Meet the Author

Timothy Dunne |

Vice President

Timothy Dunne

Timothy Dunne is a former vice president and economist of the Federal Reserve Bank of Cleveland.

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Meet the Author

Kyle Fee |

Economic Analyst

Kyle Fee

Kyle Fee is an economic analyst in the Research Department of the Federal Reserve Bank of Cleveland. His research interests include economic development, regional economics and economic geography.

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04.01.13

Economic Trends

GDP Growth in U.S. Metropolitan Areas during the Recovery

Timothy Dunne and Kyle D. Fee

The Bureau of Economic Analysis recently released preliminary 2011 GDP data for all 366 metropolitan statistical areas (MSAs) in the nation. In general, these metropolitan areas account for 90 percent of the nation’s GDP. Metro-area real GDP increased 4.7 percent between 2009 and 2011—the first two years of the recovery. However, the growth of GDP during the recovery varies widely across metropolitan areas.

Real GDP Growth in Metropolitan Statistical Areas, 2009-2011

On one end of the distribution are MSAs that continued to struggle with the effects of the housing boom and the subsequent bust. Metropolitan areas in the “sand states” of Florida, Nevada, California, and Arizona populate this lower end of the growth distribution. The upper end of the GDP growth distribution tends toward MSAs associated with natural resource extraction or high-tech industries. In addition, several metros associated with automobile assembly also showed significant growth, as production of vehicles picked up markedly over this period.

One can disaggregate GDP growth at the metropolitan level into two components: the contribution due to changes in output-per-employee (labor productivity) and the contribution due to expansion in the number of employees. Both factors contribute to the changes that we observe in overall GDP growth. For the top 100 metros (by population), GDP grew on average by 4.4 percent from 2009 to 2011. About 43 percent of that growth was due to increases in GDP per employee and 57 percent was due to growth in employment. For the fastest-growing metros, output-per-employee accounts for the majority of GDP growth, with the exception of Austin, Texas, where employment growth exceeded output-per-employee growth. For slow-growing MSAs, there is actually a decline in output-per-employee over the 2009 to 2011 period. Combined with very slow (and sometimes negative) employment growth, this yields a set of metro areas where real GDP contracted over the early phases of the recovery.

 

MSA Productivity, Employment, and GDP Growth, 2009–2011: Highest- and Lowest-Growth Metro Areas

  Productivity + Employment = GDP
Top 100 MSA average 1.9 2.5 4.4
San Jose, CA 16.1 4.6 20.7
Portland, OR 12.1 3.7 15.8
Austin, TX 4.5 6.4 10.9
Baton Rouge, LA 8.2 1.5 9.7
San Antonio, TX 5.4  3.6  9.0
New Orleans, LA  6.5  2.4  8.9
Tucson, AZ  −1.0  0.7  −0.3
 Sarasota, FL  −2.1  1.7  −0.4
 Las Vegas, NV  −1.0  0.3  −0.7
 Norfolk, VA  −1.3  0.5  −0.8
 Stockton, CA  −1.3  −0.6  −1.9
 Lakeland, FL  −1.2  −0.9  −2.1

Source: Bureau of Economic Analysis; Bureau of Labor Statistics.

 

Fourth District metro areas also experienced considerable variation in real GDP growth between 2009 and 2011. Pittsburgh had the highest growth rate over period, experiencing both solid growth in employment and labor productivity. Pittsburgh was followed closely by Toledo and Youngstown in terms of growth during the recovery. However, it is important to note that Toledo and Youngstown suffered severe contractions during the Great Recession, while Pittsburgh had a much milder recession. The net result is that Pittsburgh’s real GDP in 2011 had risen above its pre-recession (2007) level, whereas Youngstown and Toledo’s economic activity remained well below their 2007 levels.

 

MSA Productivity, Employment, and GDP Growth, 2009–2011: Fourth District Metro Areas

  Productivity + Employment = GDP
Pittsburgh, PA 3.7 3.1 6.8
Toledo, OH 3.6 2.9 6.5
Youngstown, OH 4.4 2.1 6.5
Cleveland, OH 1.9 2.0 3.9
Lexington, KY 0.6 3.3 3.9
Dayton, OH 1.3 2.3 3.6
Columbus, OH −1.5 4.8 3.3
Cincinnati, OH 1.5 1.6 3.1
Akron, OH 0.0 2.3 2.3

Source: Bureau of Economic Analysis; Bureau of Labor Statistics.

 

Over the 2009–2011 period, there was little correlation between employment growth and growth in output-per-employee at the metropolitan level. The correlation is weakly positive. Fourth District metros are generally in the middle of the scatterplot, showing that the District’s metros had pretty typical employment and labor productivity growth. The exception is Columbus, which experienced relatively high employment growth but negative productivity growth.

Employment Growth vs. Productivity Growth

The growth in real GDP over 2009 to 2011 is related to a number of different attributes and measures of economic activity for metropolitan areas. Metropolitan areas that saw higher growth in real GDP over the period tended to be metropolitan areas that had higher GDP per capita prior to the recession (2007) and higher educational attainment. In the latter case, educational attainment is constructed as the share of the adult population with a four-year college degree (or college attainment). San Jose, California, and Portland, Oregon, are clearly outliers in the scatter diagrams with high growth, high per capita GDP, and high educational attainment. Even if such data points were omitted from the analysis, there would still remain a positive correlation between real GDP growth and per capita GDP and real GDP growth and college attainment.

Correlation of Real GDP Growth and Real GDP per capita in Metropolitan Statistical Areas

Correlation of Real GDP Growth and College Attainment in Metropolitan Statistical Areas

Finally, it might be posited that metropolitan areas that experienced relatively severe recessions perhaps experienced a rebound effect. For example, we saw that Detroit and Toledo (metros with large automotive sectors) showed very solid growth in the recovery. However, looking across the largest 100 metros, this is not the case. Indeed, the opposite is true. Metropolitan areas that experienced the most severe recessions tended to have somewhat lower GDP growth in the recovery than MSAs that had somewhat milder recessions.

Correlation of Post-Recession and Recession GDP Growth in Metropolitan Statistical Areas