TheNotSoGreatMigration_05152012

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May 15, 2012

Eco n o m ics Gr o u p

Recently, the television program 60 M inutes ran a news segment on the African Serengeti-MasaiMara Great Migration, which is the worlds last remaining large-scale movement of landmammals.1 A 350-mile round trip beginning in northern Tanzania that reaches parts of Kenya,this Great Migration is comprised of wildebeest, zebra, impala, buffalo and numerous otherherbivore species. The migration, which begins in late-January each year, is said to be one of the

most impressive wildlife spectacles on Earth.

But the purpose of the 60 M inutes news segment was not to highlight the impressiveness of theSerengeti-Masai Mara Great Migration. Rather, the news segments purpose was to document themigrations impending demise.

The migration cuts through the Mara River, which serves as a crucial source of nourishment forthe migrations participants. In recent decades, however, the Mara River has been receding, dueto increased human development in surrounding regions. According to migration experts, ifcurrent trends continue and the Mara River dries up completely, then the migration couldcollapse, killing millions of animals.

A similar story can be said of the recent human migration experience in the United States, thoughthe matter of life or death is thankfully not at stake. That is to say, U.S. net migration was strongduring the previous expansion in the 2000s, but migration trends have slowed more recently. In

this report, we highlight regional net migration trends around the country by comparing theexperience before and after the 2007-2009 recession. In addition, we describe the economies ofthose areas in which net in-migration has been strong in recent years, along with thecharacteristics of those regions from which residents have migrated elsewhere.

Regional Trends in Net MigrationRegional net migration patterns across the country have changed dramatically over the pastdecade, mostly as a result of the effects of the 2007-2009 recession. Our analysis begins with acomparison of the regional migration trends leading up to the recession and then highlights thedeviation from this pattern that emerged during the post-recession period.

Figure 1 below displays a county-level map of the United States, with each county ranked by itsaverage net migration flows from 2002 to 2007. During this period leading up to the recession,the majority of counties, 1,620 of them, saw relatively flat net migration, while 792 counties saw

positive net migration. Many of the areas in which population inflows were the strongest duringthe previous expansion are regions where housing markets overheated, such as parts of Florida,the major metropolitan areas in New England and several regions in the West, including Arizona,Nevada, California and the coastal regions of Washington and Oregon.

1Pelley, Scott. (January, 2012). T h e G r e a t M i g r a t io n . 60 Minutes. CBS News.

Special Commentary

John Silvia, Chief [email protected] (704) 374-7034

Michael A. Brown, [email protected](704) 715-0569

Joe Seydl, Economic [email protected](704) 715-1488

The Not So Great Migration

R eg ion a l n e t

m i g ra t io n p a t t e r

a c r o s s t h e co u n t r

h a v e c h a n g e d

d r a m a t i ca l ly o v e

t h e p a s t d e c a d e .
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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The Not So Great Migration WELLS FARGO SECURITIES, LLCMay 15, 2012 ECONOMICS GROUP

The 698 counties that saw net population outflows during the previous expansion include ruralregions in the South, a large swath of the middle part of the nation and parts of Nebraska, Kansasthe Dakotas and northern Montana.

Figure 1

Average Net Migration Rate 2002 - 2007

Flat

Average Net Migration Rate2002 -2007

Negative Weak

Negative

Positive

Positive Strong

Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

Average Net Migration Rate 2002 - 2007

Flat


Negative Weak

Negative

Positive

Positive Strong

Flat


Negative Weak

Negative

Positive

Positive Strong


Figure 2

Net Migration Rate 2011

Flat

Net Migration Rate2011

Negative Weak

Negative

Positive

Positive Strong


Net Migration Rate 2011

Flat


Negative Weak

Negative

Positive

Positive Strong

Flat


Negative Weak

Negative

Positive

Positive Strong


If we fast forward to today, it appears as though net migration has slowed considerably. Figure 2presents the net migration flows at the county level from 2010 to 2011 using the same scale as thatused in Figure 1. Thus, those areas that saw net migration grind to a halt are highlighted in blue,

while those counties that saw negative net migration (population loss) are highlighted in darkercolors.

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There are several interesting trends that appear when comparing the pre-recession period (2002-2007) to the post-recession period (2011). Most of the in-migration observed leading up to therecession slowed and in many cases turned negative, as tough labor markets forced workers tolook elsewhere for jobs in the wake of the construction bust. As can be seen, large parts of thecountry experienced a significant slowdown in population in-flows and out-flows, represented by

the large number of counties highlighted in blue in Figure 2.Some regions of the country are seeing much stronger population growth in the post-recessionperiod. A case in point is North Dakota, in which four of the nations top 10 fastest-growingcounties lie, including McKenzie and Williams counties. Each of these counties is home to theBakken Well, around which oil sands exploration has picked up significantly not only in NorthDakota, but also in parts of Montana and southern Canada. Other areas that also saw particularlystrong net in-migration from 2010 to 2011 were mostly rural counties, with low population bases,thus underscoring the extreme halt in migration activity around the nation.

Economic Characteristics of Regions with High Net MigrationWhile it is difficult to discern the exact causal relationship that explains why individuals migratefrom one region to another, we can describe the economic characteristics of those areas that areadding residents compared to those of the regions that are experiencing population losses. It isimportant to note, however, that economic conditions are not always the most important factor inan individuals decision to migrate. Indeed, a recent paper from the Federal Reserve Bank of St.Louis finds evidence to suggest that individuals often move to less economically desirable areas.2The St. Louis Fed finding underscores the difficulty in attempting to identify the determinants ofnet migration. Therefore, our primary focus is to identify areasrather than general economiccharacteristicsthat have the potential for future economic growth based on strong in-migration.

In Table 1 and Table 2, we highlight our findings. Table 1 shows a select list of economicmetrics for the five metropolitan areas in which net in-migration was the strongest in 2011, whileTable 2 shows the same list of economic metrics for the five metropolitan areas in which net in-migration was the weakest.

Table 1

Me t ro A re a

Net Migra ton Rate

2 0 1 0 -2 0 1 1

Un e mp lo y me n t Ra te

(Ma rc h 2 0 1 2 )

Emp lo y me n t Gro w th

(Ma rc h 2 0 1 2 )Y r / Y r % C h a n ge

Popula t ion Growth

(2 0 1 1 )Y r / Y r % C ha n g e

Bui ld ing Permits

(Ma rc h 2 0 1 2 )Y r / Y r % C ha n g e

Percent o f Popula t ion

w / Ba c h e lo r ' s Deg re e(2 0 1 0 )

Hinesv i l le , GA 2.40% 7.2% -0.7%

-1.1%

4.1% 108.3% 7.2%

Kennewick , WA 2.18% 9.6% 3.3% 120.7% 10.1%

Aust in , TX 2.06% 6.0% 2.2% 3.2% 140.0% 16.2%

Myrt le Beach, SC 1.84% 10.3% 5.4% 2.1% 72.0% 10.6%

Cape Cora l , FL 1.65% 8.9% 1.4% 1.8% 35.2% 10.8%

Source: U.S. Department of Labor, U.S. Department of Commerce and Wells Fargo Securities, LLC

Top 5 Met ro Areas W i t h Fas test Ne t I n -M ig ra t i on

Table 2

Me t ro A re aNet Migra ton Rate

2 0 1 0 -2 0 1 1

Un e mp lo y me n t Ra te

(Ma rc h 2 0 1 2 )

Emp lo y me n t Gro w th

(Ma rc h 2 0 1 2 )

Y r / Y r % C h a n ge

Popula t ion Growth

(2 0 1 1 )

Y r / Y r % C ha n g e

Bui ld ing Permits

(Ma rc h 2 0 1 2 )

Y r / Y r % C ha n g e

Percent o f Popula t ion

w / Ba c h e lo r ' s Deg re e

(2 0 1 0 )

De t ro i t , M I -1.1% -0.1%

-1.2% -1.5% -0.8%

-1.4% -1.2%

-1.8%

-2.5% -1.5%

9.4% 1.7% 55.9% 11.3%

Wichi ta Fa l ls , TX 6.5% 21.7% 7.8%

Pine Blu ff , AR 9.3% 1.0% 241.7% 6.9%

Jacksonv i l le , NC 8.9% 2.7% 0.1% 47.7% 6.6%

Fa rm in g to n , NM 7.4% 0.0% 60.7% 6.0%

Source: U.S. Department of Labor, U.S. Department of Commerce and Wells Fargo Securities, LLC

Top 5 Met ro Areas Wi t h S low es t Ne t I n - M ig ra t i on

In general, those areas in which net in-migration has been strongest since the recession endedhave tended to exhibit somewhat higher unemployment rates, a counterintuitive finding to besure. But this finding makes sense when one considers what the unemployment rate measures.Since the unemployment rate measures the total number of unemployed workers who are actively

2 Murillo, R.H., Ott, L.S., Owyang, M.T., and Whalen, D. (2011). P a t t e r n s o f I n t e r s t a t e M i g r a t i o n i n t h eU n i t e d S t a t es f r o m t h e S u r v e y o f In c o m e a n d P r o g r a m P a r t i ci p a t i o n. Federal Reserve Bank of St. LouisReview: 93(3), pp. 169-85. Federal Reserve Bank of St. Louis.

M o s t o f t h e in -

m i g r a t io n o b s e r v

le a d in g u p t o t h e

r e c es s io n s l o w e d

a n d i n m a n y ca st u r n e d n e g a t i v e ,

t o u g h la b o r

m a r k e t s f o r ce d

w o r k e r s t o lo o k

e ls e w h e r e f o r j o b


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searching for work as a percentage of the overall pool of available labor, strong net in-migrationwhen measured over short periods of time, should be associated with a rise in the unemploymentrateor a least should prevent the unemployment rate from dropping quicklybecause strongernet in-migration increases the overall pool of available labor. This is one of the reasons why theunemployment rate is often a misleading measure of the strength of a regions labor market. Inour current national economic environment, in which job opportunities across the country are

still scarce (Figure 3), it is likely that more workers than those that have been needed havemigrated to places like Myrtle Beach and Cape Coral, putting upward pressure on unemploymentrates in those areas.

Figure 3

Number of Job Seekers Per Job OpeningRatio, Seasonally Adjusted

0.0

2.0

4.0

6.0

8.0

01 02 03 04 05 06 07 08 09 10 11 12

0.0

2.0

4.0

6.0

8.0

Job Seekers to Job Openings: Mar @ 3.4

Figure 4

FL Home Price Declines vs. Sales Activity% Change in Existing Sales, Peak-to-Current % Decline

Cape Coral

Daytona

Fort Lauderdale

Gainesville

Jacksonville

Miami

NaplesNorth Port

Ocala

Orlando

PalmBayPanama City

Pensacola

Port St. Lucie

Punta Gorda

Sebastian

Tallahassee

Tampa

West Palm Beach

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

-60.0% -55.0% -50.0% -45.0% -40.0% -35.0% -30.0% -25.0%

Peak-to-Current Home Price Decline

ExistingH

omeSales:2011PercentChange

Source: U.S Department of Labor, CoreLogic and Wells Fargo Securities, LLC

Conversely, regions that have experienced population outflows during the post-recession periodtend to have lower unemployment rates but weaker job growth. This is true in Farmington, NewMexico, where the unemployment rate is currently much lower than the national average, but

where job growth has been flat over the past year.

In general, permitting activity for construction was strong in the areas that experienced robust netin-migration flows in the post-recession period. The exceptions to this finding include manycoastal markets, which became severely overbuilt during last decades housing boom and whichare still struggling with a glut of excess vacant housing inventory. Florida is a perfect example ofthis trend: Even though Figure 2 shows that net in-migration into many parts of southernFlorida was robust in 2011, construction activity remains muted, in part because Florida has thehighest shadow inventory rate in the country.3 In recent quarters, however, home sales activityhas picked up noticeably across the state, reflecting the fact that home prices have fallen so far inmany marketssuch as Miami, Naples, Daytona Beach and Palm Baythat investors are now re-entering the market, looking for good deals (Figure 4).

Finally, the level of educational attainment in a region is correlated with migration flows. Asevidenced by Table 1 and Table 2, the areas in which net in-migration was strongest in 2011tend to have more highly educated population bases. This is especially true in Austin, Texas

where more than 16 percent of residents hold at least a bachelors degree. With the exception ofDetroit, Michigan, each of the metropolitan areas that experienced the weakest net in-migrationin 2011 is home to a relatively low proportion of college graduates.

In a recent report published by the Federal Reserve Bank of New York, researchers find a positiverelationship between the number of colleges in a regionand thus the number of degrees

3According to data from CoreLogic, nearly 30 percent of outstanding mortgages in Florida are either90 days or more delinquent, in some stage of foreclosure or real-estate owned. The comparable shadowinventory rate at the national level is only around 11 percent.

In g en er a l,

p er m it t in g a ct iv it y

fo r co n s t r u ct io n

w a s s tr o n g i n t h e

a r e a s t h a t

e x p e r i en c e d r o b u s t

n e t i n -m i g r a t i o n

f lo w s in t h e p o s t -

r eces s i on per i od .


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produced in the regionand the regions overall stock of human capital. 4 In other words, theareas with more colleges are producing higher-skilled workers and retaining at least some ofthose higher-skilled workers on a permanent basis. Areas in which a higher number of collegedegrees are being produced and in which a high degree of scientific research and development is

being conducted also tend to attract highly educated workers from other parts of the country. This

is precisely the type of net in-migration that is most valuable, because highly educated workerstend to earn higher salaries, which can boost a regions tax collections. Moreover, higher taxcollections can often lead to a positive feedback loop, enabling the public sector to make more keyinvestments in infrastructure and education, which further boosts a regions human capital stock.In a future in which available jobs will require more technical training and higher degrees ofeducation, we expect the regions that are home to a larger number of colleges and universities toexperience stronger population inflows.

Conclusion: Implications for Future Economic GrowthMigration patterns play a critical role in the development of a local economy. Positive inflows ofpopulation contribute to the local housing market by stimulating demand for new construction,

boosting retail sales and providing incentives for future economic development investments, all ofwhich add to the tax base of a locality.

While there are several positive by-products of population growth, too rapid population growthcan also present problems for local economies. Population booms can put pressure on localinfrastructure and strain local schools, as is currently the case in North Dakota, which hasexperienced strong net in-migration due to the recent natural gas boom. Conversely, regionsacross the country that face strong outflows of residents are left with declining tax bases and self-reinforcing economic decline.

In the wake of the 2007-2009 recession, net migration across the country has slowedsubstantially. However, some regions are performing better than others, and the flexibility of theU.S. labor market has enabled many workers to relocate to areas in which job opportunities aremost abundant. The challenge for many workers, however, is that todays job opportunitiesincreasingly require a specific skill set and an advanced education. To that end, many workers inthe United States are falling behind. Regions of the country that can attract and maintain higher-skilled workers will be at a competitive advantage for future economic growth. Regions in which a

highly educated workforce produces a steady stream of knowledge spillover effects will be bestpositioned to take advantage of new technologies, leading to stronger business development. Inturn, these investments will attract more highly educated households, creating a positive feedbackloop that leads to more development and even stronger economic growth. Much like the AfricanSerengeti-Masai Mara Great Migration, the United States does not have to suffer from apermanent slowdown in net migration among states; the country just needs to recognize theproblems that are preventing stronger migration from occurring and address them.

M u ch li k e t h e

A fr ica n S er en g et

M a sa i M a ra Gr ea

M ig r a t io n , t h e

U n i t e d S t a t e s d o e

n o t h a v e t o s u f f e

fr o m a p er m a n en

s lo w d o w n i n n e t

m ig r a tio n a m o n g

s t a t e s .

4Abel, Jaison and Deitz, Richard. (2011). T h e R o l e o f Co l le g e s a n d U n i v e r s i t ie s i n B u i ld i n g L o c a l H u m a nCap i t a l. Current Issues: Vol. 17, No. 6. Federal Reserve Bank of New York.


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Wells Fargo Securities, LLC Economics Group

Diane Schumaker-Krieg Global Head of Research& Economics

(704) 715-8437(212) 214-5070

[email protected]

John E. Silvia, Ph.D. Chief Economist (704) 374-7034 [email protected]

Mark Vitner Senior Economist (704) 383-5635 [email protected]

Jay Bryson, Ph.D. Global Economist (704) 383-3518 [email protected]

Scott Anderson, Ph.D. Senior Economist (612) 667-9281 [email protected]

Eugenio Aleman, Ph.D. Senior Economist (704) 715-0314 [email protected]

Sam Bullard Senior Economist (704) 383-7372 [email protected]

Anika Khan Senior Economist (704) 715-0575 [email protected]

Azhar Iqbal Econometrician (704) 383-6805 [email protected]

Tim Quinlan Economist (704) 374-4407 [email protected]

Ed Kashmarek Economist (612) 667-0479 [email protected]

Michael A. Brown Economist (704) 715-0569 [email protected]

Joe Seydl Economic Analyst (704) 715-1488 [email protected]

Sarah Watt Economic Analyst (704) 374-7142 [email protected]

Kaylyn Swankoski Economic Analyst (704) 715-0526 [email protected]

Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer registered

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TheNotSoGreatMigration_05152012