Category Archives: Population

State population growth: What does it tell us about the states in the Seventh Federal Reserve District?

The degree to which a state’s population has grown can tell us a lot about that state’s economic conditions and prospects. Many U.S. households move very far to find a better quality of life. They seek not only more sunshine and recreational amenities, but also higher income and wages, more employment opportunities, and better housing affordability. Local public leaders and businesses care deeply about population growth. Lately, such concerns focus on possible loss of highly educated “knowledge workers,” who help drive local economic growth. More generally, a decline in population in a local area can create difficult problems in public infrastructure. If a state’s population shrinks unexpectedly, many public services and facilities, such as roadways and water and electricity infrastructure, are not easily reduced in scope or size. And if current population estimates hold up through the end of 2010, national political representation is likely to shift. In particular, the Seventh Federal Reserve District states of Michigan, Illinois, and Iowa could each lose one seat in the House of Representatives.

The U.S. Census Bureau recently released its state population estimates through mid-2009, with a breakdown of population change. The Seventh District comprises all of Iowa and most of Illinois, Indiana, Michigan, and Wisconsin; of these five states, Michigan alone is estimated to have experienced a decline in population between July 1, 2008, and July 1, 2009[1]. This marks the fourth year in a row, beginning with 2006, that Michigan has had that distinction. Michigan also lags every state in the nation in cumulative growth since 2005. Michigan has cumulatively lost 121,000 people over the period 2005–09.

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The “natural increase” in population, namely, births minus deaths, is typically the largest component of year-to-year population change. But the states’ different migration trends can tell us the most about their relative attractiveness. A state’s “net domestic migration” measures how many people come in from other states to live there versus how many residents leave for other states. In the table below, it’s clear that all five Seventh District states experienced domestic out-migration in 2009. This has been their typical experience over the past decade. Only Indiana experienced any years of positive domestic net migration during the decade (over the period 2006–08).

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Converting net domestic migration to a rate of migration (per 1,000 residents) helps us to scale these figures relative to the size of each state. Here, Michigan’s rate of domestic out-migration easily outweighs the other states’, though Illinois’s is also quite high. For 2009, Illinois’s rate of domestic net-migration, at -3.8 residents per thousand ranked 46th in the nation; Michigan ranked 50th.

Illinois and Michigan differ greatly in the degree to which net foreign in-migration offsets domestic out-migration. Illinois’s net gain of 36,000 individuals through foreign in-migration in 2008–09 offset virtually three-fourths of the state’s domestic out-migration. In contrast, for example, Michigan’s net foreign in-migration offset only 15 percent of the state’s domestic out-migration. According to demographer William Frey, states having important “gateway” cities for immigrants, such as Chicago, are especially advantaged in this regard.

Surprisingly, even though Michigan’s economy has foundered over the past decade, the state’s pace of domestic out-migration held steady rather than climbed in 2009. Michigan’s state demographer, Kenneth Darga, has carefully documented the state’s demographic trends over many years, including net migration back to 1961. As seen below, net out-migration during the early years of the 1980s easily outpaced those of recent years. By way of possible explanation, in comparison to today, there were more states back then having labor market opportunities that unemployed Michiganders found attractive, compelling them to move away. Recall that some energy-producing states, such as Texas and Louisiana, were then faring well; and other states were benefiting from surging national defense expenditures and a technology boom in personal computers and related equipment and software.

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Other explanations have been offered. Demographer Frey and others note that the overall U.S. domestic migration rate has been declining; it is currently at its lowest point since such statistics have been reported, back in the late 1940s. Americans are less likely to move far away from their current homes for economic opportunities out of state, as both average age and homeownership rates have climbed. Michigan—with 76 percent of its households being homeowners—does have among the nation’s highest rates of homeownership. At the same time, because of its flagging economy, the share of Michigan homes whose current market value exceeds the size of the mortgage debt on the property is also among the highest. In contemplating a move to another state in search of employment, some of these Michigan households may find themselves too cash-constrained to finance job searches outside the state. That is, even if they managed to sell their homes and move away, they would likely need to pay off the remaining balances to their homes’ existing mortgages.


[1]Among all 50 states, only Michigan, Maine, and Rhode Island lost population year over year over this time period. (Return to text)

City-Suburban Population and the Housing Bust

Demographer William H. Frey calls to our attention a striking turnaround in population growth in the central cities of metropolitan areas. Since the 2005-06 peak of the housing construction boom in the United States, the growth rates of central cities have begun to gain ground on surrounding suburban areas. Beginning with 2005 and ending with population estimates reported by the Census Bureau for mid-year 2008, Frey illustrates a convergent city-suburb trend for U.S. metropolitan areas having a population over one million. These trends hold for all four major U.S. regions—North, Midwest, South, and West. (The 12-state Midwest population performance is shown below).

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Similarly, Frey reports that these gains “are not confined to the very largest American cities. Among the 75 cities with populations exceeding 200,000, 41 grew faster in 2007-08 than in the preceding year, and 54 grew faster than in 2004-05.” We show the population trends for such cities by region below. Once, again, we can see that the turnaround has taken place, on average, in all Census regions of the U.S.

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Within the Seventh District states of Illinois, Indiana, Iowa, Michigan and Wisconsin, growth has also tended to rebound in cities over 200,000 in population (below). For the year ending in the middle of 2008, six of seven cities exhibited positive population growth. However, the City of Detroit is an outstanding exception with an accelerated decline in the mid-year ending 2008.

On average, Seventh District cities shifted from zero or negative growth in 2005 to an annual growth rate of 0.5 percent for 2008. The largest swings in performance were registered by Des Moines, with a swing from minus 1.3 percent in 2004 to plus 1.2 percent in 2008, and Chicago, with a swing from minus 0.7 in 2005 to plus 0.7 for 2008.

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At this point in time, the reasons for this shift toward central cities remain open to speculation. But given the timing, there are strong reasons to believe that the housing bust lies behind much, if not most, of the reversal. A general rise in demand for housing, such as that which occurred earlier in this decade, exerted a magnified impact on the fringe of urban areas. Given the lower price of land on the fringe and the ease with which larger single family homes can be constructed there (rather than tear-downs closer in), both population and housing generally shifted towards the periphery. Construction jobs related to fringe development likely bolstered the trend, as some households followed job opportunities to the suburbs. And now we may be seeing a reversal of such trends as home demand and employment have fallen off.

William Frey also attributes the urban population resurgence to the nature of the urban economies, citing “broad economic diversity at a time when smaller cities … are vulnerable to economic shocks” and the “resiliency of large urban centers that are economically and demographically diverse.” There may be some wisdom in thinking that this is so. In pursuing economic development, central cities have been trying to attract and grow “Eds and Meds,” (education and health care). As measured by George Erickcek and Tim Bartik of the Upjohn Institute, health care and hospitals, along with colleges and universities have been a bulwark of the economic base of many cities. These sectors of the U.S. economy have tended to grow and expand consistently, and cities have benefited. From the 2000 Census, Bartik and Erickcek report that earnings derived from the education sector are, on average, 36 percent more concentrated in the principal cities of the nation’s 283 metropolitan areas. Health care earnings are 12 percent more concentrated.

Nonetheless, with the release of the next mid-year Census estimates (for 2009), it will be interesting to see if central cities are able to sustain their momentum of population growth in relation to suburban areas. Beginning with 2009, the influences of the sharp U.S. recession and related job declines may become important. [1] Favoring central city economies, the education and health care sectors are steady performers even in recessions. So too, many central cities no longer host manufacturing production, which tends to be hit particularly hard during recessions. However, in many cities other elements of the economic base are both concentrated and highly sensitive to economic downturns. Such sectors include professional and business services, law, tourism/business travel, and especially the financial sector, which has been buffeted by the recent financial crisis.

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Little evidence is available so far concerning the differing impact of the two national recessions, 2001 and the current one, on city versus suburb. However, in a recent report by the Metropolitan Policy Program at Brookings, Elizabeth Kneebone and Emily Garr report on year-over-year unemployment rates for city versus suburbs in the nation’s 100 largest metropolitan areas. They find that “in contrast to the last recession,” when city unemployment rates rose more sharply versus their suburbs, “unemployment has increased at nearly equal rates in cities and suburbs.” [2] The table below excerpts the year-over-year rise in unemployment rates for cities and their suburbs for several Seventh District cities and their suburbs and for the four major regions of the United States.

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Note: Thank you to Emily Engel and Matt Olson for assistance.


[1]To some degree, people tend to locate their residences in proximity to their jobs, so that job locations would tend to drive population growth as well.(Return to text)

[2]The difference in the gap between the two recessions is not large. Year over year changes in unemployment rates in cities rose by 1.9 percent in primary cities versus 1.4 percent in suburbs from May 2001 to May 2002. For May 2008 to May 2009, year-over-year rates rose by 3.9 and 3.7 percentage points, respectively, for cities and suburbs. However, city/suburb unemployment rate differences in level are wider currently than in the 2001-02 period.(Return to text)

Educated (young) workers and regional growth

By Britton Lombardi, Associate Economist

As the U.S. continues to grow into a knowledge-based economy, human capital and ideas earn a higher premium. Therefore, competition for future economic growth and vitality leaves states and large metropolitan areas vying to attract and retain the young, well-educated population within the U.S., commonly defined as 25- to 39-year-olds with at least a bachelor’s degree. These young and educated adults have certain characteristics that make them particularly appealing to metropolitan areas, such as their especially high mobility and entrepreneurial tendencies.

Among a number of interested parties, policymakers, businesses, and researchers question what attracts these young professionals to certain areas over others. Some of the allure could come from characteristics that are specific to the individual, such as a job offer or personal relationships. However, Yolanda Kodrzycki of the Federal Reserve Bank of Boston, finds that these young professionals also exhibit certain general preferences. They gravitate toward areas that have high job growth, high average pay, and an array of employment opportunities where they feel possibilities and opportunities abound. At this point in their lives, they are the most flexible, and many may still be trying to choose a career path; therefore, a region that will allow them to explore many options is more attractive to these individuals. The payoff to successful “job matching” can be especially high for younger people because payoffs may accrue over a lifetime career supplemented with further learning and development. This implies that certain industry clusters may help attract specialized human capital to a location. A current trend going back two decades has been that cities with a strong technology industry have appealed to a disproportionate number of these young professionals. However, cities that have focused on other knowledge-intensive industries like finance and real estate have done well too. Metropolitan areas that value human capital and maintain a strong regional economy draw in these young and educated individuals.

Besides the direct advantages of high-wage jobs, the clustering of young professionals in an economy provides spillover benefits of knowledge and innovation through networks among firms and workers. Places such as the San Jose area are legendary for frequent job-hopping among workers, who thereby spread innovation more broadly. Such innovations typically involve tacit knowledge and know-how. Looking at patent data, Jerry Carlino has demonstrated how a higher density of skilled workers leads to a higher level of intellectual property.

Aside from economic opportunity, amenities offered by populous urban areas are also thought to attract young professionals. They often prefer to live in lively neighborhood areas within a few miles of the city center and take into account the affordability of this type of housing. Other amenities that appeal to this population include parks or other areas for walking and outdoor recreation, reliable public services including transportation, vibrant neighborhoods, and a dynamic commercial district. However, the extent to which these amenities matter remains the subject of debate and further study.

Warmer climate has been a magnet for the general U.S. population over recent decades. However, cold-weather cities can seemingly compensate with a combination of vibrant economic opportunities and/or big-city recreational and cultural features. The table below, for example, examines working age college-educated migrants from 1995-2000. Although the metropolitan areas that had the five highest net in-migration rates were located in the South and West, both the Minneapolis-St. Paul and Chicago areas posted relatively high net in-migration rates. Indeed, Minneapolis-St. Paul ranked among the top ten highest for that period.

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A recent discussion paper issued by the New England Public Policy Center further explores the regional concentration of young professionals using data from the 1980, 1990, and 2000 Censuses and the 2005 American Community Survey (ACS).

The concentration of young, educated workers in any one region depends on the extent that its young residents achieve college education and the region’s ability to retain them, as well as attracting others from around the U.S. and abroad. As of 2005, New England had the highest concentration of young, educated individuals in the nation, with 38.6% of its 25- to 39-year-olds holding at least a bachelor’s degree compared with 30.1% for the U.S. (see table below). However, overall educational attainment in the U.S. increased between 1980 and 2005, especially between 1990 and 2005 when the number of college educated, 25- to 39-year-olds soared by 22%. The Middle Atlantic, East North Central, and South Atlantic regions outpaced New England’s rise, although they began with lower percentages.

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The discussion paper further calculates a net migration rate from 2004 to 2005. The rate takes the difference between the gross inflow and outflow of domestic young professionals in relation to the base population of that age group. Migration rates are calculated as described but multiplied by 1000 to make it a rate per 1,000 residents. Using this measure, only the Mountain, South Atlantic, and Pacific regions have positive net migration rates of 20.4, 10.9, and 1.0, respectively. The two Midwest regions, East North Central and West North Central, had the two most negative net migration rates of -9.5 and -12.5, respectively, raising concerns about a Midwest “brain drain.” New England ranked third from the bottom with a -6.8 net outflow.

Movements of workers to and from abroad have recently become a more integral part of regional work force composition. Using a similar calculation as above, but only accounting for international inflows due to data limitations, New England comes in second highest with international inflows of 14.4 behind only the Pacific with 17.4. The East South Central region reported the lowest inflow of these individuals with 5.1; West North Central comes in second to last with 7.9. The East North Central barely outpaces West South Central as the fourth and third from the bottom with 11.6 and 11.4, respectively. Again, the Midwest appears near the bottom of the rankings, heightening concerns about not only maintaining or attracting domestic young professionals but gaining international ones. In New England’s case, the net inflow of international young professionals seems to offset the region’s domestic losses, but this does not hold true for some of the other regions, including the Midwest.

Although emphasis has been placed on young professionals, the growth in older workers, those aged 55 and above, will be the largest of any working-age group over the next ten years. The older labor force is projected to grow by 46.7% from 2006 to 2016 — more than five times the projected annual growth rate of the overall labor force of 0.8%. This large projected growth rate results from the aging of the baby boom generation into their “golden years” and still participating in the labor force. Older workers may continue to work due to the removal of the earnings test from Social Security, the increased retirement age for receiving Social Security benefits to 67, decreased employer-provided retiree health benefits, and the improved health status of older individuals.

Another reason for employers and regions to focus on older workers stems from the diminishing education attainment gap between young entering workers and older workers. Dan Aaronson and Dan Sullivan document the dramatic overall rise in educational attainment of the U.S. workforce since the 1970s. Educational attainment has been climbing as younger (more educated) cohorts have been displacing older (less educated) cohorts as they retire. Today, younger workers are only as educated, on average, as those that they displace at the older end of the workforce, and their lesser work force experience may put them at a disadvantage in some respects. All the more reason for employers to turn somewhat to older cohorts for tomorrow’s needed work force skills.

As the number of older workers continues to increase, will firms and policymakers shift some of their attention to retaining or enticing these workers by giving them incentives to extend their careers or possibly return to the work force? Older workers offer benefits to businesses that might not be available from young professionals, such as leadership, experience, and specialized skills gained over their lifetime that can increase productivity and output. On the other hand, these older workers have characteristics quite different from those of young professionals. They tend to prefer more flexible work schedules to balance work and family and to be less mobile geographically. Therefore, they may require a slightly different and possibly more demanding set of economic incentives and living amenities.

Population Ranks of Midwest Cities

Have you ever heard of Zipf’s Law? I’ll bet you haven’t. Zipf’s Law states that there typically appears to be a numerical regularity between the population size and population rank of cities within any particular region or nation. Specifically, within a region or nation, multiplying any city’s population size by its rank among cities will yield a constant number throughout the distribution. For instance, if the most populous city in a nation has a population of 10 million, the constant should be 1.0 multiplied by 10 million; the second largest city should have a population of 5 million so that 2 times 5 million yields 10 million once again; and so on.

As a fun way to display the size distribution of metropolitan areas in the Great Lakes, we tried to fit Zipf’s Law to the size distribution of metropolitan areas for the (census) year 2005. Guess what? We found that Zipf’s Law nailed it.

For the statistical trial, we chose the Great Lakes region which is defined by the Bureau of Economic Analysis as the states of Ohio, Michigan, Indiana, Illinois and Wisconsin. As it turned out, and as shown in the chart below, Zipf’s regularity applies very closely to the population distribution of Great Lakes metropolitan areas.

My prior thinking was that this region, which we think of as the industrial belt, was a cohesive economic region with close ties among firms and workers. In fact, there is no economic theory at all behind the Zipf’s Law and its relationship between population size and rank. Yet, in choosing a region, I thought it to be a promising trial to choose a region in which we might expect to find the statistical regularity if it was undergirded by economic linkages.

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In the rank distribution, the Chicago metropolitan area leads the pack with approximately 9.4 million. The Detroit area comes in second with, as might be expected, a population of one-half of Chicago’s at 4.5 million. The third metropolitan area, Cleveland, does not quite fit, dropping down too far with a population at just over 2 million. Still, the remaining distribution fits well enough so that G. K. Zipf’s regularity retains our fascination.

Perhaps it is only the statistical geeks among us who love this sort of analysis. Still, almost everyone loves a good horse race. So, for the rest of you, here is a comparative graph of the population growth for the top 10 most populous Great Lakes metropolitan areas from 1990 to 2005. And the winner is … Indianapolis, with a population growth of 27 percent , 346 thousand. What a town!

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Foreign born

The recent influx of foreign born into the United States has drawn attention on several public policy fronts. The U.S. Congress is currently considering a tighter border policy with Mexico, in part due to concerns of national security and the rule of law. In addition, the surge in foreign born (and their offspring) figures into debates over the sources of the widening wage and income disparities in the U.S. and in the slow growth of wage rates and income at the bottom of the income distribution.

On a more positive note, the foreign-born population is accounting for approximately one-third of U.S. population growth, somewhat more if the newborn children of recent immigrants are counted. The possible benefit of a more rapid population growth stems from the fact that the U.S. labor force market is already tightening rapidly and promises to tighten further as the “baby boom” generation retires. Slow growth of the work force can ultimately slow the overall pace of economic growth, especially if accompanied by slow growth of workers with specific skills. Indeed, for many regions, one key economic challenge and opportunity is to facilitate education and skills acquisition of the foreign born. As of 2005, the U.S. Department of Labor reports that 28 percent of the foreign born aged 25 years and older had not completed high school versus 7 percent for the native-born.

Prior to the 1990s, as shown by the chart below, the Seventh District region, which includes much or all of Illinois, Indiana, Iowa, Michigan and Wisconsin, had not attracted immigrants to the same extent as many other U.S. regions. Still, as shown by the second chart below, strong growth in immigration has taken place here in recent years. So too, the Chicago metropolitan statistical area (MSA) has remained an exceptionally strong magnet among metropolitan areas. Chicago ranked 5th in foreign-born population according to the 2000 Census of Population, with 17 percent to 18 percent of its population foreign born. And since that time, the Chicago metro area has ranked among the top 10 metro area gainers in numbers of both Asian and Hispanic population.

Recent immigrants (as well as members of other ethnic and minority groups) are, to a greater extent, relocating to new areas of opportunity and high growth. According to recent report by demographer William Frey, “Hispanic and Asian populations are spreading out from their traditional metropolitan centers” and expanding their presence in new destinations, including suburbs and rural areas. In part, this dispersion may be an added impetus to current public policy attention concerning U.S. immigration and border control policies.

The chart below confirms for the Seventh District the dispersion of immigrants and foreign born. All Seventh District states experienced healthy growth of foreign-born population. However, the two states with the lowest proportions of foreign-born population—Iowa and Indiana—experienced the largest population growth rates over the decade of the 1990s at 110 and 98 percent respectively.

The Seventh District experience also confirms that immigrants are now following opportunities in employment and housing to a greater extent rather than simply following their historic well-worn path to the largest U.S. metropolitan areas and their central cities.

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Immigration and Chicago’s Growth

In preparing for a presentation to be delivered before the ARS National Forum on Regional Stewardship this week, I was prepared to expound on the superior economic performance of Chicago in comparison to neighboring cities. After all, John Grimond’s recent review of Chicago for Economist magazine recently stated that “Chicago has come through deindustrialization looking shiny and confident.” I must admit that I, too, often characterize Chicago’s performance as robust, and I have observed that both Chicagoans and other Midwesterners believe this to be the case. Much to my surprise, however, in examining total payroll employment trends, I discovered that Chicago’s growth fell short of the neighboring East North Central (U.S. Census division) states region during the 1990s and since that time as well! And in comparison to the nation, Chicago’s per capita income has been flat to slightly declining. What gives?

I believe that part of the answer can be explained by the robust influx of immigrants to the Chicago area, along with the high birth rates of recent immigrants, which have made for a more complex story than the payroll employment and income trends suggest.

Owing to immigration, the Chicago area’s population growth has exceeded the surrounding region since the 1990s, as the chart below suggests. The Chicago metro area is now ranked fifth nationally in proportion of foreign-born population, adding 537,000 between 1990 and 2000—an expansion by over one-half. As of the 2000 U.S. Census, 17.5% of Chicago’s population were foreign born, many of them young families with children. And so, the rapid expansion of the region’s housing stock, revitalization of many older neighborhoods, and home appreciation have not been simply the figments of imagination or the heady boosterism by residents and observers of the Chicago region.

The growing immigrant composition of Chicago’s work force, and the way we measure it, may also explain part of its tepid payroll employment growth. Owing partly to language barriers, immigrants are more likely to be self-employed rather than work for a firm as a “payroll” employee. So too, to some extent, immigrant payroll employment may also tend to be casual or uncounted by government payroll employment surveys. An alternative way to estimate employment is conducted by the U.S. Bureau of Economic Analysis (BEA) which takes some account of self-employed workers. In contrast to payroll employment, trends using BEA data (below) suggest that the Chicago area’s employment growth exceeded the East North Central states of Ohio, Indiana, Michigan, Illinois, and Wisconsin in the early years of this decade, and its performance during the 1990s also converges somewhat with the national average.

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