Today, we bring you a first look at new data on how domestic migration trends in the pandemic are reshaping local economies. Plus, what new trade figures show about demand. πŸ‡ΊπŸ‡Έ

Situational awareness: Philadelphia Fed president Patrick Harker is ready to be done with rate hikes, he said in a speech this morning. "I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work," Harker said.

Today's newsletter, edited by Kate Marino and copy edited by Katie Lewis, is 593 words, a 2-minute read.

1 big thing: How the pandemic shifted the geography of income

Net change in income from migration, 2020 to 2021
Reproduced from Economic Innovation Group analysis of IRS data; Map: Axios Visuals

When millions of Americans rethought their living situations during the pandemic, their moves changed the geography of where money is made in the United States.

Why it matters: A new analysis of tax data by the Economic Innovation Group, shared first with Axios, quantifies the reasons some of America's biggest cities are struggling to rebuild their economies post-pandemic.

  • It also shows a surge in income that arrived in many rural and exurban places and in popular vacation destinations.
  • Not only did residents leave the biggest cities, but those who left disproportionately had high incomes, meaning the hit to those local economies was larger than migration numbers alone would imply.

By the numbers: In San Francisco, out-migration caused a 20% drop in adjusted gross income from 2020 to 2021 as a share of the taxable income of those who stayed put. In Manhattan, that drop was 13%, and in Boston, 11%.

  • These cities were losing high earners. San Francisco out-migrants' average taxable income was $240,000, while those moving in averaged $134,000. The numbers were similar for Manhattan.
  • The biggest percentage rise in income due to migration was in Walton County in the Florida panhandle (+51.6%).
  • Other large surges occurred in Collier County, Florida (best-known city: Naples, +31.4%), Pitkin County, Colorado (home of Aspen, +27.4%) and Summit County, Utah (home of Park City, +34.9%).

State of play: In some cities β€” including Washington, D.C., and New York β€” income taxes are a major source of municipal revenue. But even places without a county-level income tax depend on residents' incomes to support the local housing market, retail sales and tax base.

What they're saying: "The scale of urban income flight is a lot larger than I thought it would be," said Connor O'Brien, who conducted the analysis at EIG, a Washington-based think tank.

  • "It's very likely that in the last couple of years in superstar cities, high earners have become more mobile while everyone else had been stuck."
  • At the same time, "rural areas caught a break for the first time in a while," he said.
  • There were particularly strong inflows of income in counties near the Canadian border in Michigan, Minnesota and Maine β€” places that haven't been magnets for entrepreneurship and investment.

What's next: The data only covers 2021, so it doesn't shed light on 2022 and what's happened so far this year.

  • Based on other evidence, O'Brien said, the trend likely eased but does not appear to have reversed.

2. The trade deficit shrinks

Data: Bureau of Economic Analysis; Chart: Axios Visuals
Data: Bureau of Economic Analysis; Chart: Axios Visuals

New trade data suggests America's booming demand for goods and services waned in June.

By the numbers: The value of goods and services imported into the U.S. fell to the lowest level since late 2021. That's a key reason the trade gap shrank to $65.5 billion, down $2.8 billion from May.

Why it matters: The trade deficit widened to its largest ever in March 2022 ($102 billion) as imports surged at the height of the white-hot consumer spending wave and soaring inflation. The latest trade figures show those pandemic-era dynamics have continued to normalize.

Details: Imports fell 1% to $313 billion in June, nearly 8% lower than the same period a year ago. That reflected a decrease in imports of things like capital goods and industrial supplies. Auto parts and vehicle imports, meanwhile, increased.

  • Exports dipped by a smaller amount: 0.1% to $247 billion (4% lower than June 2022).

Of note: China, one of America's largest trading partners, overnight reported plunging imports and exports in July compared to a year ago β€” pointing to sluggish domestic demand and cooling appetite for its products overseas.