Related Links

• Urban Marylanders Are Migrating to More Affordable and Smaller Metro Areas
• Urban and Regional Migration Estimates, Federal Reserve Bank of Cleveland
• Unlocking Housing Supply: What Can We Learn About Recent Construction and Permitting Patterns in Our Region?

Transcript

Tim Sablik: My guests today are Adam Scavette and Keith Waters. Adam is a regional economist at the Baltimore branch of the Richmond Fed and Keith is the assistant director of the Stephen S. Fuller Institute at the Center for Regional Analysis at George Mason University. Both research urban and regional economics, which is the topic of our conversation today.

Adam and Keith, thank you for joining me.

Adam Scavette: Great to be here. Thanks for hosting us today.

Keith Waters: Yeah, thanks for having us. I've been looking forward to this.

Sablik: You both recently wrote a Richmond Fed Regional Matters post examining migration trends in Maryland. We'll include a link to that article in the show notes for listeners who want to look at the full data.

You open that article with a fact that immediately jumped out to me, which is that Maryland has the tightest labor market in the country, with an unemployment rate of 1.9 percent as of the end of 2023. Keith, what seems to be driving that?

Waters: There's a number of factors driving this. For me, the most important is the fact that the labor force contracted in the wake of the pandemic and never recovered. In March 2020, immediately prior to the onset of the pandemic, the labor force in Maryland consisted of roughly 3.36 million people. In April of 2020, just one month later, the labor force shrank to 3.17 million. That is, the labor market shrank by 184,000 people or about 5.5 percent.

Unfortunately, as the economy slowly recovered and jobs became more plentiful — particularly in the leisure and hospitality sector — the labor force has remained nearly unchanged. In February 2024, the labor force was again 3.17 million, effectively unchanged since April 2020.

So, while the unemployment rate is low, there are just fewer workers. This is supported by looking at the employment-population ratio, which fell from around 67 in early 2020 to 60 immediately following the pandemic. While it has come back to 62.8 in February 2024, it's still five percentage points below pre-pandemic levels.

In summary, while Maryland has a tight labor force, much of this is simply driven by the fact that there are fewer people looking for work. Businesses just have to take what they can get regarding labor.

Sablik: That brings us to the topic of your post, which is about migration in the state.

Maryland has experienced the highest out-migration of residents in the Fifth District, which also includes Washington, D.C., West Virginia, Virginia, North Carolina and South Carolina. Adam, where in Maryland are these outflows concentrated, and do we know anything about why people are leaving?

Scavette: It looks like all of Maryland's out-migration is coming from the Washington-Baltimore corridor. Most of these outflows are concentrated in Montgomery and Prince George's Counties. Those are the two counties that hug the District [of Columbia] and contain inner ring suburbs that you might be familiar with, like Bethesda, Silver Spring, Rockville or College Park where the University of Maryland is. There are also some outflows coming from Baltimore City and Baltimore County, but not to the same extent as those D.C. suburbs.

In terms of why people are leaving, we think that the high cost of living in the D.C. area can explain some of it. We looked at the Federal Reserve Bank of Cleveland's Urban and Regional Migration Estimates in order to gain some insights on this. Steven Whittaker, who's an economist in the regional section [of the Cleveland Fed] created this dataset by tracking consumer credit accounts as people move across the country. It's really useful because he classifies migration patterns across metro areas based on the relative size and costs. We track this data from 2018 through 2023, and it becomes pretty clear that people are leaving the Baltimore-D.C. area for smaller and more affordable metro areas, rather than other large, high-cost metro areas like New York City, San Francisco, Boston or Miami.

Sablik: Yeah, so do you have data that you can see where Marylanders are moving to?

Scavette: When we look at the state migration data, we can see that former Marylanders have resettled in neighboring states such as Virginia, Pennsylvania, and Delaware. That isn't surprising because there tends to be a high degree of reciprocity in migration flows between neighboring states. However, the other destinations that Marylanders have traveled to over the past couple of years tended to be in southern states. North Carolina, South Carolina, Florida and Texas are major destinations for these former Maryland residents.

Sablik: On the other side of the coin, are there parts of Maryland that are seeing net in-migration, and are you able to tell where those new residents are coming from?

Scavette: If you look at the data by region, every part of the state aside from the Baltimore-Washington corridor, which locals refer to as Central Maryland, has seen net in-migration.

The largest inflows seem to be concentrated on Maryland's Eastern Shore, so that's east of the Chesapeake Bay. That area has seen quite a large spike since COVID, and that seems to be part of a larger trend of people's desire for more space and quiet living as remote work opened up options for telecommuters. The Eastern Shore offers a lot of natural amenities, proximity to the ocean and generally a more rural, bucolic environment compared to the more urban environment of Central Maryland. Southern Maryland and Western Maryland have also seen similar spikes in in-migration, but not to quite the extent of the Eastern Shore.

Sablik: Keith, what can researchers and policymakers learn from these trends?

Waters: Maryland's economy just does not appear to be competitive relative to peer states, particularly the southern states such as North Carolina and South Carolina that Adam mentioned. As Adam was referring to, the high housing costs in much of the state — particularly the D.C. area — is just simply out of reach given the available jobs.

In addition to high housing costs relative to potential jobs, it's also the simple fact of the number of available houses for sale. For example, there were just 1,500 active listings of homes in the Maryland suburbs of the D.C. metro in February 2024. This is down from 5,700 in 2015. The region and the state have underbuilt housing for at least a decade, and this has constricted supply.

In addition to the constricted supply, the ultra-low interest rates implemented to keep the economy afloat during the pandemic has really exacerbated this supply issue. People who are looking to move to a house that better fits their needs aren't going to get a loan even close to their current rate, so they're going to be less likely to move.

Unfortunately, new supply is unlikely to change the situation anytime soon. In 2023, there were about 18,000 residential permits issued in the state of Maryland. In contrast, North Carolina issued 98,000 and South Carolina issued 42,000. Florida issued 193,000 and Texas issued 227,000 permits. This isn't just an issue of sprawl — Texas and Florida both had higher shares of total permits issued to structures with five or more units than Maryland. So, in relation to the destinations for Maryland out-migrants, Maryland just really lags on permitting new housing.

Sablik: Yeah, the topic of housing is something that we've discussed quite a bit on this show. And I imagine we'll continue to discuss it in the months ahead.

Waters: It doesn't appear to be going away anytime soon.

Sablik: Another interesting thing that jumped out to me from this piece was the fact that in the years before the pandemic, there was some research suggesting that Americans weren't moving around as much as they used to. Is that still generally the case or have things changed since the pandemic?

Waters: That is true. Americans are generally moving less than they used to. Oddly enough, for all the impacts of the pandemic, one thing it didn't really disrupt was the continued slowdown of the national migration rate. In 1987, the mover rate was about 20 percent. In 2021, it had slowed to 8.4 percent.

But when you look at the geographic distribution, in general people just aren't moving to Maryland. Maryland had a statistically similar in-migration rate to the U.S. as a whole but a higher out-migration rate. So, while the migration rate has continued to slow, Maryland just really isn't a destination for those who are still moving.

Sablik: Given this pattern of out-migration, is there anything that policymakers can do to reverse it?

Waters: The main policy that Maryland could do to reverse some of this out-migration is to loosen up housing restriction, both at the state level but also at the jurisdictional level where most of these policies are made.

Scavette: Adding on to what Keith said, I totally agree. I think housing is a big part of this story.

One of the counties in the Greater Washington area that's actually adding people is Frederick County. It's about 50 miles northwest from the Capitol. They've loosened up permitting restrictions quite a bit. It's one of the fastest growing counties in the state. It's grown about 23 percent since 2010. I wrote an article [where] I looked at land use regulations in Maryland and throughout the Fifth District and I highlighted Frederick as being one that has taken in quite a lot of population.

Sablik: Adam and Keith, thanks so much for coming on the show today.

Scavette: It's great chatting with you, Tim.

Waters: Yeah, thanks for having us.