Welcome Visitor Thursday, June 13, 2024
Tennessee economy tied to cities' tech-weighted industry expansion
Comment Print

TWO handfuls of Tennessee cities saw their rankings rise up or down in the Milken Institute's Best Performing Cities (BPC) report on U.S. metropolitan regions.

The BPC report released Feb. 17 included 10 Tennessee metro areas large and small. They were among 401 U.S. cities examined.

The study reflects some of the economic impact of the coronavirus pandemic, still unfolding.

Half the Tennessee cities in the study improved their 2021 standing, relative to numbers Milken reported in 2020.

The Tennessee gainers: Davidson/Nashville-Murfreesboro-Franklin (ranked 8, up 6 places from 14); Morristown (24, up 62 places from 86); Cleveland (58, up 132 places from 190); Chattanooga (62, up 23 places from 83); and, Knoxville (91, up 8 places from 99). That Cleveland score was the largest one-year improvement among the 401 metros ranked.

Five Tennessee metros with rankings that fell: Johnson City (ranked 112, down from 96), Jackson (132, down from 67), Clarksville TN-KY (134, down from 110), Memphis TN-MS-AR (166, down from 152), and Kingsport TN-VA (181, down from 179).

The Milken Institute plans to publish this spring more detail on the BPC assessments and information about best practices for defining and implementing efforts to improve cities' performances, factoring-in each city's BPC data.

Meanwhile, one of the BPC report's most important messages is that BPC ranking results could look very different, next time around.

That's because city economies are dynamic and fluctuating, and external forces are relentless.

There's perhaps no better evidence of that than the fact that San Jose and San Francisco, which are often rank in the top five slots of such rankings, fell in this round to 24 and 22, respectively, due largely to high housing costs and short-term job losses in their markets.

BCP researchers tagged Provo-Orem, Utah, and Idaho Falls, Idaho, as overall Best-Performing Large City and Small City, respectively.

While prospects for U.S. and Tennessee recovery seem to be steadily improving, few state and city agenda-shapers can afford to wait for a better reality before setting strategy and taking action.

The growth in the value of the U.S. economy's GDP is seen by some as returning to its pre-pandemic level later this year, although recent government and media reports indicate the absolute numbers of people on payrolls is not likely to reach pre-pandemic levels until 2024 -- and the percentage of would-be workers within our steadily expanding labor supply might not reach pre-pandemic levels til sometime in 2025-2026. National reports indicate manufacturing may not reach pre-pandemic levels for nearly a decade.

Many state- and city-shapers are under pressure to make decisions on an accelerated basis, based on what we think we've learned about recovery, growth, infrastructure, inclusive economies and the social, educational and health determinants, thereof.

At the micro-level here in Tennessee, these and other factors could heavily influence, for example, who the Memphis Chamber and Metro Nashville government hire to fill their currently vacant economic-development jobs, or how rapidly Memphis proceeds with its land-use planning and the advancement of its new Medical District.

Meanwhile, next week Gov. Bill Lee and the General Assembly resume their march toward agreements related to myriad issues and options -- for example, whether or not to fund a proposed billion dollars worth of state university construction; further tranches of funding for the Memphis Regional Megasite; and-or, the smaller things, such as more money for rural broadband, farming innovation, and matching grants to encourage technology transfer and commercialization, among a myriad of other items vying for attention and funding on Capitol Hill.

NASHVILLE's favorable ranking in the BPC review naturally includes references to the economic roles of the city's healthcare, healthtech and postsecondary education institutions among the city's legacy strengths.

However, the Milken report focuses more on factors that have resulted in Nashville "emerging as a hot spot for the tech sector and entrepreneurial expansion" -- a rise that brought an 11.5% GDP surge in high-tech GDP during 2018-19, and 55.4% growth in high-tech GDP from 2014-19.

The Nashville Metro also experienced during 2014-19 exceptionally strong job growth of 19.1% and wage growth of 38.1%.

Nonetheless, say the BPC authors, Nashville was found to be somewhat "held back" by its concentration in too-few of 20 key industry sectors used in the BPC analysis.

Using pre-pandemic data, they found that Nashville has achieved "concentration" in only 6 of the 20 key industries use in the researchers' comparisons.

Although Nashville has other initiatives underway and the Milken Institute will publish related "best practices" this spring,l VNC asked Milken Senior Policy Analyst and BPC Co-Author Misael Galdamez for his thoughts regarding the mindset that is required to get started.

Galdamez replied, in part, "For Nashville, the path forward is steady and hard work. It requires building an ecosystem around existing innovation assets -- like research universities and health-tech start-ups -- to ensure that local talent has room to grow and the ability to stay. It also includes making the necessary investments (like broadband infrastructure) and working to meet industry needs at a local level (for instance, land use and workforce needs)."

Nashville scores by sector
Click here for Large Image

Nashville's scores by sector appear in the accompanying chart, which was provided by the Milken team at VNC request.

Those scores indicate whether the local economy's shares of individual industry sectors are equal to, below or above the corresponding national economic sector shares.

The scores provide state and local analysts an additional lens through which to view potentially leverageable opportunities in targetable sectors, while shaping policy, program and spending decisions that can help, rather than hamper the economy.

Based on its numbers, Nashville could select targets by leading from strength, i.e., focusing on its 6 "over-represented" sectors, which include sound recording; medical and diagnostic labs; data processing, hosting, and other IT; machinery and equipment manufacturing; production of magnetic and optical media; and, motion picture and video production, among others.

Nashville could also focus some effort on its 14 under-represented sectors and segments, such as telecommunications; software development; computer systems design; scientific R&D; medical equipment and supplies, and others listed.

The metro economies assayed by Milken researchers were, and continue to be heavily influenced by the cities' investment and policy choices -- particularly choices related to increasing the local economic presence of any or all of 20 industries the researchers identified as major determinants of each city's economic progress.

Simultaneously, the Milken report says, inclusive and equitable participation by metro and metro-linked populations is essential.

In the Milken report, a metropolitan area's degree of achievement of economic inclusiveness can be represented by the degree of affordability of local housing, a precept widely accepted by government and industry alike (e.g., the NAHB/WellsFargo index).

As the nation struggles to recover from the current pandemic-induced recession, state and local actors will be forced to make both adaptive and innovative investment and policy choices, and those choices will heavily influence the well-being -- and rankings -- of metro economies in 2022 and beyond.

The latest Milken findings are meant to enable cities to compare their relative economic performances with those of other cities, and to then make investment and policy decisions that help spur further economic growth, with inclusive and equitable participation by all citizens of each metropolitan statistical area and other nearby communities with which they have social and economic ties.

Note that a score of "1.0" indicates that the share or proportion of Nashville economic activity (GDP) attributed to a given industrial sector is identical to the proportion of the U.S. economic activity in that same industry.

A local share greater than 1.0 means that the local industry is more concentrated than the nation's share of that industry, while a local share less than 1.0 signals an industry less concentrated than on the national level.

Such "shares" or ratios (known to professionals as "locational quotients" or LQs), can be used for many purposes, including identifying existing sources of economic and workforce strength, or for attracting relocating employers, employees or other market entrants.

VNC interprets Milken's description of its BPC methodology as having resulted in Nashville being the only Tennessee city with sufficient performance to qualify for ultimate consideration for those two BPC accolades.

The Milken Institute Study -- Best Performing Cities 2021, Foundations for Growth and Recovery -- was authored by the above-mentioned Misael Galdamez, Charlotte Kesteven, and Aaron Melaas, with input and assistance from other colleagues, including Kevin Klowden, executive director of the Milken Institute Center for Regional Economics and California Center. A related press release is here.

Related reports: Milken | UTBCBER | Brookings | ITIF | TEConomy18 | Cyberstates08 | TNInnoRoadmap06 - VNC

. last edited 1203 21 February 2021

Related Articles
Tags: Aaron Melaas, Charlotte Kesteven, economic development, entrepreneurship, jobs, Kevin Klowden, megasite, megasites, Memphis Regional Megasite, Milken Institute, Misael Galdamez, technology, wages, West Tennessee Regional Megasite

Powered by Bondware
News Publishing Software

The browser you are using is outdated!

You may not be getting all you can out of your browsing experience
and may be open to security risks!

Consider upgrading to the latest version of your browser or choose on below: