by Richard Florida
James Surowiecki notes that:
"[In] 2008, for the first time in sixteen years, the finance and insurance industry shrank. Since 1980, this sector's share of the economy has grown by almost half. Now, apparently, the worm has turned."
A couple of months earlier, Eric Janzen predicted that:
As more and more risk pollution rises to the surface, credit will continue to contract, and the FIRE economy--which depends on the free flow of credit--will experience its first near-death experience since the sector rose to power in the early 1980s. The FIRE economy--which depends on the free flow of credit--will experience its first near-death experience since the sector rose to power in the early 1980s.
The FIRE economy - which stands for finance, insurance, and real estate - is extraordinarily concentrated geographically. FIRE made up a whopping 40 percent of Charlotte, North Carolina's economy in 2006. But that didn't make it the most FIRE-dependent economy in the nation. That distinction goes to Des Moines, Iowa. FIRE made up roughly a third of total economic activity in Bridgeport and Hartford, Connecticut; Bloomington, Illinois; and greater New York, as well as resort towns like Naples, Florida; Myrtle Beach, South Carolina; and Ocean City, New Jersey.
But, as of yet, the popping of the FIRE bubble doesn't appear to be having any substantial effect on regional unemployment. There was no statistical relationship at all between the FIRE share of regional economies and the unemployment, measured as either the Feb. 2009 unemployment rate and as the change in that rate between Feb. 2008 and Feb. 2009, according to number-crunching by my colleague Charlotta Mellander. There was a slight positive correlation between real estate and both the unemployment rate (0.13) and the year-over-year change in unemployment (0.17).
But one aspect of real estate economies - construction - does appear to put regions at substantially greater risk. The correlation was higher between regional share of the construction industry and the unemployment rate (0.18) and even more so for year-over-year change in unemployment (0.23).
Hard to say why, but one reason may be that regions with a large share of finance and insurance jobs are economically more diverse. Or perhaps finance and insurance workers have skills that are more flexible, enabling them to shift jobs relatively more easily than say construction workers or blue-collar workers in general.
One thing is clear: the recession continues to hit hardest at older industrial regions and those with sprawl-driven, construction-heavy economies. Those with large shares of finance and insurance jobs seem to be adjusting relatively well.
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