Houston and San Jose Are Leading U.S. Economic Growth

The continued rise of America's new knowledge-energy economy.

Image REUTERS/Richard Carson
Houston saw the largest economic output percentage growth of any major U.S. metro area in 2013. (REUTERS/Richard Carson)

The metro areas that form the twin pillars of America's knowledge-energy economy continue to rise and prosper, according to new figures on economic growth released this week from the Bureau of Economic Analysis. According to the data, which measured economic output as gross domestic product (GDP), the energy hub of greater Houston showed the fastest growth in terms of economic output last year, while the Silicon Valley tech hub of greater San Jose came in second.

The map below, from the BEA, shows the percent change in economic output across U.S. metros. While 173 metros had growth above the 1.7 percent average, a worrying 86 cities, or 23 percent of all U.S. metros, saw economic output decline in real terms.

As the map shows, the metros where economic output grew the most (in blue) are clustered along the tech hubs of California and the West, the energy centers of Texas and the Gulf Coast, and the shale gas industry hot spots of West Virginia and Ohio. The regions where economic growth declined (in orange) are concentrated in the South, Midwest, and Mid-Atlantic.

The table below shows growth rates along with the total economic output for the fastest and slowest growing large metros (those with more than a million people). These 51 metros accounted for nearly two-thirds of all U.S. economic output.

Rank

Metro

Percent Change from 2012

1

Houston

5.2%

2

San Jose

4.4%

3

Denver

4.3%

4

Raleigh

4.1%

5

Oklahoma City

3.9%

6

Charlotte

3.7%

7

Indianapolis

3.4%

8

Columbus, OH

3.3%

9

San Antonio

2.8%

10

Riverside, CA

2.8%

 

 

 

42

Cleveland

0.5%

43

Milwaukee

0.5%

44

Philadelphia

0.4%

45

Buffalo

0.4%

46

Virginia Beach

0.2%

47

St. Louis

0.1%

48

Memphis

-0.1%

49

Louisville

-0.1%

50

Birmingham, AL

-0.8%

51

Washington, D.C.

-0.8%

In addition to Houston and San Jose, the tech hubs of Denver, Raleigh and the energy hub of Oklahoma City round out the top five fastest growing large metros. The top seven large metros all registered rates of economic growth more than double the national average.

On the flip side, the large metros with the slowest growth are mainly older industrial economies, like Louisville, Birmingham, St. Louis, Cleveland, Buffalo, Philadelphia, Milwaukee, and Cleveland. There was one startling exception: Washington, D.C. The capital actually tied with Birmingham, Alabama, for the slowest rate of economic growth of any large metro, seeing a real decline in GDP of -0.8 percent. This is both surprising and troubling, since greater Washington has long been cited as one of the most economically stable metros over the course of the economic crisis. Government cuts are at least partially responsible for this decline: the metro area's government sector declined by -0.4 percent, while professional and business services, likely related to government, declined by nearly -0.3 percentage points.

Also troubling, the nation’s three largest metro economies all registered below average growth: New York saw a growth rate of 1.0 percent (220th of all metros); L.A had a growth rate of 1.2 percent (204th); and Chicago clocked in at 1.3 percent (201st).  Still, those large economies are nothing to sneeze at. As I pointed out earlier this year, the New York metropolitan area’s economy is about the same size as Australia’s, L.A.’s is the size of the Netherlands’, and Chicago’s is significantly bigger than Sweden’s.

Smaller metros dominate the lists of both the fastest and slowest growing places, as the table below shows. The ten fastest growing metros all registered growth more than four times the national average, many driven by the shale gas boom. And two of them experienced economic growth of more than ten percent. The bottom ten metros, many of them in the South, saw their economies decline by 3 percent or more.

Rank

                               Metro              

Percent Change from 2012

1

Mount Vernon-Anacortes, WA

10.6%

2

Greeley, CO

10.1%

3

Beckley, WV

9.4%

4

Wheeling, WV-OH

9.0%

5

The Villages, FL

8.8%

6

Bellingham, WA

8.6%

7

Madera, CA

8.0%

8

Lake Charles, LA

7.9%

9

Lima, OH

7.9%

10

Beaumont-Port Arthur, TX

7.2%

 

 

 

372

Gadsden, AL

-3.1%

373

Glens Falls, NY

-3.1%

374

Anchorage, AK

-3.2%

375

Pine Bluff, AR

-3.3%

376

Fairbanks, AK

-3.3%

377

Missoula, MT

-3.6%

378

Hinesville, GA

-4.2%

379

Lafayette, LA

-4.8%

380

Shreveport-Bossier City, LA

-5.4%

381

Peoria, IL

-6.8%

All together, America's metro economies generated more than $15.1 trillion in economic output in 2013, nearly 90 percent of the country's $16.8 trillion total. Metro economic output, measured as real gross domestic product, or GDP, increased 1.7 percent in 2013 – down from the 2.6 percent jump in 2012. Still, this growth continues to be a major improvement over the declines of the economic crisis.

Metro economic growth was powered by several key sectors that comprise the knowledge-energy economy, according to the BEA analysis. Together, professional and business services sectors and the finance, insurance and real estate sector grew at an 0.6 percent annual rate, accounting for more than a third of overall economic growth.  While the natural resources and mining sector did not contribute substantially to overall national growth, it was a substantial factor in the rapid growth of booming metros with large shale gas industries, like Wheeling and Charleston, West Virginia, and Greeley, Colorado. Additionally, energy metros like Beaumont, Texas, benefited from substantial refining, which is captured under the non-durable manufacturing sector. The government sector declined by -0.12 percentage points nationally, with more than three-quarters of all metros registering declines in that sector.

Once again, we see the pattern of concentrated or spiky growth around the twin hubs of America’s knowledge-energy economy, while older industrial areas and Sunbelt centers of sprawl continue to struggle.

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