Tuesday, November 22, 2011

Life in Metropolitan America: Is it Improving?

Updated February 3rd, 2012

During the third quarter of 2011, the Brookings Institute released its most recent MetroMonitor which tracks the recession and recovery in the 100 largest metropolitan areas in the United States.  Here are some of the highlights.  Please note that the economic indicators are current to the end of the second quarter of 2011 except where I note otherwise.

The report opens by noting that various economic indicators show that the American economy has stalled.  The national unemployment rate remains at an elevated rate of 8.3 percent, especially when one considers that this is supposed to be the second year of a so-called "recovery".  Here is a graph showing how elevated the unemployment rate is compared to rates over the past 10 years showing just how America's employment situation has not improved meaningfully since early 2009:

House prices, construction and sales remain very weak and wages are lower than they were last year at this time.  All of this does not particularly bode well for Americans, particularly as it certainly appears that another recession is just around the corner.  Now, let's go back to the findings of the MetroMonitor and focus on how the economic recovery is impacting life in metropolitan regions of the United States.

Here is a chart showing which 20 metropolitan areas are performing well and which 20 are performing poorly:

Here is a map showing the strongest 20 metropolitan areas in dark blue dots and the weakest in dark orange dots ranked on a combination of four factors including changes in the unemployment rate from June 2008 to June 2011, percentage change in gross metropolitan product, percentage change in the housing index and the percentage change in jobs (the last three factors are measured by comparing data from June 2011 to the peak quarter):

Notice the concentration of orange dots in the sunbelt areas (generally) and the concentration of dark blue dots in the northeast states, the Great Lakes area (excluding the automotive manufacturing centres) and the Texas/Oklahoma oil producing regions. 

You will notice that most of the metropolitan areas that suffered the least since 2008 have economies that rely on either government (i.e. Washington, D.C. and other state capitals), education (i.e. Boston) or the energy industry (i.e. Dallas, Houston, Oklahoma City).  I guess that high oil prices really did benefit some parts of America!  The metropolitan areas that continue to suffer the most are those related to automobile manufacturing (i.e. Detroit) or those that suffered a large magnitude housing market bust (i.e. Las Vegas, Phoenix, and most of California and Florida).  Most of the strongest performing metropolitan areas saw an increase in government employment, the exact opposite scenario to what was experienced in the weakest metropolitan areas which saw a loss of government jobs.

Now let's look at how well the nation's metropolitan areas are recovering.  Here is a chart showing the strongest 20 recovering metropolitan areas and the weakest 20 recovering metropolitan areas:

Here is a map showing the same data:

The strongest recovery is clearly noted in Texas and its neighbouring oil-rich states.  As well, the states around the Great Lakes are recovering well with the recent increases in the production of both automobiles and durable goods.  That said, the economic performance of many of these manufacturing centres is still well below what it was prior to the Great Contraction.  The recent resurgence in the technology sector has been kind to metropolitan areas including Boston, Worcester, Portland, Rochester, Hartford and San Jose.

The weakest recovery is noted in areas where real estate was hardest hit, most particularly, the parts of America that get the warmest temperatures and the most sun.  It was these areas that experienced a massive upward and equally massive downward swing in housing prices.

Now let's take a more detailed look at the unemployment statistics for America's metropolitan areas.  The Bureau of Labor Statistics breaks down the United States into 372 metropolitan areas.  The unemployment data for December 2011 shows that 235 metropolitan areas have unemployment rates that are lower than the national average of 8.5 percent and 137 metropolitan areas that have unemployment rates that are higher than the national average.  In fact, there are 66 metropolitan areas (or 18 percent of the total) that have U3 unemployment rates that are in excess of 10 percent as shown here

Of the 49 metropolitan areas with a population of 1 million or more, Las Vegas has the highest unemployment rate of 12.7 percent.  The good news is that the September 2010 unemployment rate in Las Vegas was a breath-taking 15.6 percent so, perhaps there is a glimmer of hope.

To put all of this data into perspective, employment has rebounded from its Great Recession low point in 92 of the 100 largest metropolitan areas by the second quarter of 2011, however, only 16 gained back more than half of the jobs that they lost between their pre-recessionary peak and their post-recessionary low point and only four (El Paso, McAllen, Austin and San Antonio) made a complete recovery by the second quarter of 2011.  Unfortunately, eight metropolitan areas had not recovered any of the jobs that they had lost since their employment peak; Augusta, Colorado Springs, Des Moines, Kansas City, Lakeland, Palm Bay, Richmond and Riverside are the unfortunate communities where employment still lags.

Lastly, let's take a brief look at housing prices in America's major metropolitan areas.  Here's a screen capture showing the changes in the Federal Housing Finance Agency's House Price Indices for the top 50 metropolitan areas in the United States for the third quarter of 2011:

Notice that only 18 out of all 308 metropolitan areas have year-over-year house price increases, most of them well less than 1 percent.

Now here are the bottom 50 metropolitan areas with the largest year-over-year price decreases (middle column of data):

Notice that many of the sunnier climes are still suffering from year-over-year house price decreases in excess of 10 percent and most recent quarterly price declines in excess of 7 percent.  This shows us that the real estate market is far from turning around, likely due to a hefty oversupply of foreclosures.  Over a five year period, there are 10 metropolitan areas with price decreases in excess of 50 percent, mainly in Florida, California and Nevada where the city has seen a 5 year price decline of 59.46 percent.

When you assimilate all of this data, it becomes quite clear that, unfortunately, for those who live in Metropolitan America, the Great Recession is far from over.  Housing and employment show no signs of returning to their pre-recessionary levels despite massive intervention by the Federal Reserve and massive stimulus by the Obama Administration.  The trillions spent have gone somewhere but they certainly have not benefited those who live on the tree-shaded streets of Metropolitan America.  



    It is very sad that after so much new debt under President Obama (3 Trillion) and the build-up in spending under former President Bush, we are now at a crossroads. Without new leadership, we are at increasing risk of a financial collapse.

    If we do not soon take concerted action to reduce the amount of debt or at least immediately stop incurring new Federal debt ( debt ceiling increases),then we do risk a bond market crisis.

    Such a crisis has already hit Italy, Portugal, Spain, Greece, Ireland, and others in Europe. The bond markets will eventually stop buying U.S. Debt. Unable to roll-over old debt would mean MUCH higher interest rates (2X). The result would deceimate real estate values and stocks and bonds, as well. U.S. BANKS would come under severe financial stress and banks failures would rival the Great Depression of the 1929-1930 period.

    - H. Craig Bradley

  2. The US will never default and will never have any trouble selling it's debt because we have a printing press, Greece/Italy etc do not. The fed will buy any and all through proxy if needed to keep the game rolling.

  3. The Fed is already buying through proxy, but it is a shell game. The chick's always come home to roost, ALWAYS. You can't dig your way out of a hole, you can't borrow your way out of debt. The crisis we face will make the Great Recession, and the Great Depression look like mild economic slow downs. We have too many people eating at the government table, retiring at the government utter, and President's "take from the rich and give to the poor" silly fantasy only works until the rich fear and move their money out of the country, they stop paying taxes, investing and the real bubble collapses. If oBAMa is re-elected it will happen by December of 2012, if he is not it depends on how the newly elected plan to deal with debt and entitlement, it will buy us a few months maybe years. If we do not deal with debt and entitlement, well, let's just say I'm glad I'm debt free and have property to farm. Produce will be the currency of the future.

  4. And still the richest country in the world by miles and miles. Nope- the sky is not falling folks.

  5. Keep on dreaming: On a GDP per capita basis, the USA is merely number 10 according to IMF and World Bank, the CIA rates the USA number 12.
    The USA hasn't been number 1 in a decade, and that is a conservative estimate.

  6. I haven't had a chance to review the entire article, as I just came across your blog today, but I did note one error that may or may not affect the premise of your article. If you carefully read through the BLS Regional and State Employment Survey, from which you extracted your second graph above, Table D, you will see that it does NOT represent the number of unemployed, but the number of jobs. I'm assuming that you know that the BLS monthly reports come from two different sources. The unemployment rates come from the Current Population Survey, which is prepared for the BLS by the Census and is a survey of families and individuals. The monthly jobs numbers come from the Establishment Survey which comes from numbers of jobs reported by the various employing companies and agencies.
    Table D, therefore, shows increases in numbers of jobs in those particular states between October 2010 and October 2011.

    Yes, many metropolitan areas are still hurting, but the only states that suffered a year-over-year loss in jobs between October 2010 and October 2011 are Georgia (largest number of jobs lost), Indiana, Missouri, Delaware, and Arkansas.

  7. I trust your data, but disagree with your conclusion, "The trillions spent have gone somewhere but they certainly have not benefited those who live on the tree-shaded streets of Metropolitan America."

    What do you think would have happened if we hadn't invested that money in America and America's companies? Do you think non-intervention and market forces would have provided a better outcome? What would have happened if two of the big three really did go bankrupt?

    Yes, we need cuts. EVERYWHERE. Not just in domestic spending and entitlement programs. We need military cuts as well. But debt is not what is holding this country back or causing high unemployment. It is lack of consumer demand that is the problem. Consumer demand is down because companies are less likely to hire and consumers are much more likely to save.

    I live in Metro Detroit, and for me, the recession is over. Yes, there are still people hurting, but the fact is, things are getting better. Sometimes it feels like the Right is hoping for failure because it would be politically good for them.