September 2019 Metro Economies Report
Metro Economies in 2018
- Metropolitan areas dominated US economic growth in 2018 and continue to drive the US economy.
- They were home to 85.9% of the nation’s population, and 91.1% of real gross domestic product (GDP)
- US Metro/City share of total employment increased to 88.1% as metros added 2.1 million jobs, accounting for 94% of all US job gains.
- The metro shares of US total personal income, 89.3%, and wage income, 91.8%, also increased again in 2018.
- Many US metros have larger economies than states. New York’s gross metropolitan product (GMP), the largest among metros at $1.85 trillion, exceeds the Gross State Product (GSP) of Texas, and Los Angeles’s exceeds that of Florida, the fourth ranked state in GSP.
- The GMP of 38 US metros each surpassed $100 billion in 2018, and we project that Virginia Beach-Norfolk-Newport News will as well in 2019.
- Comparing metro economies to the nations of the world provides further evidence of the importance of US metros as drivers of the global economy. New York’s GMP would rank 10th among the nations of the world, ahead of Canada and Russia. Twelve of the world’s 50 highest-producing economies are US metropolitan areas.
U.S. Economy in 2019 and Beyond
- As US unemployment falls to 3.5% in 2019, 75 metros (19.7%) will have rates less than 3%, and 252 (66.1%) will have unemployment rates under 4%. Real GMP growth will exceed 3% in 112 metros (29.4%) in 2019, but only in 18 in 2020(4.7%).
- Real GDP growth is projected to slow from 2.9% in 2018 to 2.3% in 2019, 2.1% in 2020, and 1.9% in 2021.
- The downshift in GDP growth is expected to contribute to a continued slowing trend in employment gains. We forecast total US employment growth of 1.5% in 2019, down from 1.7% in 2018. In 2020 job gains will slow further, to 1.2%.
- The weakest economies are in the industrial Midwest, stretching from Pennsylvania to Minnesota.
- Over the second half of this year, growing populations and burgeoning workforces in the West will sustain higher consumer spending and investment, boosting the information, construction, and services sectors. Unfavorable demographic trends will continue to restrain growth in the Northeast. Trade tensions and depressed crop prices will put further strain on Midwestern states.
Distribution of Income
- Real median household income was $63,179 in 2018, 0.9% above its 2017 level. The increase though, was the slowest in five years, and not large enough to pass the test of statistical significance.
- Between 2008 and 2018, average inflation-adjusted income increased by 21% for the top 5% of households by income, while it grew only 1.1% for the bottom 20%. According to the revised data in this report, the average real household income for this lowest quintile first surpassed its 2008 level in 2017.
- In recent years, labor markets have tightened to the point where employers are being forced to compete for available workers. This dynamic is putting upward pressure on wages across the economy, especially in industries with lower average pay.
- In 2018, the middle class was the chief beneficiary: the quintile of households that enjoyed the fastest average real income growth was the group between the 20th and the 40th percentiles, followed by the group between the 40th and the 60th percentiles.
- Over the past decade, real earnings growth remains below 2%, despite historically low unemployment.
- Earlier, in the recovery from the 2001 recession the unemployment rate gradually fell from a 2003 high of 6.3% to a low of 4.4% in May 2007. Nominal wage gains during that period averaged 3.9% annually. In contrast wage gains from 2013 to 2017 averaged only 2.3% per year. This slower wage growth resulted in lost wages of $139 billion per year for workers, or $946 for each employee.
- US metro economies continue to increase their share of GDP and are the place where most of the nation’s job creation occurs. These cornerstone realities make US metros the engines of US economic growth.
- Although the nation is in its 11th year of recovery since the Great Recession, equitable wage growth remains a structural challenge to the US economy.
- In 2000, wage and salary payments to workers equaled 47.6% of the gross metro product generated in the US. That share has declined to 43.6% in 2018. This results in $293 billion fewer dollars in wage earners pockets in 2018, or $2,302 per worker.