Mayor Michael Nutter of Philadelphia made a comment that prompted nervous laughter early in a forum the Metro Program held with the National League of Cities (NLC) yesterday on the looming local government fiscal crisis.   Deadpan, he said: “Hearing a presentation that the recession is over reminds me of a sign I saw one time a couple years ago that said, ‘Mission Accomplished.’”

The man has a point. That GDP does not equal jobs is well understood. Less clear, and worth keeping in mind as some key indicators start turning around, is that the recovery is going to come only over time in three stages. First, GDP and labor productivity will rebound as they are now. Then firms will hopefully start hiring again. And eventually, once the labor market tightens and depending on what sort of jobs the ‘next economy’ creates, wages will start rising too.  

The conundrum is this: The U.S. economy is just entering stage one, and progress towards stages two and three is hardly guaranteed.  Indeed the situation is still getting worse in parts of the economy. The Mortgage Bankers Association issued a press release yesterday announcing that this quarter’s home loan delinquency rates reached another record high. Percent increases in GDP don’t pay mortgages, quipped their senior economist, wages do. And with the number of unemployed still rising, fewer people receiving a paycheck will equal fewer people making mortgage payments on-time, simple as that.

State government budget problems have been a well-publicized element of the nation’s ongoing economic crisis. Less remarked upon has been a lower-profile meltdown: the nation’s soon-to-be ugly local government fiscal mess. And now it’s time to tune in. 

How do things look? The short answer is: brutal! And that is why four of America’s toughest-minded mayors--Mayors Michael Nutter, Elaine Walker, Scott Smith, and Chuck Reed of Philadelphia, Bowling Green, Ken., Mesa, Ariz., and San Jose respectively--will travel to Washington Thursday (read the joint Brookings/National League of Cities background paper here) and review what they are dealing with prior to remarks to be delivered by Vice President Biden’s chief economic advisor Jared Bernstein.

The mayors’ messages will likely be tart. With nearly nine in 10 city finance officers reporting a declining ability to meet local fiscal needs, city budget officers across America are projecting nearly a 3 percent average budget shortfall in 2009, and much deeper shortfalls in 2010 and 2011. What is more, while there is regional variation, the pressure is building in virtually all corners of the country, shaped by differences in metropolitan economies, state-local tax structure, and service demands. In Philadelphia Mayor Nutter has been hit by rising unemployment which has hurt income tax collections. In Mesa, Mayor Smith has been managing through the fiscal chaos generated by a colossal sales tax crash and maybe the nation’s worst foreclosure mess. And in all quarters things are almost certainly going to get much, much worse. That’s because while income and sales taxes are typically the earliest sources of city revenue to decline as job losses in a community increase and consumer purchases decrease, property tax collections--which make up the bulk of city revenue nationwide--decline much more slowly as real property assessments are adjusted to reflect declining housing values and have only just begun to slump.

With U.S. unemployment at a 26-year high Americans will be feeling the economic downturn for some time. Immigration experts are seeing global signs of the recession in major shifts in U.S. immigration trends, especially at the high and low ends of the skills spectrum. Here are the most significant changes. 

You know the U.S. is in a recession when… 

Mexicans are sending money to relatives in the United States.

In 2007, Mexicans living in the U.S. sent about $26 billion to relatives living in Mexico. The amount of remittances dropped to $25 billion in 2008, the first decline since the Central Bank of Mexico started keeping track 14 years ago. In the first nine months of 2009, the Bank reports that only $16.4 billion has been sent south, a 13 percent decline from 2008. Now, there are some signs of an increase in “reverse remittances,” in which residents of Mexico wire money to their relatives north of the border to help them through tough times. While still a small fraction of the north-to-south remittance flow, which provides Mexico with its second largest source of foreign income (after oil exports), an uptick in reverse remittances is a striking example of the ripple effects of U.S. job loss.

H1-B visas are still available.

In fiscal year 2009, the H1-B visa program that links high-skilled immigrants with sponsoring U.S. employers had all 65,000 application slots filled in one day. In FY08, it took two days, and in FY07, 56 days. But things have changed. After 211 days into the 2010 fiscal year, there were almost twenty thousand slots still available. With high unemployment and shrinking budgets many corporations are unable to hire from abroad as they did in recent years. What’s more, companies that receive federal bailout funds must hire U.S. workers or demonstrate they are cannot find them if they do. Technology firms for years have pressured Congress to increase the number of H1-B visas. This may be a break for domestic tech workers who have often been on the other side of the argument.

Having spent a good deal of our time examining the path of the downturn and recovery within America’s own metropolitan areas, it’s great to see other organizations doing the same--and doing it with cool technology. In that vein, be sure to check out City Tracker, a new website from the U.K.’s Centre for Cities, which provides interactive maps, tables, and charts showing how that country’s major urban areas (more akin to our wider metropolitan areas than our central cities) have performed economically over the last 20 months.

So who’s up, and who’s down? Like in the United States, everywhere appears to have suffered to some extent, and there’s quite a bit of variation in performance. As per usual, there’s something of a North-South divide. Most of the better-off places on the map lie in England’s Southeast and Southwest regions, including cities with educational and professional services specializations like Cambridge, Oxford, and Bristol. Like New York, London has been affected by the heavy toll on the financial sector, but its sheer size and diversity have shielded it from more severe economic impacts.

In England’s northern regions, including the Northwest, Yorkshire and the Humber, and Midlands, medium-sized urban areas appear to have been hit especially hard. Cities like Bolton, Wigan, Rochdale, Hull, Leicester, and Middlesbrough all post high rates of joblessness and few vacancies per job seeker, as the recession has accelerated the longer-run decline of these once-mighty manufacturing centers. On the other hand, the very largest cities in the North, such as Manchester, Leeds, Sheffield, and Newcastle, have suffered, but not as greatly as their smaller, less diversified neighbors.

Overall, City Tracker provides a compelling illustration for the U.K. of what we’ve found to be true in the U.S. context during this recession--what a metro area did before the downturn has had a big impact on its performance during the downturn. But it also suggests that geography need not be destiny, if public policy plays an active role in facilitating the physical and economic transformation of large metropolitan centers. Across the Atlantic, then, may lie some lessons for American policymakers contemplating the uncertain future of our battered industrial Midwestern cities.

America continues to grope toward the development of an effective innovation strategy as part of a credible push toward economic reinvention. Notably, in September President Obama--through a solid white paper and a good Troy, N.Y. speech--articulated a bona fide plan for catalyzing the development and commercialization of mold-breaking new products and processes essential to staving off further economic decline.

So now comes the next juncture: Congress’ final deliberations on the creation of a new regional industry clusters program.

Congressional approval of an adequately funded clusters effort is critical because the nation’s economic recovery and longer-term revitalization hinge on restoring the economic health of its regions, metropolitan and rural.

Clusters matter because networks of interconnected, geographically concentrated businesses and related entities in a particular field have been shown, as we have noted previously, to deliver substantial economic benefits to firms and industries by facilitating accelerated knowledge sharing, enhanced access to specialized labor and suppliers, and substantial economies of scale.

A key tenet of public transit advocates has always been to provide commuters with choices beyond the single-occupant vehicle and also to price the true cost of drive alone travel. Then man the rational economic animal kicks in and theoretically chooses the cheaper, and greener, transit option.

But we all know man isn’t a completely rational actor, taking into account all sorts of intangible inputs, from perceived status to subjective quality. But what about the fun factor?

Portland’s Oregonian points to this experiment in commuter behavior on Stockholm’s metro (tunnelbana, to be precise) a project by automaker Volkswagen no less, where they attempt to woo transit patrons off the escalator and on to the stairs.

The House passed their climate change bill last spring, and the Senate Environmental and Public Works (EPW) Committee passed their version last week. It now moves on to the Finance Committee and perhaps Agriculture. It will be well into next year by the time the bill gets to the Senate floor.

The House and EPW versions have one major thing in common: They focus nearly all attention on reducing green house gases (GHGs) from the supply of energy. Through renewables, carbon sequestration, and a host of other supply-side measures, these bills hope to achieve the goal of 80 percent reduction in U.S. GHG emissions by 2050.

However, these bills are ignoring the demand side of the equation. Most research shows that the U.S. will not meet this ambitious goal without both the supply and demand measures. The demand side focuses on changing the built environment.

In a recent post citing our data on metro cap-and-trade costs, Free Exchange, the blog of the Economist, feared that people are moving from “clean” metropolitan areas with low carbon emissions to “dirtier” ones with higher emissions. As evidence, the author points to a recent paper by Ed Glaeser and Matthew Kahn, who argue that cleaner cities have set up the most onerous barriers to population growth.

There are two empirical problems here, but before getting into those, it is worth affirming the link between reform efforts related to exclusionary zoning and the environmental movement. Denser areas, with less suburban sprawl, which is created in large part by zoning, not only provide more economic opportunities for minorities and the poor, but they also reduce emissions by shortening commutes and facilitating public transportation. Reform efforts should seek the elimination of anti-density barriers, as part of an effort to reduce carbon emissions.

Now for the problems: Are people really flocking to “dirty” metros? Not any more than they are moving to clean metros. There is an insignificant positive correlation between emissions and housing supply growth at the metropolitan level. Using growth data from 1990 to 2000 for the 50 largest metros, I find that the relationship disappears completely if you adjust for initial population density, which is negatively correlated with both growth and emissions. A graph in Glaeser and Kahn’s paper also demonstrates the absence of a significant relationship between emissions and growth using data from 2000 to 2006.

There has been much talk lately about how politics complicates the 2010 Census. (See this, this, and this.) Politics aside, it’s a daunting task to count each of the nearly 308 million residents of the United States once and only once. Some people are inevitably missed, while others are counted twice.

The 2000 census actually double-counted (about 11.6 million) more than it undercounted (10.2 million). Duplicates included “snowbirds” who spent part of the year in a second home, as well as college students and those in the military or prison. For the 2010 census new efforts are in place to limit double counting, including a printed warning on the form and a scanning procedure to find duplicate names and birth dates on completed questionnaires. While over-counting is a problem, it’s easier to deal with than undercounting.

The Census Bureau would rather weed out duplicates after the fact than risk missing people altogether, and so it conducts national advertising blitzes to convince everyone that “It’s in our Hands,” while investing extra resources in communities with people who are less likely to fill out their forms. State and local governments are making similar efforts, too, including the District of Columbia, Maryland, and Chicagoland.

Who is risk of being missed and where do they live? The Census Bureau has developed a “hard-to-count” score for every neighborhood in the country, based on 12 factors that are typically correlated with low response rates: rental and multi-family housing, overcrowding, unmarried individuals, low education and income levels, public assistance, high unemployment, recent movers, lack of phone service, linguistic isolation, and vacant housing units.

This past Saturday the Washington Post ran a detailed assessment of the stimulus funding related to energy-efficiency grants. Definitions differ based on the source, but the article uses the number of $25 billion and is “split roughly equally among programs for homes for low-income workers, federal buildings, public housing, military facilities, and initiatives by local and state governments.”

Besides refuting its own awkward headline, the piece also takes a short-run and limited view on a long-range effort. It focuses on bureaucratic headaches, fraud vulnerabilities, and some weak financial outlay records from a few states.

But nowhere in the article does the reader receive estimates of energy savings per project. Does saving $X per month in energy costs lead a household to spend that money elsewhere in the economy? The article also focuses on new jobs, but it seems apparent in the reporting that some jobs have been saved due to the effort. Whether created or saved, isn’t the goal to keep Americans employed during the downturn?

A more balanced effort would let readers know how much aggregate energy the country will save (conservation, after all, is the cheapest new source of energy available) moving forward and how many jobs were created or saved by the dollars spent. And while the criticisms are well-founded, especially on the bureaucratic-front, the federal government’s expanded foray into energy efficiency is a two-sided story given one-sided treatment.

Economists continue to debate whether the U.S. can rebalance its trade deficit and lead itself into recovery through exports, with skeptics’ doubts prompted anew by the fact that U.S. consumer spending explained the bulk of last week’s announced 3.5 percent third-quarter GDP rise. Given that, it’s worth asking: Does the U.S. have a national export strategy?

Though it may come as a surprise, the answer is yes. It comes from the multi-agency Department of Commerce-led Trade Promotion Coordinating Committee (TPCC), which annually publishes a document entitled, “National Export Strategy.” And it is actually a rather good document, though you would be excused for having never heard of it. A scan of U.S. newspaper archives reveals very little coverage over the last decade. The Journal of Commerce is devoted to discussions of news relating to U.S. trade, but its most recent article on the TPCC was published in 2003, shortly after its reauthorization. And more broadly, there has been scant talk of a “national export strategy” since Bill Clinton, whose administration tried to strengthen export policies, referred to it in his 1994 State of the Union address.

The 2008 “National Export Strategy” is worth looking at, and highlights some of the many activities that the U.S. government engages in to promote and encourage exports. Along these lines, the U.S. government has an online clearing house of trade related resources called export.gov. This website contains information on public-private partnerships that help companies find solutions to financial problems, regulatory questions, marketing, transportation hurdles. The site also has links to relevant government agencies that help exporters. The most directly significant agency is probably the Export-Import Bank of the United States, which, in 2008 provided $14.4 billion in loans, guarantees, and export-credit insurance to exporters.

Yesterday, the Senate Environment and Public Works Committee voted to report out climate legislation, with ten Democrats voting yes, one Democrat (Montana’s Sen. Baucus) voting no, and all of the Republicans boycotting. If you look at the vote tally (using Project Vulcan data), you find that the states of senators voting "no" emitted 29.4 tonnes of carbon per capita, and the states of "yes" voters emitted 13.3 tonnes per capita, compared with a national average of 20.9 tonnes per capita.

What do you think? Does this mean that the likely impact of cap-and-trade legislation on the members’ states influenced their votes? We would say it does, as we implied in a post we put up the other day on the household costs by a bill by metro. However, Matthew Yglesias would likely disagree, going by his response to our previous examination of this issue.

Matt doesn’t think representatives from metros (or states) with higher carbon emissions are less likely to support cap-and-trade. Instead, he argues that “the primary driver of the politics of climate change is general ideological factors, followed by the interests of energy producers rather than consumers.” That is, he thinks that industry opposition to carbon legislation is a stronger motivator of "no" votes than consumer opposition—an interesting theory that we can almost buy. Did you see all those anti-climate bill industry ads during the World Series?