In the good news versus bad news department, this week could have produced a case of statistical whiplash. First came the report from the Brookings Institution warning of the dangerous decline in business dynamism – the churn of businesses and jobs resulting from the continuing flow of startups (business births) and closings (business deaths). According to Brookings, “dynamism is slowing down,” and this slowdown has, over the last three decades, been true “in all 50 states and in all but a handful of the more than 360 U.S. metropolitan areas.” While the reasons for this decline are unknown, the trend “implies a continuation of slow growth for the indefinite future.”

That’s the bad news, though at least it wasn’t another list where Maine landed 49th or 50th.

Then later in the week came the story that John Egan of the tech blog sparefoot.com had rated the Portland metro area as No. 5 on his “Top 5 Under-the-radar Tech Hubs.” That certainly seems like good news – and, unfortunately, tends to underscore the common belief that economic data can be found to support any point you may desire to make.

Digging into the data, however, does show that both news tidbits are true and that, together, they highlight an important point for our state.

First the basics – what’s so good about business dynamism, the birth, growth and death process? The answer, in a word, is productivity. Turns out that workers in startup businesses that survive three years are more productive than workers both in businesses that close (duh, that’s hardly surprising) and in businesses that survive and expand. Business birth and death is the way we move workers from lower to higher productivity jobs. It’s the key to maintaining a rising standard of living. The fact that it’s declining across all states, all regions and all industries is of serious concern for the entire nation.

Yet however much it may have declined over the past 30 years, the fact that dynamism remains in certain areas is good news, both for the metro areas where it exists and for their states. The five areas named “Top under-the-radar tech hubs” were Boise, Idaho (No. 1), Des Moines, Iowa (No. 2), Little Rock, Arkansas (No. 3), Baton Rouge, Louisiana (No. 4) and Portland, Maine (No. 5). Examining the Brookings data for these areas, I find the overall conclusion Brookings cites remains true – the business birth rate has declined drastically over the past three decades in all five areas, the business death rate has declined somewhat less and the job reallocation rate has declined substantially. None of these areas escapes the national trend.

For four of the five, however, the job reallocation rate (the net change in the labor force from low to high productivity jobs) is greater in the metro area than in the state as a whole. In short, to the extent that there is any good economic news, it is in the relatively more dynamic metro area. Indeed by this measure (the metro area leading the state), Portland is No. 3 on the list, behind Boise and Baton Rouge and ahead of Des Moines and Little Rock.

The message from this brief examination of these two apparently disparate news items is clear. First, we need a dynamic economy – lots of startups, lots of failures and lots of migration of workers to the successful startups – if we are to accelerate economic growth and thus provide the means to build a better standard of living for us all. Second, we must look to our urban center to lead the charge, to set the dynamic, creative, entrepreneurial pot to boil and begin the long process of job reallocation that is our state’s only hope for the future.

And, to add another notch to the “good news” side of the ledger, what better way to encourage this critical process than to get involved in Maine Startup & Create Week (full disclosure: the event is organized by my stepson Jess Knox, statewide innovation hub leader for Blackstone Accelerates Growth.) The event is running June 12 to 20 in various locations throughout what will in July undoubtedly be a Tech Hub far less under the radar.

Charles Lawton is chief economist for Planning Decisions Inc. He can be contacted at:

clawton@planningdecisions.com

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