Some economic texts get lost in the minutia. However, The New Geography of Jobs takes a step back to revel in the Big Picture where the real patterns of commerce can be explored.

Author Enrico Moretti, a University of California, Berkley professor of economics, examines economic trends from the U.S.’s manufacturing days to the current innovation craze. Moretti concludes the U.S. is experiencing a quickly accelerating transformation of its labor markets, affecting different cities in unique ways. Like a high-stakes teeter-tooter, manufacturing-driven cities have declined in tandem with foreign manufacturing’s dramatic rise. Now, the U.S. is a nation fueled by innovators and experts, rather than physical producers.

What does all this mean for California housing professionals?

Employment levels directly correspond to home sales, and salaries are the most significant contributor to home prices, as buyers can only buy what they can afford.

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Innovation and profit go hand in hand: the more innovative a company is, the more money its employees can potentially make — and by extension — the wealthier the community in which they rent or purchase real estate.

Innovators and the highly educated, frequently of the same cloth, cluster together and feed off each other’s creative energies, creating a snowball effect which nurtures the growth of the city where these individuals live. It’s a feedback loop. Successful cities become more successful as less successful cities decline, creating the Great Divergence, felt in both the labor and housing markets. For an example, look no further than Silicon Valley.

In contrast to innovation-based jobs, the traded sector consists of jobs that can be performed anywhere, and thus are liable to outsourcing. Therefore, the traded sector will have a less significant impact in the future of the U.S. economy than the non-traded sector, the innovation engine that drives jobs.

The non-traded sector (filled by the innovators and experts who walk among us) consists of jobs that can only be performed in one space: for example, a real estate agent cannot be outsourced since one has to be able to meet with clients in order to get the job done (traditionally).

Education and innovation have a compounding, positive affect on a city’s health. Average life expectancy, divorce rates, mobility and real estate prices improve, demonstrating the social-multiplier effect of living near successful groups. Moretti also notes real estate prices are stabilized by looser zoning restrictions, and increased by temperate weather (of which California has a clear advantage). While not explicitly focusing on California’s real estate market, the implications for our even-weathered, innovation-minded state, particularly for areas like Silicon Valley, are apparent.

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Moretti’s work on jobs is readily comprehended by the everyday reader, and proves interesting to readers of all backgrounds, including those with only a modest knowledge of economics. By applying the concepts of The New Geography of Jobs, you will be better situated to predict the future real estate needs of the labor force in the market you serve.