Higher House Prices on Coasts
Send Home Buyers Packing

An exodus of U.S. workers from the technology-rich San Francisco Bay and Boston areas accelerated early this decade, according to Census Bureau data to be released today.

Meanwhile, high housing costs on both coasts drove more Americans to cheaper cities nearby. One big winner is the inland Riverside, Calif., area. It continued to attract residents from the Southern California coast from 2000 to 2004, experts say. States in the Southwest and Pacific-Northwest continued to attract many disaffected Californians, economists say. But their rate of U.S. migration gains slowed compared with the 1990s, the Census data indicates. Florida continued to attract new residents at a fast clip.

The bursting technology bubble sent people packing from the San Francisco Bay area. The rate of domestic migration out of the area nearly tripled to an average annual net loss of 14.7 people per 1,000 population, compared with a loss of 5.5 people in the 1990s. At the same time, the Boston area, another high-tech hub, lost workers at an average annual rate of 9.5 domestic residents per 1,000 population, nearly double the '90s rate.

Some economists say the losses of skilled workers, coupled with high housing costs, could hamper the ability of the tech industry to attract new labor, at least in those areas. "Today, housing in both Boston and the Bay area is unaffordable" relative to other parts of the country, says Mark Zandi, chief economist at Moody's Economy.com. "If the tech sector takes off, it's going to be much harder to bring in skilled labor for these positions."

During the latter half of the 1990s, when housing prices were lower and the tech sector was booming, San Francisco's job market expanded at an average rate of 3% to 4% a year, compared with 1.3% today, Mr. Zandi estimates. Boston's job market was growing an average of 2% to 3% a year in the late 1990s, compared with roughly 1% today.

More than half of the roughly 973,000 tech workers employed in California in early 2000 had left the industry or the state by 2003, according to the Sphere Institute, a Burlingame, Calif., think tank.

The tech sector tends to be highly mobile. A labor shortage in one part of the country could be quickly made up in lower-cost regions with a labor surplus, and former tech workers who left the industry, but didn't relocate, could return to tech jobs as the sector rebounds. Mike Curran, director for the Nova Workforce Board, of Sunnyvale, Calif., which helps people find work, says many former computer-industry workers now work in bioscience and nanotechnology. Others have become nurses, or math and science teachers. Those workers "can jump back in the labor pool" if tech-industry hiring resurges in California, Mr. Curran says.

Recently, California tech firms have met current labor needs by recruiting at local universities, attracting tech workers from within the state, luring foreign workers and outsourcing jobs overseas, experts say. Roughly one-third of Silicon Valley entrepreneurs emigrated from China or India, estimates Doug Henton, president of Collaborative Economics Inc., a Mountain View, Calif., economic-consulting group. "Talent still wants to come here from all over the world," he says.

The Census data compared annual domestic net migration rates from the 2000-2004 period with comparable rates from the 1990s. It excluded immigrants, although it counted foreign-born residents moving within the U.S.

In some large cities, such as San Francisco and Boston, gains from immigrants failed to completely offset the loss of residents to other cities, says William Frey, a demographer at the Brookings Institution. Census officials say domestic migration tends to be one of the best measures of the impact of economic factors such as job growth and housing prices.

Areas near regions with fast-rising housing costs were among the biggest beneficiaries of domestic migration. In 2004, for example, the inland California region of Riverside-San Bernardino-Ontario attracted 46,000 net residents from the Los Angeles metro area, according to Economy.com. In the Boston area, roughly 3,700 net residents relocated to the Providence, R.I., metro area.

Meanwhile, Florida continued to lure domestic immigrants. A combined 41,500 net residents from the greater New York region moved to the Miami, Orlando and Tampa regions in 2004, according to Economy.com. "The New York to Florida highway is still intact," says Brookings' Mr. Frey. Orlando and other Central Florida cities "are new destinations where people are finding jobs. Employers are saying, 'It's more affordable to move to these areas.' The local economy is much more diversified. Central Florida is not just Disney [World] anymore."

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