As the "superstar" cities of the United States prosper, the weaker ones are left behind

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NASHVILLE, Tennessee (Reuters) – Deep in the financial crisis, when the world was denying the debt and fighting for the worst, city officials here were gagged in what appeared to be an absurd direction and spent $ 600 million on a new Convention Center.

The center district is represented in Nashville, Tennessee, United States, January 7, 2019. Photo taken January 7, 2019. REUTERS / Howard Schneider

A decade later thousands of new hotel rooms stand on the site, including a 33-story Marriott which is only a small part of the investment and job boom that made Nashville the envy of other cities looking to find their place, a cemented image when Amazon announced that it would put a logistics center of 5,000 jobs here.

"Look at the horizon, see the activity – whether it's a Monday night or Saturday night – the city is prosperous," said Tom Turner, president of the Nashville Downtown Partnership.

It is in many ways a positive story of how the new winners can emerge even after a devastating recession. But it also represents an important dividing line in the resulting recovery: winning places like Nashville have won big, often for reasons that obviously can't be replicated or quickly, while much of the rest of the country has struggled to stay in balance or slip behind.

It is a schism that has helped Donald Trump rise to the presidency with his enormous support in the less populated and slower growing areas. The division is also worrying Central bankers in the United States and economists are worried about what happens if large portions of the country never recover.

"The superstar cities have gone so far," said MIT economist Simon Johnson. He recently requested a $ 100 billion annual federal investment in basic research centered in cities like Rochester, New York, which have a university base and graduates to compete as innovation hubs.

"There is no other entity besides the federal government that has the ability to move the needle on this."

WHERE GROWTH IS … AND IT IS NOT

The US economy has entered a second decade of growth this month, marking the longest expansion ever recorded.

In many ways, the country has apparently recovered from a 2007-2009 recession that was the worst recession since the 30s. Unemployment is close to a minimum of 50 years, household income has increased and the country is at a point in the economic cycle where workers usually see their earnings more robust.

But a Reuters analysis of federal data shows how unequally the loot of growth has been divided.

In a ranking of 378 metropolitan areas based on the way in which their share of national employment changed from 2010 to 2017, 40% of the new jobs generated during that period went to the top 20 places, along with a similar quota of additional salaries.

These cities represent only about a quarter of the country's population and are concentrated in the rapidly growing southern and coastal states. No one was in the northeast, and only two were inside the "rust belt" – Grand Rapids, Michigan, and Detroit bouncing.

Nashville ranked eleventh on the list, keeping company with other southern cities like Charlotte and Atlanta, and the usual rapidly growing suspects like Seattle and San Francisco.

The decline from there is steep. The next series of 20 cities has captured around 10% of the jobs created from 2010 to 2017, almost 7.5% of the population.

Down below, 251 cities, many of them scattered around the heart and in the industrial northeast, have lost their workload.

It is a map that comes close to Trump's election results: of 221 counties that voted for President Barack Obama in 2012 and Trump in 2016, only three are in metropolitan areas that have achieved the highest number of jobs. Sixty-two are part of the metropolitan areas where the percentage of national employment has decreased.

MIRACLE OF THE CITY MUSICAL? O HAPPY ACCIDENT?

Among the winners of the decade, many have an obvious story to tell – Houston as a long-time oil city in the midst of a boom in power generation in the United States or San Francisco as the epicenter of all things technology.

But interviews with entrepreneurs and officials in Nashville point to a number of factors behind his success, including some that were out of the control of the city, such as the lack of a state income tax and others associated with his unique local resources .

The decision, once in the generation, to bet on the convention center demonstrates the importance of political leadership, something that Federal Reserve officials and economists have begun to consider central to the success of a local jurisdiction. But it also depended on the celebrated roots of country music in the city and the seven-night festive scene every week as a draw for important conferences and fairs, something that cannot simply be reproduced by other municipalities.

With falling interest rates and companies competing aggressively for construction work, "you could never build at that price again," said Turner of the convention center. "He gave the city a different way of looking at things. Coming out of the recession you had a new momentum."

For some cities, the presence of legacy companies positioned in growing sectors such as health care can give a boost. But for others, whose anchorage firms may have been in industries that have fled abroad, such as textiles, the hill is more difficult to climb.

The jobs in the private sector in Nashville have increased by 31% since the national occupation hit bottom in 2010, from 622,000 to around 820,000 in 2017, double the rate of national labor growth of around 15 %, according to federal data.

The 40 best metropolitan job creation areas have seen employment expand by 23% during those years. Jobs in other metropolitan areas grew by around 11%, while in the counties outside the metropolitan areas the job growth rate was around 4.5%.

WHAT IS LUCK TO DO WITH IT?

And there are whims of history. The zoning rules of downtown Nashville were notoriously severe. When they were relieved in the 90s, the result was rapid growth from a low base, as the builders turned the empty land into new neighborhoods.

It turned out to be a boom, but in reality it was more "upside" after years of construction, said Jay Turner, whose MarketStreet companies developed the now trendy Gulch district around an abandoned railway yard .

Jay Turner, who is not related to Tom Turner, said Nashville "was underdeveloped due to the zoning" that he had put a prize on the offices and parking lots.

That kind of surge can only happen once, and not in all cities that have already been completed.

Turner said he created a dynamic in which "people say we need exposure in Nashville".

Fed officials are taking the gap between economic performance between cities and regions seriously. Providing time to "recover" between delayed demographic groups and areas of the country is one of the reasons behind the decision by politicians to keep interest rates low and to consider reducing them in the coming weeks.

The president of the Atlanta Federal Reserve Bank, Raphael Bostic, has made the issue a priority in his travels and research, disconcerting why places in his district like Atlanta have stepped forward while others have not.

Presentation (3 images)

It is not clear, he said, that there is a mix of uniform policies that could easily spread wealth.

"Every city has its own unique narrative of why it came to where it came from," Bostic said. "I don't think there's a general formula that if you hit every point at a certain level you guarantee a result."

Reporting by Howard Schneider; Edited by Dan Burns and Andrea Ricci

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