To Get America Growing Again, We Have to Look to Our Most Productive Metro Areas
Shortly after being re-elected for his second term, President Obama told the nation that "our top priority has to be jobs and growth." As I've been arguing for some time now, to get serious about that, we must focus on the cities and local factors that actually fuel economic growth. Rana Foroohar put it succinctly back in September in TIME: post-election is the time to move away from the current "simplistic conversation about tax cuts versus spending" and focus on the different growth strategies and experiments that are working in many of our cities.
Productivity at the national level has stalled since the Great Recession and even before. Productivity growth was 1.9 percent in the third quarter and just 1.5 percent for the past year. A number of leading economists, led by George Mason University's Tyler Cowen, argue that the United States has in fact entered into a period of prolonged stagnation, having exhausted its capacity for innovation and productivity improvement.
A very different picture emerges when we consider the United States not just as a single national economy but as a collection of city and metro economies. Some have dramatic productivity growth, while others are stagnating.
To get at this, I turn to a simple metric — the Metro Productivity Index— developed by José Lobo of Arizona State University. It is a ratio that compares the level of economic output per person for metros to the gross domestic product (GDP) per person for the nation as a whole. It covers the period 2001 to 2010 and is based on data from the Department of Commerce’s Bureau of Economic Analysis (BEA).
Map courtesy of MPI's Zara Matheson
The map above by Zara Matheson of the Martin Prosperity Institute charts the Metro Productivity Index for all U.S. metros. The table below shows the 20 highest-ranking large metros (with a population of more than one million).
There is considerable geographic variation in the Metro Productivity Index. The most productive metros have a ratio of almost two to one; the least productive have a ratio of less than 0.4. Just six metros have productivity rates of 50 percent or more than the national average, and 26 metros have 25 to 50 percent more. This urban productivity advantage is concentrated in a relatively small number of metros: 85 metros have productivity rates above the national rate, while a whopping 281 fall below it.
|1||San Jose-Sunnyvale-Santa Clara, CA||1.82|
|2||San Francisco-Oakland-Fremont, CA||1.62|
|5||Houston-Sugar Land-Baytown, TX||1.42|
|7||Hartford-West Hartford-East Hartford, CT||1.40|
|8||New York-Northern New Jersey-Long Island, NY-NJ-PA||1.38|
|10||Minneapolis-St. Paul-Bloomington, MN-WI||1.31|
|11||Dallas-Fort Worth-Arlington, TX||1.30|
|12||New Orleans-Metairie-Kenner, LA||1.26|
|14||Los Angeles-Long Beach-Santa Ana, CA||1.21|
|17||Atlanta-Sandy Springs-Marietta, GA||1.19|
|18||San Diego-Carlsbad-San Marcos, CA||1.18|
|20||Milwaukee-Waukesha-West Allis, WI||1.15|
The top ranked metro is San Jose (Silicon Valley) with a ratio of 1.82. San Francisco is second with 1.62. The metros of the Bos-Wash corridor do well: Greater D.C. is third, Greater Boston fourth, Hartford seventh, and Greater New York eighth. Houston and Seattle are fifth and sixth. Denver and Minneapolis round out the top 10.
A number of smaller metros also perform well on this metric. Bridgeport, Connecticut (1.94); Casper, Wyoming (1.79); Sioux Falls, South Dakota (1.5); Midland, Texas (1.57); and Anchorage, Alaska (1,48) all outpace national productivity by a considerable margin.
The metros with the highest levels of consistent productivity growth over the past decade are those with high-tech knowledge based economies or strong energy economies.
On the flip side, the other metros with the lowest ratios — less than .5 — all come from three states: Arizona, Texas, and Florida. They include McAllen and Brownsville, Texas; Lake Havasu and Prescott, Arizona; and Punta Gorda and Palm Coast, Florida.
Productivity growth is the backbone of healthy economy. There's much to gain from understanding the uneven geography of productivity and the kinds of metros that drive it. Brookings economist Alice Rivlin has long argued that the state and local level is the appropriate one for implementing policies for innovation, productivity improvement, and economic development. The diversity of our cities and metro areas is a veritable petri dish for discovering the key factors that can drive future U.S. growth.
As I wrote on this site last month, "It's time to recognize that the U.S. economy is not only made up of industries which grow and decline at different rates, but hundreds of metro regions that do so as well. There is a great deal national economic policy makers can gain from studying the factors that underpin the metros with more consistent and resilient growth."
If we want to restore growth and generate good jobs, America needs to move quickly away from stalled national economic strategies and toward the cities and metros that are showing us how to do it.