Movers and shakers; Internal migration.

 "The covid reshuffle of the past two years will change America for longer.

A FTER THE second world war, Americans took their new cars on their new highways and decamped for the suburbs, changing American life forever. Today, the internet and remote work presage a similar transformation. A two-hour commute a couple of days a week may be worthwhile, if it allows a bigger house and smaller mortgage payment. So might a move across the country, if one rarely has to travel to company headquarters. Adam Ozimek of UpWork, a freelancing platform, has estimated that some 14m-23m Americans may up sticks because of the rise of remote working, which amounts to between 9% and 13% of today's workforce.

"People are asking deep questions about how and where they want to live," says Richard Florida of the University of Toronto, who observes a "great unmooring" in Americans' thinking about where they live. Chris Proctor, who works for John Burns Real Estate Consulting, which advises homebuilders, says this is "unlike anything we've seen in decades. The closest comparison is the suburbanisation we saw in the 1950s".

Migration is following two trends, both of which existed before the pandemic. First, people have been leaving large, dense, expensive urban cores for smaller, less-dense cities and suburbs. Second, people and companies have been moving to warm, low-tax states in the South and south-west (see chart 1 on next page).

Take the flight from cities first. Stephan Whitaker at the Federal Reserve Bank of Cleveland uses credit data to show how hard urban neighbourhoods were hit during the pandemic. More people left and fewer people chose to move into large cities, such as New York, Los Angeles and Chicago. Late 2020 saw a peak of net out-migration from urban neighbourhoods of around 75,000; in the second quarter of 2021 it averaged 54,000 per month, more than double pre-pandemic levels.

Mr Whitaker estimates that from March 2020 to March 2021 around 600,000 people moved from large, high-cost metro areas to mid-size cities (meaning those with between 500,000 and 2m people), and more than 740,000 moved to rural areas, small towns and cities with populations below 500,000--an increase in both instances of 13.5% from pre-pandemic levels. New York and San Francisco saw the largest jump in the share of people leaving. In recent months, young renters have started returning to some cities while middle-aged people are continuing to flock to the suburbs to buy homes.

Cost and covid-19 are not the only considerations. Many cities have seen an uptick in crime, homelessness and business closures just as they are experimenting with criminal-justice reform and proposing tax increases. Edward Glaeser, a professor at Harvard and co-author of "Survival of the City", says he worries about "the understandable urge for progressive action in cities running into the buzz-saw of heightened geographic mobility". But he warns that if cities target the rich and businesses with taxes "and fail to offer basic services like public safety, then something that was a modest economic disruption could turn into something much more severe".

Towns and suburbs near large cities have been the biggest magnets. According to The Economist's crunching of data from the United States Postal Service, the three zip codes with the most changes of address for new arrivals were in suburbs and exurbs outside Houston and Austin in Texas and Jacksonville, Florida.

The places attracting people share common features: relative affordability, a strong sense of community, amenities (natural or constructed) and friendliness towards business, says Cullum Clark, director of the Bush Institute-Southern Methodist University Economic Growth Initiative. Nearness to nature is attractive, but so is the ability to bring up a family and nurture a nest-egg. According to Joel Kotkin of Chapman University, "People go to places where they can achieve the American dream. It's increasingly difficult to do that in cities that created the American dream, like New York," because of the cost of living there.

Housing costs are one indicator of where people are going. Kalispell, Montana, has seen the largest increase in property values in the country--with the average home up nearly 50% year-on-year. Second is Austin, Texas, followed by Boise, Idaho. Traditional holiday spots--including Bend, Oregon and California's Lake Tahoe--have seen a surge of interest.

But not every under-the-radar town has prospered. "It's very hard to find examples of places that were losing people or jobs but have drawn them in during the pandemic," says Jed Kolko, chief economist at Indeed, a job-listings firm. Some had expected left-behind cities and rural areas to benefit from remote work and migration. "But the migration data so far suggests that the relatively affordable places people move to are the affordable places they were already going," says Mr Kolko.

The pull of suburbs has been observed for more than half a century, but covid-19 has given it new force. "Urbanising suburbs", as Mr Clark calls them, are gaining amenities but keeping their characteristic sprawl. Contrary to the stereotype of identical white homes with white occupants, today's suburbs are diverse. Wendell Cox of Demographia, a consultancy, estimates that 86% of the population of big metro areas live in suburbs or exurbs. That includes 90% of whites, 83% of Hispanics, 81% of Asians and 76% of African-Americans.

Four in five of the zip codes that saw the largest percentage increases in population since the start of the pandemic were in just three states: Texas, Florida and Arizona. This underscores the second trend, which is a shift of people to low-tax states in the South and West.

Sunshine and low taxes are the most obvious reasons. Both Florida and Texas levy no state income tax, while California's top rate is 13.3% and New Jersey's is 10.75%. Two owners of buildings and housing developments in the Dallas area estimate that 20% of occupants are recent Californian transplants. But part of the impulse may be a reaction to covid-19 restrictions. Unlike Texas and Florida, which reopened quickly, California insisted on factories and businesses staying shut, to the frustration of bosses. According to Mr Florida, "the reason people have left cities and moved to rural hinterlands or cities in the South is not just taxes. It's the fact that they can live their daily life and send kids to school with minimal restrictions."

South by south-west

Out-of-state buyers, flush with cash from selling their expensive homes, have pushed up prices in once-affordable markets. Prices rose so much in Frisco, Texas, that Scott Warstler, executive director of operations for the Frisco Independent School District, decided to sell his house. He sold it in three days, above the asking price, to a Californian buyer. He put in offers on four rentals but was gazumped by people willing to pay a full year of rent in advance, and eventually found somewhere in Prosper, the next town over. The same outward shift is under way in Denver, where house prices have also spiked, pushing people 60 miles south to smaller, less congested Colorado Springs.

As with everything else, the rich have more choices. The 70-odd mile stretch running from Miami to Palm Beach has become a popular destination for people fleeing Wall Street and Silicon Valley. In Palm Beach, at least ten homes have sold for $85m or more this year. One financier who moved from Connecticut to Florida reckons that home prices on Palm Beach Island have tripled since the start of covid-19. He predicts that the next wave of millionaire migration will not be from the north-east and west coast to the South, but from all 50 states to Puerto Rico, which is the only place one can live in America and pay no tax on capital gains.

Even if not to Puerto Rico, though, the flow of people and firms out of California will probably continue, as state politicians consider ratcheting up taxes on high-earners and imposing new regulations. Since January 114 companies have moved their headquarters from California, double the number in 2018, according to Joseph Vranich of Spectrum Location Services, a relocation consultant. Businesses of all shapes and sizes are assessing their options. The poster-child for Silicon Valley disruption, Tesla, recently moved from California to Texas. Mr Vranich says he was even contacted by a winery in northern California that wants to shift its headquarters: it will leave the vines there but take its rootless departments, such as distribution and finance, elsewhere.

If the dispersal means more places will thrive, that is a good thing. "If I had to choose between an America where there were two or three wealthy cities or two or three hundred, I'd choose two or three hundred," says Glenn Kelman, the boss of Redfin, a property brokerage. In 2005-17 a whopping 90% of employment growth in the "innovation" sector was concentrated in just five coastal metro areas: Boston, San Diego, San Francisco, San Jose and Seattle. Innovation in the coming decades will probably be more widely distributed.

As with any disruption, there will be losers from the covid reshuffle. The long-term prospects of America's biggest cities depend on how well they are managed. With fewer people commuting into centres because of remote work, shops may not return, putting a greater burden on remaining city dwellers to fund costly services such as public transport. Meanwhile, people in some suburbs and small towns may find themselves priced out.

If the country's population were expanding rapidly, where Americans choose to live might matter less. But in the past decade the population has grown at the second-slowest rate since 1790, just slightly faster than during the Great Depression, according to Bill Frey of the Brookings Institution (see chart 2). Immigration has slowed markedly, because of the pandemic and also because of tighter border controls. This means that states are competing for a limited resource: the people that comprise their tax base. And many states are losing the fight. Over the past decade, Illinois, Mississippi and West Virginia have seen their populations decline. The implications for funding pensions and public education could make living in shrinking states even less attractive for younger people, who will finance those debts. Growing states such as Texas and Florida will have an economic advantage.

This will also influence the country's politics. Texas, Florida, Colorado, Montana, Oregon and North Carolina have all gained population, and therefore congressional seats, while seven states, including New York and California, have lost seats. According to the 2020 Census, the South now has ten of the country's 15 fastest-growing cities with a population of 50,000 or more. About 62% of Americans now live in the West and the South, compared with 48% in 1970. The share residing in the Midwest and north-east has fallen from 52% to 38% over the past 50 years. This will affect congressional seats, federal funding and electoral-college votes, all of which are apportioned to states by population size.

The movement of people will not only give certain places more national political clout: it will also reconfigure local politics. In the 2020 election, Democrats gained ground in Arizona and Georgia in large part because of the young, college-educated, non-white people moving there. The shifting politics of Arizona and Georgia received attention, but less noted is that "growing suburban places moved quite dramatically toward the Democratic Party", says Jonathan Rodden, a political-science professor at Stanford. Traditionally Democrats have been at a disadvantage because so many of their voters are clustered in cities. Their spread outward into suburbs could determine the result of more races.

"The big question that everyone would like to answer is whether this is a short-term reaction to some of the excesses of the Republican Party by relatively young, educated voters, or if it is a longer-term realignment of the suburbs," Mr Rodden says. A countervailing political force is that some of the people who are moving into Texan, Floridian and Arizonan suburbs from California and the north-east consider themselves political refugees, fleeing badly run state and local governments. They may vote against Democratic candidates to prevent their new areas from turning into the places they left.

America is never stagnant. Towns, cities and suburbs will be transformed by their new inhabitants. The richness, diversity and creativity of cities will come to smaller places, and the country's urban-rural divide should narrow. "The dispersing of millennials, minorities and immigrants means the country will have more in common than it did before," predicts Mr Kotkin of Chapman University. That would be something to celebrate." [1]

 In Lithuania, we will see from soap operas how Americans now work and live, so we will move on to that also.

1. "Movers and shakers; Internal migration." The Economist, 18 Dec. 2021, p. 24(US).