September 29, 2004
In a study I presented to a seminar sponsored by the
Regional Leadership Institute, I found several surprising factors that have
changed economic conditions in metropolitan Atlanta since this decade began.
Since 2000, employment in Atlanta has increased at a
slower pace than in the nation. I
cannot remember another 4 year stretch where that has been true since the
1950s. Moreover, employment
appears to have increased only slightly more than eleven thousand in the
past year. Nationwide, job
gains over that same time period are more than 1.1 million.
In other words, Atlanta suffered a greater recession
than the nation and is recovering at a slower rate than nationwide.
In order to discover why this is occurring, I begin
with a concept called location quotients.
In August 2004, metro Atlanta accounted for 1.663
percent of the jobs that exist nationwide.
If we were a pure microcosm of the national economy, every sector
should have that percentage of jobs in comparison to the nation. If that occurred, the location quotient would be 1 for all
Of course, metro areas have different economic reasons
for being. Indeed, city forming
industries are dramatically different in many metro areas. These city forming industries are jobs created because goods
or services are exported to other regions of the country or even to the rest
of the world. In Los Angeles,
entertainment is a city forming industry.
In Boston, financial management is a major factor forming that city.
Those city forming functions have location quotients
far in excess of one.
Cities also have city filling industries.
While there are some fluctuations based upon the intensity of retail
activity, I normally find that retailing almost always has a location
quotient between 0.9 and 1.1 for large cities.
(Small economic units could have much higher retail location
quotients as they distribute goods for a much larger area outside the
economic unit relative to the economic unit).
Anyone in economic development should be aware of these
separate functions. The city
filling functions arrive because customers are there.
Therefore, you do not use your development dollars to provide
benefits for retailers or for normal services, such as dry cleaning, movies,
etc. For example, do not use
development dollars for Walmart stores.
Walmart distribution centers, on the other hand, may create jobs and
stimulate growth that otherwise would not occur.
What about those sectors with location quotients far
below 1? If Atlantans have the
same tastes as in the nation, these low quotient sectors reflect import
needs (and also identify opportunities where local production might
substitute for imports). Of
course, they may also reflect differences in tastes.
Now, the poor performance of Atlanta could be the
result of four factors: 1) We
could be losing our competitiveness in our city forming functions.
2) Our city forming
functions may be industries that were harder hit in the recession than other
We had large imbalances in our city filling functions that needed to
be corrected. 4) We are
becoming even more import dependent than four years ago.
So, what are the Atlanta sectors with the highest
location quotients? By far the
most important is air transportation, followed by telecommunications,
computer systems designs, accounting, and wholesale trade.
Some of the areas of import activity (or altered
tastes) are surprising. Our low
employment in exploiting natural resources is not surprising. But the
weakness in production of computers, arts and entertainment, the
manufacturing of transportation equipment, and state government is.
Clearly, in the manufacturing of transportation equipment, we have
lost a great deal of competitive advantage over the years.
However, most city forming functions remain about as
important in Atlanta relative to the nation as they did in 2000.
We just suffered the unfortunate result of having, as our most
important industries, those that were most heavily impacted nationwide by
Also, two of our city filling functions, retail trade
and construction, were above national norms in 2000. They are now at or below norms today. Now that we have corrected those excesses, our job recovery
should be more in line with national trends.
However, there is no reason to believe that those 2000 excesses will
We may be losing our competitiveness in gathering
temporary workers, as the location quotients for employment agencies have
fallen from 1.6 to 1.15 in only four years.
(As our population growth remains strong while unemployment is well
below national norms, I find this result hard to believe.
Could we have a data problem here?)
We are becoming more significant in one area: eating and drinking places. Perhaps we are becoming party town USA.