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Guhan Venkatu |

Vice President and Senior Regional Officer

Guhan Venkatu

Guhan Venkatu is vice president and senior regional officer at the Pittsburgh Branch of the Federal Reserve Bank of Cleveland, where he manages relationships with key stakeholders in the area and is responsible for monitoring the region’s economic environment. For the past several years, his economic research has focused on inflation and inflation expectations, housing and household finance, and factors related to regional economic growth.

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04.07.11

Economic Trends

The Recovery, Revised

Guhan Venkatu

The Labor Department recently released updated employment estimates for U.S. metropolitan areas (MSAs). These revisions primarily reflect the incorporation of information from unemployment insurance filings, which nearly all employers are required to submit quarterly. Accordingly, these data provide an almost complete count of employment in a metro area. For the current cycle, this new information replaces the reported employment totals for the period from April 2009 to September 2010. The previous totals had been estimated by sampling a set of employers every month.

These revised data alter our assessment of how MSAs have fared throughout the recovery. To understand the impact of these revisions, let’s consider the 100 largest MSAs in terms of employment, at the time the recovery began in June 2009. Employment levels in these MSAs range from about 200,000 to over 8 million. The largest area is the New York City MSA, and an example of a smaller area is the Youngstown MSA. Collectively, these 100 MSAs employ nearly 90 million workers, and account for about 70 percent of the total U.S. workforce.

Among these 100 MSAs, most (69) saw greater growth over the course of the recovery than was initially reported. Almost a third (31) saw downward revisions to their estimates of employment growth for the first 18 months of the recovery. This is shown in the chart below. Points falling on the 45-degree line would indicate no revision to their initial estimate, while those above and below the line reflect upward and downward revisions, respectively. The vertical distance from a point to the 45-degree line reflects the magnitude of revision.

Within the Fourth District, employment in every MSA except Cleveland is now thought to have grown more over the first 18 months of the recovery than was initially reported. Some of the revisions were relatively substantial. For instance, from the time the recovery began to the end of 2010, employment growth for the Toledo and Columbus MSAs was revised up roughly 2 percentage points. This put Toledo in the top decile in terms of the change from the initial estimate, and Columbus in the top quintile.

As a consequence, relative growth rankings for these 100 MSAs have changed considerably. Both Toledo and Youngstown, which were previously showing declines, now boast gains that are in the top 10 (see the table below). Akron, Columbus, and Dayton also experienced a substantial increase in their rankings. Notably, Columbus moved from the bottom third of the distribution to the top third. Finally, Cleveland fell from 29th to 55th, which isn’t surprising given its downward revision. But for the more recent part of the recovery (December 2009 to December 2010), the change was even greater: Cleveland fell from 11th in terms of growth over this period to 51st. The lesson here is to be cautious when interpreting the initial data, remembering that it is a best estimate.

Employment Growth during the Recovery, Largest Fourth District Metro Areas

 
Post-revision
Pre-revision
Change
MSA Ranka Growth
(percent)
Ranka Growth
(percent)
Ranka Growth
(percentage
points)
Toledo, OH
3
2.1
28
−0.1
25
2.2
Youngstown-Warren-Boardman, OH
10
1.4
41
−0.6
31
2.0
Pittsburgh, PA
16
1.1
17
0.3
1
0.8
Lexington-Fayette, KY
20
1.0
24
0.1
4
0.9
Akron, OH
29
0.4
53
−0.9
24
1.4
Columbus, OH
31
0.3
69
−1.5
38
1.8
Dayton, OH
47
−0.1
65
−1.2
18
1.1
Cleveland-Elyria-Mentor, OH
55
−0.5
29
−0.2
−26
−0.3
Cincinnati-Middletown, OH-KY-IN
75
−1.2
71
−1.5
−4
0.3

a. Among the 100 largest MSAs in terms of employment at the start of the expansion
Source: Bureau of Labor Statistics.

Given these revisions, where do Fourth District metro areas stand through the first year and a half of recovery? Nearly all appear to be experiencing about average or above-average growth, when compared to the median outcome for our 100 metro areas. (The median outcome is shown as a dashed line in the middle of the chart below; the top-most and bottom-most dashed lines depict the 10th best and worst outcomes, respectively, at any given point.) The exception to this pattern is the Cincinnati MSA, which is at the bottom of the third quartile.

This is something of a reversal from the last business cycle. Across all 100 large MSAs, the amount and range of employment growth during this recovery are surprisingly similar to what we experienced up to this point in the last recovery—surprising because of the very different recessions that preceded each recovery—but employment-growth patterns of indivicual Fourth District MSAs have differed considerably in the two episodes.

Through the first 18 months of the previous recovery, for example, the Cincinnati MSA experienced above-average growth. In fact, it saw the strongest growth of any other District MSA within our set of 100 large MSAs. Moreover, nearly all of the other District MSAs were in the bottom half of the growth distribution up to this point in the previous recovery. That turned out to be an ominous sign: By the time the expansion was over in December 2007, all of the District’s MSAs were in the bottom half of the employment-growth distribution. Four of these nine metro areas were within the bottom decile and actually experienced employment declines over the entire expansion.

Employment Growth during the 2001 Recovery, Largest Fourth District Metro Areas

 
In initial 18 months
Entire expansiona
MSA Rankb Growth
(percent)
Rankb Growtha
(percent)
Cincinnati-Middletown, OH-KY-IN
21
1.0
62
4.4
Akron, OH
30
0.4
58
5.0
Columbus, OH
50
−0.4
70
3.3
Lexington-Fayette, KY
62
−0.8
51
5.4
Youngstown-Warren-Boardman, OH
64
−0.9
94
−3.5
Pittsburgh, PA
69
−1.2
86
0.2
Dayton, OH
79
−1.7
98
−5.5
Cleveland-Elyria-Mentor, OH
86
−2.1
92
−2.9
Toledo, OH
94
−2.6
96
−4.2

a. Through December 2007.
b. Among the 100 largest MSAs in terms of employment at the start of the expansion.
Source: Bureau of Labor Statistics.