Five Years, What a Surprise

Part 1: De-Urbanization in the US

Note to reader: This is the 1st part of a 5-part series examining and predicting trends in human behavior in US over the next five years.

Times Square During the Great Depression (AP)

In “Five Years”, the first track on Ziggy Stardust, David Bowie imagines a world that has just found out they have five years left. He sings:

“News guy wept and told us,
Earth was really dying
Cried so much his face was wet,
Then I knew he was not lying”

Sounds a bit like the world we live in now, doesn’t it?

Unlike the characters in Bowie’s fictional world, I don’t think we are doomed. But in the aftermath of Covid-19, the world will certainly change. People will change. Habits will change. Common assumptions will change.

Common assumptions will change. Internalize that. They way we live, eat, buy, sell, interact, socialize…the we way act is based on the way we think, and the way we think is based on our assumptions.

(Here’s a simple example of the above: I assume people value seeing me wear a luxury purse. I think a luxury purse will provide me satisfaction. I go out and buy a luxury purse. Unwind the base assumption, and the subsequent thinking and acting disintegrates. This line of thinking is fundamental to Maslow’s Hierarchy of Needs, which we’ll dive into in depth in Part 2.)

Let’s start by taking a look at where we live, and how this may change over the next five years.

De-Urbanization…how’d it go down last time?

It’s recently been a popular opinion in real estate circles that Americans will move out of cities, favoring the suburbs or the countryside. The decade from 1930–1940 is an apt comparison for modern times. Why the great depression, you ask? Social distancing will be a short-term phenomenon, long outlived by Covid-19’s economic impact. Let’s say social distancing prolongs for even another two years…the economic fall out will likely last a decade. This is why the decade of the Great Depression is our best comparison to understand a historically significant economic downturn. Though it’s not a perfect comparison, most of the takeaways do apply.

The Urban Population of the USA has steadily increased since Independence (Source: US Census Data)

As of the 2010 census, 80.70% of Americans lived in cities. Compare this to 1930, when the urban population of the US was 56.1%. By 1940, it was 56.5%, an increase of 0.40%. The population of the US as a whole increased by 7.27% from 1930–1940 so, overall, relatively less people lived in cities.

Let’s dive deeper. Take a look at this chart:

The 10 Biggest US Cities (Source: US Census Data)

From 1930–1940, NYC actually grew 7.57%, and LA grew 21.5%. These cities, and to a lesser extent Baltimore and Detroit, increased in population during the Great Depression, and crushed the national urbanization average from the same period of 0.40%. New York beat the average by 7.17%, and LA beat the average by a whopping 21.10%. Smaller cities, like Philly and Cleveland, shrunk.

New York City has historically followed the overall US rate of urbanization, except outperforming during the 1930s:

New York Population from 1910–2010 (Source: US Census Data, New York City Department of City Planning)

(Wow, huge de-urbanization across the board in the 1980s.)

Census data from the Great Depression tells us that people moved out of Tier B cities (Cleveland/St. Louis/Boston/Pittsburgh), but moved into Tier A cities (NY/LA).

Now let’s dive into the more important question…why?

As the economic impact takes its slow, sweet time to permeate every part of society (trust me, it will touch everything soon, it’s just a question of when), people will look for new opportunity. Some people can digitize their skills. But most cannot: service, labor, construction…any sort of manual or technical skill cannot be digitized. I can tell you how to fix a legal contract on zoom, but I cannot come to your house and fix your plumbing in any digital manner. As people look for opportunities to make money, they will move to the cities where opportunity is more available. Opportunity means providing your services to other people. The more people around to pay for your skill, the more attractive that market is. People will aggregate where there are many other people, ie, Tier A US cities like NYC, LA and Chicago.

Immigrants arriving at Ellis Island in the early 1900s (Library of Congress)

Speaking of economic trends, what about immigration?

Note: I look at immigration trends as an economic thing, not a political/policy things. In the long term, economic and population data should factor in any short term shocks, like policy. Also, talking about politics makes me angry.

While doing a deep dive on urbanization, specifically with NYC, immigration started looming in my mind as a key variable. As a child of immigrants myself, I constantly ponder: why did my parents come to the USA…and more importantly, why did I stay here? In a nutshell, it’s economic opportunity, with a mild dose of personal freedom. (You may argue personal freedom is a bigger factor…hold that thought till we dive into Maslow next week.)

The similar theme echos back to any mass immigrant groups. I’m a byproduct of the Indians and Russians of the 1980s quant-driven immigration (we’re good at math, Americans are bad at math, we get paid for being good at math). Most Americans are a byproduct of the early 1900’s exodus from Europe.

Take a look at NYC’s foreign born population over the decades:

NYC Foreign Born Population by Decade (Source: NYC Department of Planning)

I always knew NYC’s foreign born population was high, but I was pleasantly surprised it was this high (go NYC!). Look at the trend from 1930 to the 1970s. NYC got more white over the years, until the Reaganomics glory days of the 1980s attracted immigrants again.

National immigration trends are pretty similar:

Population of US Immigrants (Source: US Census Data)

NYC mirrors the trend for the country from 1930–1970. Right now, it’s too early to tell on immigration trends, as the patterns cover longer time periods. Something to think about and keep an eye on.

PS…If you live in NYC, and haven’t been to the Tenement Museum, make sure you go ASAP when the stay-in-place cools down. It’s an amazing collection of NYC’s immigrant history.

Predictions

Domestic: In five years, NYC, LA, Chicago will grow at a rate higher than the US population growth rate. Tier B cities like Nashville, Atlanta, San Fran, Seattle and Boston will decrease >15% in total population.

International: In five years, we will start to see decrease in immigration to the US, and this will continue over the next 2–3 decades. Tough to predict exact numbers on this one at the moment.

Conclusion

The short term economic ramifications of Covid-19 should cause more Americans to move to the big cities. The long term economic ramifications should decrease incentivizes for foreigners to move to America.

As David Bowie sang,

“We’ve got five years, what a surprise
Five years, stuck on my eyes
We’ve got five years, my brain hurts a lot
Five years, that’s all we’ve got”

There will be massive change in where we live over the next five years (and longer). Let’s buckle up and enjoy the ride!

Next up:

“Save the Slogans”

Part 2: De-Leveraging Happiness, as Maslow Would Have”