Worry, we might.
But if a recession is coming, one thing we can be pretty certain of is that it will not be spread evenly across the map. Some areas will be hit hard. Some will be virtually untouched.
We may, for instance, soon be hearing phrases like “the rust belt” once more. The phrase was used frequently to describe a wrenching decline for the mid-western industrial states during our last major automobile slump. With Detroit clearly burdened with excess capacity, a turndown could be hard on states like Michigan and Illinois. On the other hand, shear population growth may allow the Great American Growth Triangle to outrun the worst of any slowdown or malaise.
How? Simple momentum and our unabated love of homeownership.
You can understand this by examining the Great American Growth Triangle.
It begins in the North with a rough apex in Denver. It is bounded on the East by Houston, on the West by Los Angeles, and on the South by our border with Mexico. If you get a map and draw that triangle, then compare it to population growth in the remainder of the country; you start to get the idea.
The triangle is where the action is.
Lets start with the results of the 2000 Census. While population growth for the nation was 13.1 percent, Nevada was 66 percent, Arizona 40 percent, Colorado 31 percent, Utah 30 percent, and Idaho 28 percent. They were leaders in the ongoing migration westward.
One could, of course, pooh-pooh these growth figures, pointing out that it’s easy to grow from a small base. After all, the entire state of Nevada still has less than two million people. Little New Mexico still has only 1.8 million people. Even burgeoning Arizona and Colorado have only 5.1 million and 4.3 million people, respectively.
In comparison, the Chicago metropolitan area, alone, has 8 million and the New York, New Jersey, Long Island urban complex has over 20 million people.
So lets examine one of the big blocks. New York, which started the 90’s as the second most populated state, gained less than one million people (5.5%).
During the same decade Texas gained 3.9 million people, an increase of 22.8 percent. As a result, Texas has displaced New York as the second most populous state after California. Together, Texas (+2), Arizona (+2), Colorado (+1), and Nevada (+1) gained 6 seats in Congress while New York (-2), Pennsylvania (-2), Connecticut (-1), and Ohio (-1) lost the same number. The no-chads voting that people did with the feet during the last ten years is showing up, big time, in a shift of political power from the Establishment states to the Frontier states.
Will the shift continue?
It can’t be stopped.
The single most powerful force is pure economics— the cost of living in general, the cost of housing in particular.
Recently, I received a letter from a 25 year old in Massachusetts, lamenting that he still lived with his parents and wondering when, if ever, he would be able live on his own. Rents in his area, he said, started at $900 a month.
For this young man I can only suggest that he either think about getting a roommate or consider Horace Greeley’s famed advice— provided that he doesn’t go so far West that he reaches the expensive coast.
You can get some idea of the fire hose power in the cost of living difference by doing a simple exercise. Visit www.homefair.com on the web and check out their salary calculator, a tool that figures out how much salary you need in one city to replace the salary you are receiving in another. I asked the calculator how much it would cost to replace a $150,000 salary in Palo Alto, California in major Texas cities.
The answer: $58,204 in Austin; $55,201 in Dallas; $49,606 in Houston, and $47,014 in San Antonio. Similarly, it would take only $42,371 in Dallas to replace a $100,000 salary in Mountain View, California.
There is a lot to quibble about here. Palo Alto is the epicenter of Silicon Valley. People can, do, and must, live in less expensive areas of California. But you’ve got to admit that there is a lot of room for quibbling when you can cut your cost of living by two-thirds simply by moving from Palo Alto to San Antonio. More important, there are dozens of major areas on the East and West cost that suffer from housing costs that are multiples of housing costs in the Southwest.
So ask yourself: if you want to build a new plant or research facility, where will you do it? Not in the Northeast. Not in California. No, you’ll make a list of cities.
Most of them will be in the Great American Growth Triangle.
Related columns:
Scott Burns, “The Simplicity Manifesto,” 3//2019 https://scottburns.com/the-simplicity-manifesto/
https://scottburns.com/on-the-importance-of-being-a-dull-investor/
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Photo: Francesco Ungaro
(c) Scott Burns, 2022