The Metro-covery and the Limits of Growth Without Growth

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http://www.theatlanticcities.com/jobs-and-economy/2011/09/metro-covery-and-limits-growth-without-growth/168/

Last week, the Bureau of Economic Analysis (BEA) reported some welcome news. Economic output (measured as GDP) increased in 304 of 366 metros areas in 2010, after mainly declining in 2009.

Some of the most dramatic growth occurred in Rustbelt metros that were hardest hit initially by the economic crisis. Elkhart-Goshen and Columbus, Indiana, for example, showed overall GDP growth of 13 and 10.1 percent respectively. The metros of the Bos-Wash Corridor led large regions, with 4.8 percent growth in greater Boston, 4.7 percent in greater New York and 3.6 percent growth in Greater D.C. in 2010. Economic growth was much slower in Sunbelt metros, which for a long time had been seen as America’s new growth magnets, drawing people, money and jobs from the moribund Frostbelt. Once the fastest growing metro in the U.S., Las Vegas’s economy continued to contract as its overall GDP sank and its real GDP in the construction industry declined by more than 20 percent, falling below its level a decade ago. The Brookings Institution’s September 2011 Metro Monitor notes that: “The metropolitan areas in Florida, California, and the Intermountain West that experienced a housing price boom followed by a housing market collapse (e.g., Boise, Fresno, Miami, Palm Bay, Riverside, Sacramento, Stockton, and Tucson) are prominent on our list of the weakest recovering areas.”

The economic body blow suffered in once fast-growing housing boom metros should once-and-for-all put to rest the misguided notion that places that draw in lots of people must also be growing their economies. I pointed to the limits of this equivalence in a previous post, dubbing it growth without growth. “A rising population,” I noted there, “can create a false illusion of prosperity, as it did in so many Sunbelt metros, which built their house-of-cards economies around housing construction and real estate development, leaving ghost towns, mass unemployment, and empty public coffers in their wake when the bubble inevitably burst.”

Economic growth comes not from population growth per se, but from improvements in productivity. The “gold standard” for measuring productivity is economic output (or GDP) per capita. My colleague Jose Lobo of Arizona State University has compared the average annual growth in population against average annual growth in GDP per capita for US metros between 2001 and 2010, and there is virtually no correlation between the two. In fact many of the metros which experienced vertiginous population growth over the past decade experienced negligible increases in economic productivity.