'Best places to live' may not be the best places to live

Newly released 2020 census data give us a better sense of where Americans think the best places to live are. Cities such as Phoenix, Dallas, Houston and Las Vegas continue to be popular, maintaining the strong population growth that's defined them for the last half-century. Others, such as Buffalo and Cincinnati, have reversed decades-long declines in population, leading to proud claims of urban revival. Still more, such as Detroit and St. Louis, continued to lose people as they have for the last 70 years.

What's also clear from the data, though, is that population growth may no longer be the best way to measure the health of U.S. cities. What look like the "best places to live" may not, in fact, be the best places to live.

Historically, the U.S. has featured two distinct models of urban growth. The first, in place for a century or more, might be called the demand model. In this case, a variety of factors from jobs to affordable lifestyles to pleasant climates attract people to new places. The primary exemplars are the Sun Belt cities that have grown dramatically in recent decades.

The second is the asset model, which has become more prominent since the 1980s. In this case, older cities that are well beyond their initial boom phase of development have built on their corporate, institutional and amenity assets to attract people. They've placed bets on economic sectors in which they were already particularly strong such as technology, finance, universities and medical centers, thereby arresting their population declines.

Interestingly, the new census data appear to show a third category of cities developing — metro areas that are booming economically without adding new residents. I reviewed data on population growth and per capita GDP growth for the 106 metro areas that had more than 500,000 people in 2010. By 2019, population growth for those 106 metros averaged 8.4%, while per capita GDP growth averaged 32.3%.

Metro areas such as New York, Los Angeles, Chicago, San Francisco, San Jose, San Diego, Portland, Seattle, Salt Lake City, Miami, Minneapolis-St. Paul, Boston and Denver all registered higher-than-average economic output. Some, including Seattle and Salt Lake City, also saw their populations grow strongly. New York, Los Angeles and several others saw no dramatic shifts in population.

Most surprisingly, a handful of Rust Belt metros — Chicago, Detroit, Cleveland and Pittsburgh, among others — outpaced the average per capita GDP gains yet actually lost population.

That link has since been severed. The meteoric rise of technology over the last 50 years has made economic productivity possible without vast numbers of workers.

In the case of Rust Belt cities, the demand model, fueled by manufacturing, that worked for much of the 20th century fell apart. While that's also true of many other cities, the collapse hit especially hard in the midsection of the U.S., where upwards of a third of all jobs were in a manufacturing sector that disappeared.

For years, as they struggled to save all the factory jobs they could, these cities often overlooked their other assets. It's only in the past couple decades that they have effectively emulated the likes of New York and Los Angeles, investing in knowledge sectors such as tech, finance, and "eds and meds" to match today's economic landscape. That's led to productivity gains even without adding more people.

Conversely, many of the most popular cities around the country appear to be growing without a commensurate increase in economic productivity. Several Sun Belt stars — Orlando, Lakeland, Tampa/St. Petersburg, Deltona/Daytona Beach, Jacksonville, Cape Coral and North Port/Sarasota in Florida; Dallas and San Antonio in Texas; Las Vegas and Phoenix — saw average per capita GDP gains lower than the overall average for the 106 largest metros.

The places we've traditionally thought of as "winners" — the big coastal cities and Sun Belt metros — may soon face problems. The former are rapidly becoming unaffordable and driving out middle-class families. The latter could suffer from a glut of under-skilled workers in an environment that increasingly demands high-skilled labor.