New numbers show the power of energy and knowledge economies.
I've written repeatedly about how spiky America's economic geography is. In the years since the economic crisis, this has only become more true, as powerhouse metros like San Francisco, New York, and Washington, D.C., continue to grow in importance. In 2012, the top ten largest metropolitan economies produced more than a third of the country's total economic output.
Economists of all stripes agree the single most important barometer of economic growth is productivity. As part of my recent essay in The Atlantic, my team at the Martin Prosperity Institute ran the numbers on productivity — measured as per capita real economic output or GDP — based on the most recent data from the Bureau of Economic Analysis.
Productivity averaged $36,154 across all cities in 2012. But there was wide variation in productivity across America’s metro areas. The top ranked metro produced more than $100,000 per person in economic output, three times the average, while the lowest-ranked metro generated just $15,000, less than half of the national average. There were more than 30 metros that generated $50,000 or more in economic output per person, while more than a hundred produced less than $30,000 in economic output per person and eleven generated less than $20,000.
The map below, from MPI's Zara Matheson, shows the variation in productivity — economic output per capita — across America's metropolitan areas in 2012.
Notice the dark blue regions around many of America's largest knowledge economies, including the coastal centers. The map also shows the high productivity of knowledge regions in the center of the country, like Austin, Minneapolis-St. Paul, Denver, and Boulder. The Energy Belt, especially along the Gulf Coast from Houston, Texas, to New Orleans, Louisiana, stands out on the map as well. Other energy economies that have prospered include Casper, Wyoming; Fargo, North Dakota; and Anchorage, Alaska.
The table below shows the top 20 most productive metros.
|America's Most Productive Metros -- Real GDP Per Capita|
|Rank||Metro||Real GDP Per Capita 2012|
|2||San Jose-Sunnyvale-Santa Clara, CA||$90,528|
|5||San Francisco-Oakland-Hayward, CA||$69,542|
|6||Durham-Chapel Hill, NC||$69,468|
|13||Houston-The Woodlands-Sugar Land, TX||$62,438|
|15||Des Moines-West Des Moines, IA||$61,777|
|16||Sioux Falls, SD||$60,954|
|18||New York-Newark-Jersey City, NY-NJ-PA||$59,172|
|19||Hartford-West Hartford-East Hartford, CT||$57,088|
|30||New Orleans-Metairie, LA||$56,119|
The top twenty includes a mix of knowledge and energy metros. Midland, Texas — in the core of the Energy Belt — took the top spot. It is the only metro to produce more than $100,000 in economic output per person. San Jose, California, the home of Silicon Valley, is second with more than $90,000 in economic output per person. Bridgeport-Stamford-Norwalk, Connecticut, the finance and banking center of suburban New York, was third with more than $80,000 in output per person.
On the flip side, the least productive metros are concentrated in the Sunbelt, mainly in Florida, Arizona, and Texas. The five least productive metros in 2012 were The Villages, Florida; Lake Havasu City-Kingsman, Arizona; Sebring, Florida; McAllen-Edinburg-Mission, Texas; and Punta Gorda, Florida. Among large metros with populations of more than one million, Riverside-San Bernardino-Ontario, California was the only metro that produced less than $30,000 in real GDP per capita.
To better understand what ties this diverse group of top-performing metro areas together, my MPI colleague Charlotta Mellander also ran correlation analysis for GDP per capita for 2012 with various social, political, and economic factors. As usual I point out that correlation points only to associations and in no way implies causation.
But the findings are in line with what much recent research has found to be the main factors that contribute to economic growth.
First, productivity is associated with clusters of high-tech and innovation, with significant correlations to high tech industry (.56), innovation as measured by patents (.45), and especially venture capital-funded start-up activity (.67). The scatter plot above shows the relationship between the concentration of high-tech industry and productivity (or GDP per capita).
The highly productive energy metros of Midland, Texas, and Casper, Wyoming, are situated as outliers far above the fitted line. They have far greater productivity than their high-tech industry would predict. Their economic success, which derives from their energy endowments, while notable, is somewhat unique.
Productivity is also associated with human capital, measured either as the share of adults with college degrees (.54), or the share of workers in knowledge, professional and creative occupations (.52). The chart above provides a scatter graph of the relationship between the creative class and productivity. Again, Midland and Casper are outliers considerably above the fitted line.
Digging beneath these broad categories, productivity was also correlated with employment in management (.64) and science and technology (.57), and also with employment in arts, culture, and media occupations (.47). Interestingly, despite the high rankings of Energy Belt metros, there is a somewhat weaker association between productivity and employment in oil and gas industries (.32) and no correlation at all between GDP and employment in resource extractive fields.
Urban form — the size and density of metros — also appears to matter. Productivity is correlated with both the size (.42) and density (.43) of metros, which is in line with previous research.
Mellander also found weak associations between productivity and politics. Productivity was modestly positively correlated with the share of metro covers that voted for Obama (.21) and modestly negatively associated with the share of voters who voted for Romney (-.21). I'd caution against reading too much into these correlation statistics. Rather, this likely reflects the underlying fact that more liberal, Obama-leaning metros have higher levels of human capital, a greater share of creative class workers, and higher levels of innovation and high-tech activity to begin with.
While much has been made of the role of warmer climate in spurring the shift of population to the Sunbelt, Mellander’s analysis found only weak and negative correlations between productivity and mean January and July temperature (each of roughly .14).
The list of America's most productive metros is a combination of knowledge-economy centers like North Carolina's Research Triangle, Seattle and Portland, and the emerging Energy Belt, in boom towns from Houston and Midland, Texas to Casper, Wyoming. Unfortunately, too many Sunbelt metros that built their economies around real estate and inflows of people continue to falter. America’s new growth model, as I pointed out in this month’s Atlantic, is taking shape as a knowledge-energy economy.
Top Images: An oil field in Midland, Texas (Reuters/Jessica Rinaldi) and the Google campus in Mountain View, California (Flickr user Roman Boed).