 17-year low of
4.1 percent, down from 10 percent in 2009. Employers
have added jobs for 86 straight months, a record streak.
And last year, income for a typical U.S. household,
adjusted for inflation, finally regained its 1999 peak.
Yet the rebound has been uneven. It's
failed to narrow the country's deep regional economic
disparities and in fact has worsened them, according to
data analyzed exclusively for The Associated Press. A
few cities have grown much richer, thanks to their grip
on an outsize share of lucrative tech jobs and soaring
home prices. Others have thrived because of surging oil
and gas production.
But many Southern and Midwestern
cities — from Greensboro, North Carolina, to Janesville,
Wisconsin — have yet to recover from the loss of
manufacturing jobs that have been automated out of
existence or lost to competition from China, before and
during the recession. Like others, they have fewer jobs
and lower household incomes than before the downturn.
Those disparities complicate the rosy
picture painted by most nationwide economic data. With
the nation enduring a widening wealth gap, an overall
robust U.S. economy
doesn't necessarily translate into widely shared
"There's definitely a pattern of the
coasts pulling away from the middle of the country on
income," said Alan Berube, an expert on metro U.S.
economies at the Brookings Institution. "There are a
large number of places around the country that haven't
gotten back to where they were 15 years ago, never mind
ten years ago."
That said, for all the economic might
the top-flight cities have gained in the past decade,
many city officials and business leaders have become
concerned that their success is running up against
limits. Surging home prices and rents have made housing
unaffordable for many. With cities like Seattle and San
Francisco choked with traffic, engulfed by
homeless people and requiring ever-larger incomes to
live comfortably, quality of life may be at risk.
In the Western United States,
inflation reached nearly 3 percent in October compared
with a year earlier, according to government data. By
contrast, inflation rose just 1.5 percent in the Midwest
and New England.
"It's the first time I have noticed a
persistent spread between inflation in one area and the
rest of the country," says Steve Cochrane, an economist
at Moody's Analytics who has studied regional economics
for 25 years.
In this June 16, 2016, photo, shrubs grow on empty
housing pads at the Coyote Springs golf course in the
Coyote Springs development about 50 miles northeast of
Las Vegas. Before the housing bubble burst, developers
planned to create a new community out of the desert with
thousands of homes, several golf courses and other
amenities. But the housing bubble burst, with only the
golf course completed before the project stalled.
Mindful of the financial burden on
employees, some tech companies have decided to set up
shop or expand where expenses are more manageable.
Snapchat and Hulu have put down roots on the slightly
more affordable west side of Los Angeles, joining
outposts of Google and Facebook in an area now known as
Last year, nearly as many people moved
out of Silicon Valley — defined as Santa Clara and San
Mateo counties — as moved in, according to a
report by Joint Venture Silicon Valley, a civic
group. It was the first time since 2010 that the number
of arrivals and departures have been roughly equal.
The trend isn't entirely surprising
given that commuting times in San Francisco have
lengthened by 40 minutes a week in the past decade, the
report said. The price of a typical San Francisco home
has reached an eye-watering $1.2 million, according to
Trulia, an online real estate data provider.
Housing costs, inflated by local
regulations restricting home-building, can act as a
barrier to opportunity. They make it harder for people
in poorer areas to move for better opportunities. With
fewer people able to move to places with more jobs and
higher pay, the national economy tends to suffer,
Among the nation's 100 largest metro
areas, San Francisco experienced the biggest gain in
median household income in the decade after the
recession began. Adjusted for inflation, it jumped 13.2
percent, according to data compiled by Moody's
Analytics. San Jose, which is part of Silicon Valley,
enjoyed the second-largest increase, at 12.7 percent,
followed by Austin, Texas, with 8.8 percent.
By comparison, median household income
in the 100 largest metro areas actually fell 2.7
percent, on average. And the income gap between the 10
richest and 10 poorest metro areas has widened in the
past decade, Moody's data shows.
Vesa Tormanen, Neurala
vice president of engineering, sits on a couch working
on his laptop at the company's offices, Wednesday, Dec.
13, 2017, in Boston. An artificial intelligence
development company, Neurala launched in 2013 and now
has 36 employees, including eight with PhDs.
Eight of the 10 cities with the
largest income gains are "tech hubs," with heavy
concentrations of software architects, data analysts and
cloud-computing engineers. They include Denver,
Portland, Oregon; Provo, Utah; and Raleigh, North
Pittsburgh has experienced the
ninth-largest income gain, thanks to increased tech and
health care jobs. Oklahoma City, where
inflation-adjusted incomes are up 5.5 percent, has
benefited from the oil and gas boom.
Most Americans haven't received raises
anywhere near that large. Data compiled by Brookings
shows that 65 percent of Americans who live in urban
areas — defined as cities with populations above 65,000
— live in places where the typical household income is
still below its 1999 level.
Max Versace, CEO of artificial
intelligence startup Neurala, who arrived in Boston in
2001 from Italy, has watched the city transform itself
into a boomtown, filled with innovative companies
working on robotics, AI and self-driving cars. Boston
enjoyed the 11th-best income gain in the past decade,
Moody's data shows.
"I have never experienced a slowdown
in Boston," said Versace, whose company is based in
Boston's Seaport neighborhood, a formerly rundown
industrial area now crowded with startups and high-end
restaurants. "Boston is one of those bubbles — good
bubbles — that have been saved by the two locomotives of
computer sciences and biotechnology."
Versace launched Neurala in 2013, and
it now has 36 employees, including eight with PhDs.
While most workers across the country have endured scant
pay gains, Versace estimates that salaries for AI
researchers with Ph.D.'s have doubled since 2008.
Neurala is working to incorporate AI
in drones, including one aimed at energy firms that will
use its technology to spot cracks in pipelines or wind
turbines without needing humans to monitor video feeds.
One other change Versace is happy to
observe: "I no longer have to spit out espressos or
pasta," because the quality of each has improved so much
since he arrived.
The divergence between the richest and
poorest U.S. cities predates the Great Recession. But it
is historically unusual. For a period of 100 years
ending in the 1980s, income gaps between richer and
poorer cities narrowed steadily.
Economists cite three reasons why such
convergence ended. The nature of high-tech work, for one
thing, makes it productive for higher-skilled workers to
cluster in the same cities.
Elisa Giannone, an economist at the
University of Chicago, notes that in past decades,
highly paid professionals — doctors, say — might have
congregated in cities with fewer physicians to
capitalize on the lack of competition and earn more.
Likewise, many companies that employed high-skilled
workers would move to lower-cost cities to take
advantage of cheaper labor.
But her research has found that both
trends have been upended by the rise of highly skilled
information technology work. People with such skills
prefer to work in cities with their peers. And the
companies that employ them seem to care just as much
about the right skills as they do about lower costs.
What's more, higher educated employees typically become
more efficient when they cluster together and exchange
"It's more beneficial and more
productive to go where there are more people like me,"
Giannone says, referring to how such workers think. "I
don't want to be left out."
Jed Kolko, chief economist at Indeed,
the job listings website, calculates that one quarter of
tech job openings in the first half of this year were
located in just eight tech hubs: Baltimore, Washington,
Boston, San Jose, San Francisco, Seattle, Austin and
Raleigh, North Carolina.
A second factor is swelling home
prices and rents, particularly where regulations make it
harder to build more. People in poorer areas often used
move to wealthier cities to find better opportunities.
Now, that option is increasingly available only to those
with advanced skills or education.
Two public policy experts, Peter
Ganong and Daniel Shoag, concluded in a paper last year
that both janitors and lawyers used to fare better
financially in New York City than in poorer cities, even
accounting for the higher cost of living.
Now, because of rocketing home prices
in richer areas, that's no longer true. Lawyers can
still come out ahead. But janitors and other
lower-skilled workers don't.
"Skilled workers move to high cost,
high productivity areas, and unskilled workers move
out," Ganong and Shoag wrote.
In the 10 cities with the fastest
income growth, housing prices have soared by an average
of 31.1 percent in the past decade, Trulia found. That
compares with a national average increase of just 5.1
One result has been huge wealth gains
for a fortunate few. A resident of San Francisco who
bought a typical home, paying nearly $816,000 in the
spring of 2007 — just as the housing market nationwide
was collapsing — has gained $365,000 in the past decade.
In Cincinnati, a homeowner who bought
at the same time would have paid just $143,000 but would
have gained only $6,500.
"Geography plays a critical role in
wealth building," said Ralph McLaughlin, chief economist
A final factor behind the diversion is
that the industries and occupations in slower-growing
regions were leveled by the recession. Manufacturing and
mining are disproportionately located in red states. So
are retail jobs. All those sectors have endured weak
growth since the recession.
Robin Brooks, an economist at the
Institute of International Finance, a trade group, says
those job losses have opened a gap between so-called
"red" states, which voted for Donald Trump in 2016, and
About 61 percent of blue state
residents have jobs, compared with roughly 59 percent in
red states, Brooks found. That cuts against recent
historical patterns: From the 1990s through the mild
recession of 2001, there was no gap at all.
Despite the persistence of regional
inequality, some positive trends have emerged: More tech
jobs are moving out of the tech hubs and spreading
around the country. Software programming jobs have
migrated to Dallas, Detroit, and Charlotte, among other
cities, according to Brookings data. Software
increasingly plays a vital role in banking and finance,
auto manufacturing, and retail.
But many of those tech jobs are lower-
or mid-level positions, such as technical support and
help desk jobs, rather than higher-paying, cutting-edge
positions. Kolko notes that the most highly-skilled tech
jobs — in such areas as machine learning, a form of
artificial intelligence; computer vision; and database
engineering — are even more concentrated in tech hubs
than are tech jobs overall.
"There's a spreading out of the tech
economy, but it remains a different tech economy in the
middle of the country than what you find in the Bay
Area, Boston, New York and Austin," Berube said.
Software may be more widely used, but
when it comes to actually inventing new software, "that
is still a phenomenon you find in only four of five
places in the United States."