The Yankees are coming! The Yankees are coming!
Which region of the United States has the most residents?
Many of us might assume it’s the Northeast, where there’s essentially a megalopolis stretching from Boston to Washington. But no. Maybe the West, considering California’s outsized population? Not that either.
The South, with 38.3% of the nation is, according to the U.S. Census Bureau’s 2021 wrap-up report, the most populous of the four regions. Texas has more people than any state besides California and Florida and has eclipsed New York for the third spot.
The South grew more than 10% between the 2010 and 2020 censuses, which raises the question: Where did all these people come from? The South “was the only region that had positive net domestic migration … between 2020 and 2021,” the Census Bureau found.
So why did two-thirds of a million people move there from elsewhere in the U.S. in one year?
There were only 50,000 more births than deaths in the South during the 12-month period from mid-2020 to mid-2021, and only around 112,000 people moved to the South from outside the U.S. This suggests that the primary driver of the population swell seen recently in the South is people heading there from other regions of the country.
Of the roughly 658,000 Americans who are new to the South, 221,000 settled in Florida and 170,000 in Texas. Alabama, Arkansas, Georgia, Kentucky, North Carolina, Oklahoma, South Carolina and Tennessee all saw increases. Delaware, Maryland and West Virginia are also considered Southern by Census reckoning – they do serve grits rather than oatmeal at the Hampton Inn breakfast buffet – and they all saw moderately positive net migration.
So, what’s driving this?
The data shows it’s more than just people looking for a job. The hottest job markets in 2021 were Nevada (7.4% growth), Hawaii (7.1%), Massachusetts (6.6%), New Mexico (6.3%) Minnesota (6.2%), Rhode Island (6.1%), Washington (6.1%) and Oregon (6.0%), according to the U.S. Bureau of Labor Statistics. Not a lot of SEC football fans in those parts. Texas and Florida both experienced solid 5.6% job growth in 2021, but the rest of the Southern states saw only fair-to-middling growth.
People do move for jobs, but it’s a more defensive position. Nobody’s hitchhiking from Redwood City, Calif., to Austin, Texas, just to find a position that offers health insurance and paid leave. But if they worked for Oracle and their entire headquarters staff made the move, it makes sense for them to pick up stakes and follow the C-suite executives South as well.
Other reasons for migration as cited by an article in Boss magazine:
- Change in family situation. This can involve a growing family that needs more help from Grandma and Grandpa who live where the weather is nicer. It can also involve a bad breakup requiring one or both partners to move back home.
- School. This could indicate a search for a better district for primary- and secondary-grade students. It could also mean an 18-year-old leaving the nest to move into the dorms.
- Climate. If you live in the northern half of the country and you want to spend your time basking in the sun, moving down to Florida is an easy choice.
- Lifestyle upgrade. If you no longer have to go to an office, then you can live wherever you want. And if the choice is a 700-square-foot Manhattan shoebox or 3,000-square-foot mini-mansion outside Charlotte, N.C., it might make for an easy decision.
The West saw a modest gain in population as well, but the story is totally different. Births outpaced deaths, as in the South, but it was immigration from abroad that offset negative domestic migration.
When we discuss the economics or demographics of the West, to a large degree we’re talking about California. It added almost a million jobs in 2021, and yet lost more than 317,000 people to negative net migration. Both those numbers are almost as much as what the entire Northeast experienced it terms of population shifts.
The Golden State’s 2021 loss of population was the first in its history and again, there are simple reasons to be given: high taxes, natural disasters, obtrusive government. But the so-called “CalExodus” isn’t that easy to pin down. Some will say it doesn’t exist, but we know of 317,000 people who’ll tell you otherwise. That said, the University of California Policy Lab has the drilldown.
The lab saw the Bay Area – San Francisco, Oakland, Silicon Valley – hollow out during the pandemic. There’s little evidence that these people will all stay away permanently. Sure, the Oracle employees are gone for good, but that’s the thing about Silicon Valley – they’ll just invent another company. The rest of the state seems to be holding its own in terms of population.
And, yes, taxes are obscenely high in California. The state income tax is 13.3% — no other state is even close. That said, people might be tempted to move from South Lake Tahoe, California, to Carson City, Nevada, to pay a lower rate, but not to Lubbock, Texas. That move may be a bridge too far for someone who still keeps a surfboard in the garage.
“Despite concerns about tax revenue impacts, there is little evidence that wealthy Californians are leaving en masse,” according to the California Policy Lab.
Elsewhere in the West, it’s a little odd what’s going on in Idaho. It had the slowest job growth in the entire U.S., but also the fastest population increase – mainly from net domestic migration. This isn’t anything new, by the way. A report from the state’s labor department notes that, since around 2019, it was no longer mostly job seekers moving to Idaho, but retirees and others who were not labor market participants. Let’s remember that agricultural work isn’t captured by the statistics.
Arizona is interesting because it’s the exception that proves the rule. After Florida and Texas, the Grand Canyon State saw the greatest net domestic migration in the country, around 93,000 people. It also saw around 147,000 new jobs, so there’s at least one state where job growth and population growth are proceeding in rough proportion.
Moving your family or just your money?
So, what are the implications for your portfolio, if any? Even if you don’t feel the need to move and settle down in a cozy cottage among the Texas bluebonnets, there’s no denying that houses are being sold faster than they can be built throughout the South. There might be ways to place regional bets on the housing market or, for that matter, on commercial real estate.
And even if a head of household might not feel the need to move the family to a low-tax state, the boss might have another idea. More and more these days, an employee can find an accommodation to work remotely or simply find a new position locally. But that company will experience a lower corporate tax rate once it moves to warmer climates.
Contact us if you would like to continue the conversation.