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- US job creation is shifting from rich coastal cities to the Sunbelt and Midwest.
- The shift is in large part a result of skyrocketing housing costs in coastal cities.
- The cities with the lowest average wages are experiencing the fastest job growth.
Americans are heading South — and so are their jobs.
A new analysis from the Economic Innovation Group finds that the cities that used to be employment superpowers no longer hold that title. Instead, "for the first time since the Great Recession, the richest metro areas are no longer creating the majority of new jobs in the U.S," August Benzow, research lead at EIG and the author of the report, found.
While coastal powerhouses like San Francisco, New York, Los Angeles, Seattle, and Boston used to create new jobs at a much faster clip, Sunbelt metros like Gainesville, Georgia, and Hilton Head Island in South Carolina, are now leading in job creation.
Cities in the Midwest and inland cities in the Northeast, including Wenatchee, Washington, and Lansing, Michigan, are also seeing stable job growth rates, in part because of their relatively affordable home prices, the EIG analysis found.
The trend is just about a year old, but it's part of a shift that started with the geographic reshuffling of the pandemic and has only continued as the cost of living grows in the most expensive cities. And it shows yet again how the American economy is headed south and towards the middle — away from the previously dominant coasts.
The cities with the lowest average earnings are seeing the fastest job growth, the analysis found. This is in part because these cities have a lower cost of living — driven by lower housing costs — as big coastal cities have become increasingly unaffordable.
"Employers are following where people want to live and where people can afford to live," Benzow said. But he added that some employers are proactively moving to more affordable regions not just to follow the workforce, but also to save money on office space and take advantage of other financial incentives.
A slowdown in the technology sector is helping drive this redistribution of jobs, EIG found. But a similar shift is happening in a variety of industries. "These sectors tend to be pretty connected. If you have more professional services jobs in a place, you tend to also get more retail jobs and other service sector jobs," Benzow said. The job data is based on where the employer is located, rather than where the worker lives, so this data doesn't capture remote workers who live in one place, but are technically employed in another.
The EIG analysis is the latest data point to showcase how the hiring market is shifting in the wake of 2020. A Gusto analysis of over 30,000 small and medium-sized companies using its payroll platform found that between pre-pandemic times, which span from January 2018 to March 2020, to more recent times, which span from April 2022 to December 2023, hiring shares have picked up in smaller and medium-sized cities. At the same time, major coastal cities like New York City, Los Angeles, and Seattle saw their hiring shares decline. It's yet another sign that the reverberations of the pandemic's great economic and geographic reshuffle are still being felt.
The richest coastal cities are also suffering from negative perceptions about safety and public order, and those reputations likely also play a role in people leaving.
"Some of that's justified and some of that isn't, but I think they're not regarded in the same sort of way that they were before the pandemic, in terms of being the most desirable places to be in the country," Benzow said.