The economic power of the world, much like its population, is increasingly concentrated in metropolitan areas. But given the economic turmoil of recent years, the health and wealth of these metros varies significantly from place to place. According to a new report on the largest 200 metros from the Brookings Institution, the top performing metro economies today are largely outside of the typically successful U.S. and Western Europe, and can vary greatly even within countries.
By looking at changes in income (measured by GDP) and employment between 2010 and 2011, the report tracks the economic wellbeing of 200 metro areas. These areas, combined, represent 48 percent of the output of the global economy. For example, the report looks at 64 metro areas in North America. These collectively contribute about 62 percent of the combined GDP of Canada and the U.S. Between 2010 and 2011 they represented 83 percent of the growth in the combined GDP. And it’s a similar story in other countries and regions, often to a much greater degree.
But as the report notes, most of the growth is being seen in areas like the Asia-Pacific, the Middle East and Latin America. Shanghai is the top performer, with a 9.8 percent income growth rate and a 5.8 percent employment growth rate. Riyadh and Jeddah, both in Saudi Arabia, follow.
The recession has battered the economies of the West, and as their growth rates have dimmed, the fortunes of other regions have been able to shine brighter – a process that had already begun before the economic downturn.
“The recession accelerated an underlying trend,” says Emilia Istrate, one of the report’s authors. “These shifts have been going on for some time. The recession just made them happen much faster.”
This is especially true in the metros of developing countries, 42 of which are included in the top 200 in the report. From 1993 up to 2007, these 42 metro economies added 2.5 percent to the GDP of the entire sample. In just the next four years they contributed another 2.2 percent.
“The recession has been uneven. Some metros have not even had declines in GDP per capita or employment while others have had declines for many years,” says Istrate.
Of the 200 metros in the report, 149 saw growth in income between 2010 and 2011 and 140 saw growth in employment.
Some metros, though, have been underperforming. The report lists some metro areas that have seen job and income growth rates that are below their national rates. Despite the growing notion that metropolitan areas drive the economy, the role of some is small or even negative.
New Orleans, for example, saw its income rate fall 3.6 percent between 2010 and 2011, while the U.S. as a whole, on average, saw an increase of 0.9 percent. And though Beijing saw its income increase by 3 percent, China as a whole saw an increase of 8.2 percent, which makes Beijing look like it’s not carrying its weight.
“We know that there is not a one-to-one relationship between metro area performance and national performance,” says Istrate.
Much of these, Istrate says, has to do with the types of industries that are important in each metro. Beijing, for example, is home to the center of government in China, where the economy is largely based around local and non-market services that typically have relatively low value. In Shanghai, on the other hand, manufacturing is the largest industry, making up 40 percent of its output and providing one-third of its economic growth in 2010-2011. The high output and often international marketability of manufactured goods helps a manufacturing-based economy have a higher rate of income growth (9.8 percent) compared to Beijing (3 percent). And, as Istrate notes, the Shanghai metro area is nearly one-and-a-half times bigger than that of Beijing.
The centralized nature of planning in China may be blamed for some of these imbalances. But in other places, like the U.S., metro performance has also seen large discrepancies. Of the ten metro areas that have the lowest employment growth rates compared to their nations’, five are in the U.S.: Indianapolis, Kansas City, Atlanta, Sacramento, and Richmond all have employment growth rates below the national average of 0.9 percent, while metros like Dallas and Houston have been able to see growth rates of 2.4 percent and 2.5 percent, respectively.
The report stresses that metropolitan areas are – and will continue to be – significant contributors to the global economy. And though some of the historically well-performing metros – New York, Tokyo, London – have not weathered the past few years incredibly well, Istrate argues that they’re not going anywhere. They will still be major economic actors, but so will a growing number of emerging metro areas in developing countries. The recession may have slowed some metros down, but the overall trend seems to be that concentrated metropolitan areas – in countries and regions all over the world – will increasingly drive the global economy.
Top image: Saudi traders monitor stocks at the Saudi Investment Bank in Riyadh (Fahad Shadeed / Reuters)