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October 5th, 2005 Zach Dundas | News Stories
 

Portland's New New Economy

High unemployment. More businesses. Lower income. More newcomers. It ain't business as usual.

     
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These are strange times in Portland.

In many ways, it seems like our economy is mired in muck. Oregon has the second-highest unemployment rate in the country. In Multnomah County, the jobless rate is a heartburn-inducing 6.4 percent, higher than the national average.

The news from the business front often feels like a chronicle of terminal decline. Tektronix, once the center of Portland's tech economy, reports slipping profits. Intel is investing...elsewhere. Chip manufacturer LSI outsources 90 jobs from Gresham to Asia, is selling its plant and may be cutting another 500 jobs.

The headlines aren't the only grim tidings. The latest stats show that high-tech manufacturing, which replaced timber as the region's economic engine, peaked in 2000. Metals manufacturing, another vital industry, employs almost 10,000 fewer Portlanders than it did five years ago. Median income in the city is down.

On top of all that, the city's business leaders seem on the brink of revolt. They complain that taxes are high, fees are exorbitant and City Hall is in the hands of anti-capitalists. And no one who walks around downtown could miss the vacant storefronts and growing corps of semi-lawless street kids.

Jesus. What is this, Appalachia with latte shops?

On the other hand...if you shift perspective, Portland looks like it's booming. Big-time.

Most obviously, there's the real-estate explosion. Median home prices have shot up faster in the past year than any time since 1991. Downtown highrise apartments are fetching eight figures. Skycranes cluster at either end of downtown, building the luxe new South Waterfront district (where condos are selling for record prices long before completion) and pushing the Pearl District northward.

Yes: a stretch of low interest rates, tax abatements, empty-nesters, Californian investors-all play a role. But something else is going on. People are moving to the city. According to the U.S. Census, Portland proper's population went from 437,319 in 1990 to an estimated 533,492 in 2004. Compare that nearly 22-percent jump to much slower growth in San Francisco (7.3 percent over the same period) or Seattle (about 11 percent), and Portland looks like a West Coast star. Compare it to the slow death of, say, Cleveland-smaller now than at any time in the past 100 years-and it looks like a national phenom.

And as for unemployment, the Portland metro area is actually adding jobs. Federal labor stats show the city's 2.2-percent job-growth in the past year tops San Francisco, Denver, Atlanta, Chicago, Houston, New York and Minneapolis, among other cities. In general, Oregon's unemployment rate obscures its job growth, because people are moving here faster than the job market can absorb them.

Not only is Portland attracting people, it's attracting some of the most economically desirable people alive. Ever since Richard Florida's 2002 book The Rise of the Creative Class, cities everywhere have obsessed over luring young, smart, mobile professionals. In that respect, Portland is kicking butt, attracting hordes of college-educated 24- to 35-year-olds at a time when that group is shrinking nationally.

"They're like the spotted owl," says local economist Joe Cortright, whose study of these phenomena is gospel among Portland boosters. "If they're leaving, you've got a problem. If they're coming, you're doing something right."

So what is going on? How can a city that looks so stagnant in some areas be booming so dramatically in others? Or, as Portland State urbanist Ethan Seltzer puts the question, "What's a better measure of the economy: unemployment numbers or skycranes?"

In conversations with Cortright, Seltzer and other economists-and with entrepreneurs, artists, natives, newcomers, HR recruiters and professional-association leaders-a theme emerges. Portland has entered a new economic era. What makes the town tick? Nothing tangible, that's for sure.

For most of Portland's 162 years, this city's economic foundations were obvious. It grew because it was the closest port to the Willamette Valley farm country. It became a timber town because it was headquarters for the companies that cut the trees. In the '80s, the economy got taken over by high-tech hardware-silicon, oscilloscope and circuit-board manufacturers were attracted to the Portland area in large part because land, water, power and labor were cheap.

Today, only two of the metro area's biggest 25 employers-Intel and Freightliner-actually make anything here. The economy has become far more reliant on services and brainpower-on patents (Intel gets more from Oregon than from anywhere else), health care, education, and the design and marketing of sportswear made in the Third World.

One might say this is just a sign of the times-does America make anything anymore? But there are still places like Detroit, where hands-on industry is still vitally important. (And General Motors alone still makes up 1 percent of the American economy, according to some economists.)

No more does any one industry drive Portland's economy.

"The things that have always been true are still true," Cortright says. "The beach is still there. The mountains are still there. What we're finding is that those things are becoming relatively more important to people. So is the built environment and the social character of the city."

Fine. People come here, hauling their talents, money and degrees. And then what? Serve each other coffee all day? What about the city's obviously shaky jobs base and notorious anti-business climate?

"There's a big difference between what I'd call the 'folk' economy and the real economy," says Alan Durning, a researcher at Seattle's decidedly left-leaning Northwest Environment Watch. "The whole idea that your economic base consists of factories, farms or massive companies is a miserable model for explaining what really happens in any given place. What's really going on is a whole lot of people doing things for each other."

Call it the really new economy-one in which the city's most important product is itself, and where people choose to live here first, then cobble together work lives that are often unconventional.

"What makes a region healthy?" Cortright asks. "What adds to the long-term economic health of everyone here? It's really apparent how we're doing it. It's not big companies, and it's not big buildings or Donald Trump capitalism. It's by attracting certain groups of people."

Could it be that the experiment Portland has conducted on itself over the past 30 years-the push for density, transit and "livability"-is paying off?

According to Nate Palmer, a 30-year-old corporate finance specialist for Intel, a good place to find the warriors of the new new economy is the Monday-morning line for Southwest's flight from PDX to the Bay Area.

"It's a little eerie, the number of people who are on that flight all the time," Palmer says. "You know the regulars. They know to come early."

Palmer, a bright New York University MBA, is there every week. He wakes before dawn, catches the flight south, and clocks 12-hour days at Intel's global headquarters in Santa Clara till about 3 pm Thursday, when he flies back to Portland.

Palmer and his wife, a lawyer, could presumably live just about anywhere. When they decided they'd had enough of Manhattan (and sold their apartment for $1,000 per square foot), they had just one target: the Northwest. Intel offered him a job-in Santa Clara. He said no deal, unless he could commute from Portland. The company said OK.

Palmer realizes this is a little crazy. Between funding his own interstate commute-$170 per round trip-plus renting an apartment and keeping a car in Santa Clara, he is taking an economic hit.

"The thing is, the Northwest is a far better place to live than anywhere else in the country."

Palmer figures that if he sticks with Intel, he'll eventually get a chance to transfer to Portland. In the meantime, he's content to have three and a half days of mostly uninterrupted time with his wife every week. The two luxuriate in long hikes with their 50-pound springer spaniel. They dig the view from the Council Crest home their New York real-estate sale helped buy, and they explore Portland's restaurant scene.

"We're bending over backwards to make this happen," he says. "But there are a lot more of me out there."

Rian Moore, a 33-year-old filmmaker, isn't a newcomer but a native. He has owned a house in Southeast for eight years. He's a freelance film producer who spends more time in Los Angeles, Toronto and New York (where, for example, he flew last week to shoot a Verizon commercial) than here. Yet Moore says he's not about to trade his sweet PDX setup for permanent digs elsewhere.

"I'll fly out for a couple of weeks, fly back for a week or even just a few days, then be off again," he says. "I have no work-related reason to be here. But my mortgage is fairly cheap. And when I come back from L.A., the difference is so dramatic-you can get around here. If you want to meet up with five friends at some bar, it takes a half-hour to set up. In L.A., you'd have to plan for a week."

Palmer and Moore both sacrifice convenience to live in a city that seduced them but doesn't employ them. There is another breed that is attracted to Portland, ditching gainful employment elsewhere and moving to Portland for reasons that sound more like New Age meandering than career planning.

"There's something spiritual going on in Portland," says Irma Valdez, a 34-year-old real-estate agent who sells houses all over the metro area. "That's going to sound funky and weird, but it's true."

Um, OK. Ordinarily, you would suspect a real-estate agent that talks like this is trying to sell you something. But consider her story. Valdez was a federal prosecutor in Washington, D.C. So was her husband. In between locking up criminals for Uncle Sam, Irma and Steve lived the Northeast Corridor good life.

"We were hobnobbing in Paris, flying to Montreal for the weekend," she recalls. "I was spending $1,000 a month on suits."

Then, 9/11 happened and, as they say, changed everything. For Valdez and her husband, the attacks turned up the volume on a desire to chuck it all. A few years before, the two had paged through The Geography of Nowhere, James Howard Kunstler's screed against suburbia. At the time, Steve pointed out that Kunstler had good things to say about Portland, Oregon.

"I said, 'You're full of shit,'" Valdez says now. There was no way that she, a dedicated cosmopolitan, was going to live in backwater Oregon.

An eight-day visit to Portland-in November, no less-changed her mind. She and Steve turned in their high-security-clearance D.C. credentials and moved, with no jobs and, really, no plan.

Obviously, Valdez picked a good new career. In the course of selling houses, she says she meets one buyer after another who is doing almost exactly what she did. In some cases, they're classic empty-nesters-a couple from Santa Cruz recently bought a Multnomah Village house they don't plan to live in for three years. ("We're already living there in our minds," the husband says.)

Just as often, though, Valdez says she sells to young people who view Portland as their chance to get off the grid (without really, y'know, roughing it).

"I watch the magic happen," she says. "I pick people up at their downtown hotel, and I drive them around town, and I see it. Sometimes, it's one spouse who gets it, and the other one doesn't. And I've literally seen people say, 'I'll divorce you and move here.'"

Valdez isn't alone in observing the way Portland's unquantifiable magnetism drives people to unusual lengths.

"Over the last two years, we've seen a ton of people moving here," says Kim Malek, president of Portland's chapter of the American Institute of Graphic Arts, a professional association of graphic designers. "They're not coming because they have jobs, in a lot of cases. They're coming because they want to be here. My sense is, there's a perception that there's a creative energy here, and a livability that you don't find in other places. There are a lot of freelancers and one- and two-person firms."

And here's where the logic of some of the business establishment's complaints about Portland gets flipped on its head: Some worry that the city stifles free enterprise, and that its perennial failure to attract new big business is a reflection of that. For others, however, Portland looks like a great place to do business-their own business.

"Just the fact that I could incorporate my business for $35 meant a lot," says Christine Lehtonen, who moved to Portland in 2001 after 10 years in San Francisco. (She reckons that, with legal fees, incorporation costs about $2,000 in California.) Lehtonen and a partner now run a marketing and design company, with clients ranging from the Mallory Hotel to Keds.

"There are smart people all over the place," she says of Portland. "And unlike some other towns, they're friendly and approachable. I've heard a lot of people grumbling that the city is hostile to business, but that hasn't been my experience. People don't know how good they've got it. And I get daily emails from people who are moving here-from Chicago, New York, all over the place."

The potential downsides to all this, of course, aren't hard to see. For many, Portland's intangible appeal starts to wear out about the time the paychecks run dry.

"I was asking myself the other day," says Tommy DeFee, an engineer who left the defense-industry gravy train of northern Virginia early this year, "'Why did I move to Portland?'" Of course, he knows why: He was sick of the Republicans, the "Beltway blinders," the D.C. commutes. And he and his wife also thought Portland, with its plethora of cool bars and cafes, would be fun. As he prepares for his first job interview in months, however, it can be tough to focus on that stuff.

Besides producing a floating class of the overeducated and underemployed, this apparent shift from a concrete economy to one based on lifestyle, image and creative opportunity will breed alienation. As much as some people love it, Portland is not for everyone. It can be tough to be unemployed in a town that doesn't quite speak to you.

"I like Portland, but miss New York," says Bernie Longboy, a Hawaiian native who moved here this year because her Roseburg-born boyfriend wanted to return to the Northwest (he'd been working in Beijing). Longboy, who has a graduate degree from Harvard, is struggling to find work for the first time in her life. More than that, she's trying to adjust to a place nowhere near as cosmopolitan as what she's used to.

"It's not New York. It's not Boston, D.C. or Tokyo," she says. "Portland has a very specific niche of people it attracts. And it's all great, but it is very white here. I can walk up Hawthorne, and I'll be the only person of color. Everyone has a tattoo, but to me, that's not diversity."

And it takes only a bus ride through North Portland or outer Southeast to see that there are many people in this city for whom the "creative class," "livability" and the plethora of small graphic-design firms mean less than nothing.

"Every day, I see the seller who says, 'Screw it, I can't take it any more,'" says Valdez. "'I'm from here, and I don't recognize it anymore. The new Portland hipsters only care about walking their dogs and getting their next cup of coffee. I don't want coffee. I want a job.'"

For those who don't like the direction Portland is going-socially, economically, politically and even physically-the trends look ominous. Even in über-Portland neighborhoods like the Belmont and Division districts, the advent of modernist blocks amid 100-year-old bungalows-brick-and-mortar symbols of new sensibilities and cash rolling in-causes unease. And as more and more like-minded people gravitate to the center of the city, those who don't share their philosophies or tastes are likely to feel more and more alienated.

All over America, people are sorting themselves into ever more ideologically and socially homogeneous communities. "It's getting easier and easier to closet yourself with people who are more like you than ever before," says PSU's Seltzer. "And that's kind of spooky."

The process is at work here. The only meaningful divides inside city limits are between moderate Democrats, liberal Democrats and people who think Democrats are fascists. It's getting harder for people without college degrees-and the higher incomes they typically bring-to afford living here. The number of kids in public schools is plummeting.

Will we become a childless adult Disneyland of left-wing pod-people? The many Oregonians, inside the city and out, who already consider Portland a people's republic would not be surprised.

On the other hand, the future always deals from the bottom of the deck. Asa Lovejoy and Francis Pettygrove could not have foreseen that the riverside clearing they named Portland would one day compete in the "livability" sweepstakes with both New York and Ashland, while dueling Mumbai and Vancouver, Wash., on price. The timber barons could not have predicted that "sustainability" would become an economic buzzword. And who knew so much was riding on whether Phil Knight made the Cleveland High School track team?

Portland's appeal to migrants may not have concrete foundations, but it will produce a real result. The fact that so many people are so bullish on Portland does not mean the signs of current prosperity aren't fragile. It's tempting to believe that a wine bar on every corner means the official unemployment rate doesn't matter-that the rules have changed and the old measuring sticks don't apply. Then again, if the dot-com bust taught us anything, it's that it's time to get nervous when people start saying, "The rules have changed." And it is entirely possible that larger forces-oil prices, debt to China, Bush-o-nomics-have surprises in store for all of us.

The only guarantee is that the city will morph into a new form no one could predict. Maybe that's OK. Not like the world is standing still, either.

"I think a lot of what's going on here is emblematic of bigger patterns," says Seltzer. "What matters now is the completely global and the intensely local. With your cell phone, email and the Internet, you can acquire just about anything from anywhere. Once you can acquire anything in the world, what then? People are looking for a relationship with a place."

WW interns Toby Van Fleet and Max Muller contributed reporting for this story.

Oregon's Top 25

The top 25 employers in the Portland metro area as of 2004, along with number of employees.

Only Intel and Freightliner actually make anything here.

Intel Corp. = 14,363
Providence Health Systems = 13,753
Oregon Health & Science University = 11,400
Legacy Health System = 7,907
Kaiser Foundation = 7,433
Portland School District = 6,700
Nike = 5,742
City of Portland = 5,355
Fred Meyer = 5,300
Safeway = 5,282
State of Oregon = 4,865
Multnomah County = 4,428
Wells Fargo = 4,155
US Bank = 4,000
Shari's Restaurants = 3,725
Beaverton School District = 3,533
Southwest Washington
Medical Center = 3,200
Freightliner = 3,100
Portland State University = 3,054
UPS = 2,800
Portland General Electric = 2,781
Vancouver School District = 2,770
Evergreen School District = 2,600
Portland Community College = 2,519
Albertson's = 2,500


Employment numbers cited here come from the Oregon Employment Department's 2004 "State of the Workforce" report on the Portland metro area. The stated theme of that report: "A Decade of Growth Followed by a Precipitous Decline."

Census estimates suggest that the population within Portland city limits slipped between 2004 and 2005. Some researchers dispute that finding.

According to metro-area real-estate agents, the average sale price of a home in the Portland metro area hit an all-time high in August, at $300,100.

For a look at what's happening inside Portland's design industry, see www.portland.aiga.org/

 
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