Can Memphis Survive with Slow Growth? An Analysis of Demographic and Economic Data Help Answer the Question
John Gnuschke, Ph.D., Director
Jeff Wallace, Ph.D., Research Professor
There were 5 exabytes of information created between the dawn of civilization through 2003, but that much information is now created every 2 days.
– Eric Schmidt, of Google, said in 2010.
Information is the oil of the 21st century, and analytics is the combustion engine.
– Peter Sondergaard, Gartner Research.
The internet is flooded with countless sources and bits of information on virtually every subject. The volume is such that it can overwhelm even the most sophisticated observer. Accordingly, there is a temptation to ignore all the noise but to do so would lead to poorer decisions and choices and wreak havoc on more than just the decision maker. As time and resources are limited, there is a need to eliminate all unnecessary data and focus only on what matters for the task at hand.
Whether a city planner, a business owner, a homeowner, or an individual consumer, generally the purpose of data analysis is to:
- Solve problems;
- Make better choices;
- Allocate resources;
- Advance knowledge.
In this article we focus on demographic and economic data to answer the question posed in the title. In particular, our focus is on data available from U.S. government sources including the U.S. Census Bureau (Census), the American Community Survey (ACS), the Bureau of Labor Statistics (BLS), and the Bureau of Economic Analysis (BEA). Our purpose in doing so is to provide the reader with a brief overview of commonly used and easily accessible data so as to better understand demographic and economic trends impacting the Memphis area.
The Memphis MSA has a long history of slow steady demographic and economic growth. Memphis has grown as a result of natural population expansion and in-migration. Memphis has a young population base. Natural expansion is to be expected as a result of more births than deaths. Memphis is also a magnet community. It has always attracted regional residents seeking employment and income opportunities.
The movement of people into and out of Memphis is also a continuous process. County-level Internal Revenue Service data suggest that, over many years, slightly larger numbers of residents leave Memphis and Shelby County than move into it. In addition, out migrants tended to be higher income than in migrants. The movement of people into and out of cities is not unique to Memphis. People move into areas in a search for better jobs and move out of areas for the same reason.
Demographic growth is a key source of the workforce and a major driver for the local economy. The demand for public services reflects the size and composition of the local population. In general, slow steady growth communities like Memphis are stable and manageable. Transportation problems, like commuting and congestion, are minimized and public services are available to people and businesses in need of assistance. Economic fluctuations are minimized as a result of a broad and diverse employment base. Slow steady economic and demographic growth stabilizes the housing market and minimizes the chaos associated with rapid growth or contractions.
Most of the following data tables, charts and graphs are related to describing local demographics. But keep in mind that demographic and economic growth rates are positively correlated. Powerful demographic and economic growth rates dramatically increase the demand for public services and the complexity of managing communities.
Figures one and two focus on the change in nominal GDP for 2005-15 and 2010-15 for the Memphis MSA and a set of comparable cities and MSAs. The Great Recession complicates analysis of these time periods but several things stand out.
Figure 1. Change in Nominal GDP, 2005-2015
First, in regard to our comparison MSAs, only New Orleans had slower growth than Memphis for these comparison periods. Second, a significant number of the communities had growth rates twice as high as Memphis. Nashville had GDP growth nearly three times the rate for Memphis. Third, Memphis like all the communities, had positive growth over the 2005-15 decade with growth rates rising over the later years. Under these positive conditions, it should be no surprise that demographic data mirror economic data for urban communities throughout the nation.
Figure 2. Change in Nominal GDP, 2010-2015
Population. Table 1 presents total population and the percent change for Memphis and selected areas for 2010-2016. As shown, while the U.S. population grew by 4.45 percent, Memphis city population grew only 0.04 percent. Shelby County had marginally greater growth rate at 0.64 percent. By way of comparison, Metropolitan Nashville-Davidson County grew 11.29 percent during this time frame. In 2016 Nashville officially became the largest city in the state with 660,388 persons while Memphis ranks a close second with 652,717 persons.
Table 1. Population and Population Change for Selected Areas, 2010-2016
Population by Age. As shown in Figure 3, Memphis is a young town relative to the U.S. Importantly, Memphis has a large concentration of adults in their prime work years from age 25 to age 54 and at that, on the young end, too.
Figure 3. Percentage of Population by Age for Selected Areas, 2015
From a workforce perspective, the data in Figure 3 might lead to the conclusion that Memphis has an abundance of labor for years to come. The data shown in Figure 4 indicate that growth occurred for many age categories over the 2010-15-time period. But slow or negative growth for many of the age groups under 54 suggest that future demographic and labor force issues will be a challenge for the Memphis MSA. The unusual declines in the 35-54 age population categories and the large declines in the 10-19 age categories suggests that current and future labor shortages may be an issue for Memphis employers seeking to expand or relocate locally.
Figure 4. Percentage Population Change by Age by Select Geographic Area, 2010-2015
Race/Ethnicity. Memphis is like most urban areas and most areas of the South in that it has a diverse population base. This is shown in Figure 5. But, as shown, the racial makeup of the Memphis MSA,
Figure 5. Percentage of Population by Race, 2015
Memphis, and Shelby County is very different than that of both the state of Tennessee and the nation. While both the U.S. and Tennessee are roughly 75.0 percent white, all three of the local geographies have populations that are less than 50.0% white. Notably, Memphis city is approximately 30.0% white. Instead of white, both Memphis city and Shelby County are majority black while the Memphis MSA is nearly equal white and black with the balance comprised of Hispanics (7.1 percent) and Asians (2.1 percent)
Figure 6 shows how racial/ethnic compositions of the population has changed between 2010 and 2015. During this period, the city of Memphis experienced very strong growth in both Hispanics and Asians, relative to the US (14.8 percent vs 3.9 percent, Hispanic, and 43.0 percent vs 17.3 percent, Asian). Why the big differences? With regard to Hispanics, certainly some of this accounted for in terms of proximity to the Southern US border with Mexico: a crossing point for not only Mexicans but also Central and South Americans seeking a life in the United States. The large increase in the Asian population is accounted for by two things: one, if the base of the change is very small then any change will look large relative to other categories (Asians account for only 2.1 percent of Memphis’ population) and two, an influx of workers to fill technology and IT oriented jobs in the local workforce.
Figure 6. Percent Change in Population by Race, 2010-2015
Education. The latest educational attainment figures for 2015 shown in Figure 7 indicate that the educational attainment of the Memphis MSA is consistent with Tennessee and the nation. The Memphis MSA has a slightly higher percentage of its population with a bachelor’s, graduate and professional degree than the state in general but less than the nation overall. The Memphis MSA also has a higher percentage of it population with at least some college relative to the state. But Memphis alone has slightly lower levels of educational attainment approximately 16% having less than a high school degree. For Memphis, approximately 25 percent of the population over 25 have a bachelor’s degree or more.
Figure 7. Educational Attainment of the Population Over 25, 2015
Employment and Income. Figure 8 shows relatively steady employment growth in the MSA since 2010, rising from over 592,000 jobs to more than 638,000 jobs by 2016. However, employment in the Memphis MSA peaked at nearly 641,000 jobs in 2007, while bottoming out in 2010 at just over 592,000. After losing nearly 50,000 jobs, the MSA has gained back 46.0 thousand since the recession ended but the hardest hit industries have not completely recovered since the recession. This year (2017) should finally see Memphis MSA employment levels grow beyond the pre-recession peak that occurred in 2007.
Figure 8. Annual Memphis MSA Establishment Employment (000), 2000-2016
Table 2 provides more detailed employment data by industry in March 2017 and reflects an improvement in the local economy. In percentage terms, mining and construction was the biggest winner with 13.4% growth over 2016. As there is almost zero mining in the MSA, this was growth in construction and reflects rebounding optimism by both buyers and builders locally and reflected in local home price increases. However, in comparison, national growth in construction employment was only 2.8 percent.
Table 2. Memphis MSA Employment by Industry, March 2017 and 12 Month Percent Change
Figure 9 shows a comparison of growth in construction employment for the Memphis MSA, Tennessee, the U.S. and selected comparison MSAs. Nationally construction employment growth was only 2.8 percent compared to Memphis MSA’s 12.0 percent, just ahead of Nashville’s 11.7% growth. In contrast, both the Birmingham and the St. Louis MSAs had losses in construction employment of -2.3 percent and -0.3 percent, respectively.
Figure 9. Twelve Month Percent Change in Construction Employment, Selected Areas, March 2017
So why is construction employment growth so strong in Memphis? Certainly it is less in actual size as a sector compared to Nashville’s so that small numerical changes will look bigger in Memphis. However, as previously mentioned, much has to do with finally recovering from the last recession and housing bust. The Memphis housing market had a large excess of supply relative to demand for many years after the housing market crash. Supply has now reached a level that it is now impacting house prices and drawing builders back into the market. In fact, as shown in Figure 10, the supply of houses for sale in the Memphis area has fallen 31.7 percent since July 2015. This has impacted house prices, but particularly new home prices as year-to-date prices were 8.6 percent above new home prices at this time a year ago.
Figure 10. Memphis Area Housing Inventory for Sale, April 2015-March 2017
Figure 11 shows the distribution of income levels for national, state and local area households. The percentage of the population with incomes in excess of $200,000 for the Memphis MSA and Shelby County was over 4 percent, slightly higher than the state average of 3.7 percent and lower than the national rate of 5.8 percent. Memphis has only 2.7 percent of its households making more than $200,000. By contrast, Memphis has more than one third of its households with incomes lower than $25,000.
Figure 11. Percentage Distribution of Household Income for Selected Areas, 2015
Household income figures shown in Table 3 indicate that the Memphis MSA and Shelby County income levels were consistent with the state but roughly $7,000 less than the nation in general. Tennessee, Memphis and the Mid-South are in general low-income areas of the nation and this household income data simply highlights the fact. Memphis proper has a high concentration of poverty and low-income residents as the data indicate. Memphis household income of approximately $37,000 is roughly $10,000 lower than Shelby County, the MSA and the state and $19,000 less than the nation.
Table 3. Median Household Income for Selected Areas, 2015
The question posed in the title is not easy to answer. In general, nearly all the economic and demographic indicators suggest that the City, County and MSA mirror the growth seen by urban areas around the nation. But growth in Memphis in particular is slow, manageable but too slow to be dynamic and too slow to allow room for error. The outmigration of the population and the associated movement of the employment and income opportunities outside the central city suggest that a major meaningful intervention needs to occur quickly to protect the vitality of the core city. Dramatic action plans with essential evaluation requirements need to focus on accelerating economic and demographic growth in Memphis. The County in general and the MSA are growing at sustainable rates and everyone will benefit from a push to transform and revitalize Memphis. Memphis, Shelby County and the MSA are changing but economic and demographic growth is not a zero-sum game. Everyone wins or loses together.
United efforts to promote growth are an essential step forward. We can’t wait—time is passing quickly. Other cities are moving forward while we wait for a plan to magically transform the community. Aggressive global economic development is an essential ingredient for the future of the city. Efforts to make Memphis and the surrounding area more attractive for young and economically driven population groups from around the world will pay dividends for the future of the community. Higher education can and must be a major component of any plan to change the trajectory of the city and the metro area. We only have to look to Nashville to see the power of rapid growth and the complexities generated by that growth. The road map is clear and the positive and negative implications are also clear. Memphis can and will survive with slow growth but it will not prosper.
 See Memphis Area Association of Realtors, Market Report, at https://maar.org/marketreports.