Look at all those American dreamers.

A Population History of Phoenix

How a Well-Positioned City Grew to a Rational Size

This post will zoom in on Phoenix, Arizona, and look at why the valley of the Salt River has turned into one of America’s largest cities. This question arose last week when I needed a topic to write on, and got this suggestion:

Good question. I’ve only been to Phoenix once, and was not overwhelmingly impressed with the city itself, though granted I was only there about a day and a half. But apparently millions of people, 4.5 million at latest count, are rather impressed with the city, at least enough to stick around.

So why is this middle-of-nowhere city with no signature modern industry so big?

Well, the simple reasons are going to be that (1) it’s not in the middle of nowhere and (2) it does have signature modern industries.

A Century of Growth

Phoenix’ Population Charted

The above chart shows an annual estimate of the population of Phoenix-proper from 1880 to the present day, as well as estimates of the population of Maricopa County, and the Phoenix MSA. One big thing should stand out: the lack of any significant period of decline. Phoenix has grown, and grown, and grown, and grown, no matter the geographic unit you look at.

We can also look at growth rates. One good comparison may be Phoenix proper vs. the remainder of Maricopa County.

Looking at growth rates, we can see a few key factors. First, the periods of highest growth for Phoenix proper came in the 1910s and the 1950s, as well as during WWII. But since 1960, the rest of Maricopa County has outgrown the city of Phoenix pretty reliably, and since 2000, the MSA beyond Maricopa County, what we might call the exurban areas, has grown even faster.

What caused these trends?

Well, it’s hard to say with any exactness, but one thing we can look at, just to start with, is the housing supply. We only have this data going back to 1980, but it’s worth noting that, since 1980, we can compared Phoenix to other cities and get an idea of its supply of new housing versus population growth, compared to peers. Some peer cities might be San Diego, San Francisco, Dallas, and San Antonio, all similarly-sized in 1980. If we then take the total population growth for those cities’ home counties, as well as the total building permits granted in those counties, we get this graph:

If we then compare new building permits granted per net increase in population, we get:

And lo and behold, Phoenix has provided more new housing compared to population growth than most of its peer cities! Since the 1950s, Phoenix has had municipal policies intended to (1) enable the city to grow easily in terms of area and population, (2) provide for medium-to-high-density neighborhood cores, (3) make it easy to build new neighborhoods around the urban fringe.

The result is that Phoenix is ranged 92nd in terms of the median cost to own a home among metro areas. Of the cheaper metro areas, most are either far smaller than Phoenix, or else economically depressed. In other words, Phoenix is one of the largest cities where ownership is still quite affordable. This is partly due to favorable geography (it’s hard to expand San Francisco), but also largely due to favorable political choices (laxer zoning and other pro-development policies).

So why does Phoenix have so many people? Because Phoenix manages to not do anything to keep the great unwashed masses away.

Hub and Harbor

The Middle of Nowhere Is, Actually, Somewhere

Phoenix’ location baffles many observers, but it’s actually a very reasonably placed city in many regards. Far from being a desert, the Salt River/Gila valley has been a hub of urbanization for 1,000 years, going back to the Hohokam city of Snaketown, one of the largest precolumbian population clusters in North America. The Hohokam people carved out hundreds of miles of irrigation channels through the “Valley of the Sun” as it was branded in modern times, making the area around Phoenix quite prosperous, productive, and, dare I say it, even green.

When Phoenix was founded, some of those Hohokam irrigation works were updated and continued in use. The city’s name was itself a nod to the area’s urban past; a new city would rise from the ashes of an ancient civilization. So far from being just a random watering hole in the desert, Phoenix’ location has centuries of history of humans recognizing it was actually a fairly okay spot to settle and live.

Nonetheless, Phoenix was not large initially, and its first settlers selected the spot at least as much due to the nearby presence of a US cavalry fort as for the fertility of the land. The area was good enough for farming, sure, but it was nice to have the US army nearby in case things went poorly with the natives. The proximity of US military bases was a key determinant of urbanization in many early cities and towns in the west, and these first-mover advantages can, in some cases, be lasting.

Until 1950, the only city of note between the rocky mountains and California was Salt Lake City, Utah. No other city in the area ever cracked the top-100 until Phoenix did it in 1950. While Tucscon was comparably sized until the 1920s, Phoenix became Arizona’s biggest city by 1930, and the mountain-country’s undisputed population-leader by the 1960s.

But why?

Simple: by the 1880s, a railroad spur had come to Phoenix, making it a key market-town. That spur led to the southern branch of the transcontinental railroad. By 1895, that spur extended northwards, beyond the Mogollon Rim into the high desert, making Phoenix the premier marketing destination for goods going into that region, or produce coming out. By 1912, Arizona was a state, with Phoenix its capital, giving it newfound political significance as well, which created a steady base of employment and renewed emphasis on making sure the city was reachable and modern. In 1911, the Roosevelt Dam was completed, supplying electricity and water to the Valley of the Sun. At the time, the Roosevelt Dam was the largest masonry dam ever constructed, and was built largely using Federal dollars, much as the railroads were largely built thanks to Federal land grants and subsidies.

All of this adds up to unique governmental favoritism. What might have been a sleepy farm town in the desert instead developed a vibrant mercantile class, became home to an educated political elite, and benefited from enormous taxpayer largesse. Then in 1929, Sky Harbor airport was constructed, and by 1931 Phoenix was a major airmail dropoff point. Getting into the aviation game early, Phoenix was a hub for military and civil aviation through the great depression. By the 1940s, there were 3 military airbases near Phoenix, in addition to 2 large pilot training camps. After the war, major aviation and aeronautics contractors like McDonnell Douglas located in the area, and aviation continues to be a huge industry in the area. Construction of anew spaceport is even underway near Tucson.

Those pilot training camps would turn out to be a big deal. Tens of thousands of GIs and airmen would come through Phoenix during WWII, and note (1) its warm, comfortable weather, (2) its ample room and low prices, (3) its numerous government jobs and contracts, and (4) its friendliness to business. The result is that, after the war, many of these young men would return with their families and put down roots. The addition of one of the original Eisenhower interstates just made the city more accessible.

It’s hard to overstate the value of WWII in reshaping American demographics. Millions of men were relocated. This constituted a kind of information-shock, as they found that, huh, they really liked living in California, or Florida, or Texas, or Arizona, instead of Illinois or Pennsylvania. In the prewar economy, large amounts of welfare-improving migrations did not occur (indeed the depression and 20s had strikingly low migration) thanks to resource constraints on migrants, but also information and social constraints. Mass media was focused in a few cities, and most people had poor information about opportunities around the country. Plus, social norms did not tend to be conducive to migration during this era: migrants were viewed with suspicion and hostility in many cases, while the key facilitators of 19th century migration, free land and profitable agriculture, had faded away. But when forced to experience life in Arizona, evidently many people found it to their liking, and returned after the war.

This kind of information shock is hard to imagine today. We have such good information that it doesn’t seem like there would be lots of welfare-improving migration left “on the table” so to speak. But then again, maybe there is: people might not know their own residential preferences, or the “real” opportunities for work, without actually migrating. If in fact individuals have limited access to their own true preferences, then there may still be potential for large welfare-improving “information shocks,” i.e. a major hurricane wiping out a neighborhood, or volcanic eruption, or some other geographic displacement.

All that to say: Phoenix isn’t in the middle of nowhere. It’s a well-placed transportation hub that’s managed to be right on major thoroughfares for a century or more, has been cutting-edge in adopting new transportation technologies, and has benefited from substantial political spending. All of these factors helped create a city that, if a big boom happened, would be well-positioned to efficiently capture the benefits.

Phoenix Has Major Industries

Aerospace, Tourism, Retirement, Government

Phoenix has a lot of major industries that continue to create economic strength. Aerospace has been a strength since the 1930s, and continues to be a major employer. US Airways was based in Tempe until its merger with American in 2013. Business technology firms like Avnet and Insight, alongside traditional tech companies like Intel and Motorola, are and have long been major employers. Meanwhile, the $15 billion mining conglomerate Freeport McMoRan is based in Phoenix too. A gazillion other transportation, aerospace, and tech firms flesh out Phoenix’ list of businesses: U-Haul, Go Daddy, Best Western, Coldstone Creamery, Mesa Airlines.

So like every large metro area, Phoenix has its fair share of big, prominent firms, with evident specialties in aerospace, business technology, and transportation services, as well as apparently semiconductors. But that’s just one way of looking at Phoenix’ economic environment. Another is to look at the people who go to Phoenix purely to spend their money.

Three groups of people head to Phoenix without regard to its job market: retirees, students, and tourists. Arizona is a huge state for tourism, and Phoenix is a major beneficiary. I mentioned I’ve only been there once: it was for my honeymoon. My wife and I flew into Phoenix before renting a car and driving to Flagstaff, where we would stay while we did the Grand Canyon, the Painted Desert, Four Corners, all the touristy stuff. Crucially though, of the $2,500 budget or so for the trip, we spent easily $800 of it in Phoenix on airport food, gas, a rental car contract, our most expensive lodgings, etc. Even though Phoenix wasn’t our destination at all, it still ended up a major beneficiary of our tourism spending. That’s true for many tourists; and some even come to Phoenix for more local tourism than we were.

Phoenix also gets lots of retirees. While visiting, we stopped by my great uncle Lyman’s house (yep, my namesake). He’s in his 80s and retired in a community just south of Phoenix. He moved to Phoenix for family, but ultimately because Phoenix affords a good climate for him, at a budget price, in a community where he can actually have community. That’s true for many retirees. Phoenix has a kind of first-mover advantage at securing retirees, but also has natural advantages as long as cost of living is kept reasonable and the climate doesn’t radically change. Endless suburbs of ranch-style houses may be a kind of hellscape to urbanists, but they’re great for retirees who, for example, can’t go up stairs.

Finally, we’ve got students. Arizona State University is the 6th largest university in the US, with over 50,000 students. Those students will continue to come regardless of local job prospects. The combination of retirees needing care and students getting degrees means that the meds part of the “Eds & Meds” formula for economic growth is also doing quite well in Phoenix.

And where there’s good large-scale public education and good housing for grandma and affordable living for the rest, other family members start to congregate. Phoenix, by capturing both ends of the generational chain and being easy striking distance from many of the “adventure” amenities many young people want, is likely to keep experiencing economic growth.

As the metro area expands and runs up against more mountainous terrain, and as changes in the housing market have made homeownership both less attractive and less attainable, Phoenix’ multi-decade era of unrestrained headlong growth may come to an end. But it is not likely to be replaced by a crash, like what was experienced in Detroit, or Baltimore, or St. Louis, or New York, or Appalachia, after their booms died down. Phoenix has enduring economic amenities in the form of a retirement-friendly climate, world-class tourism, a very pro-business and pro-development political climate, and a large, educated workforce. Once homeownership trends begin to return to pre-recession levels, with Millennials moving out of rental units into houses with families, we can safely expect Phoenix to rise again.

Check out my Podcast about the history of American migration.

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I’m a graduate of the George Washington University’s Elliott School with an MA in International Trade and Investment Policy, and an economist at USDA’s Foreign Agricultural Service. I like to learn about migration, the cotton industry, airplanes, trade policy, space, Africa, and faith. I’m married to a kickass Kentucky woman named Ruth.

My posts are not endorsed by and do not in any way represent the opinions of the United States government or any branch, department, agency, or division of it. My writing represents exclusively my own opinions. I did not receive any financial support or remuneration from any party for this research. More’s the pity.

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