Based on an analysis of a report entitled U.S. Metro Economies, prepared by IHS Global Insight for the U.S. Conference of Mayors and the Council for the New American City, Morgan Keegan’s Municipal Trading Desk concludes that this country has arrived at “a new normal.” While municipalities will likely continue to seek ways to cut costs and raise revenue, the economic engines of these cities will be the driving force that determines their future.
The IHS Global Insight report, which calculates the gross metropolitan product (GMP) of U.S. metro areas, is a valuable tool because it quantifies the data for cities. “National statistics are useful, but mask the strengths or shortcomings of the economic resiliency of the metro areas,” says the Morgan Keegan commentary, entitled In the New Normal – It’s Always the Economy.
“Certain cities have stronger economies because they have inherent competitive advantages,” according to Michael J. Ross, CFA, Senior Municipal Trading Desk Analyst and lead author of the report. Chicago, for example, repeatedly finds ways to regenerate itself after an economic downturn. New York City, despite the high cost of living, also benefits from the strength and diversity of its core sectors, including Wall Street. Cities like Chicago and New York continue to attract not only capital investment, but also an educated workforce – people who earn more, and spend more, keeping their local economies alive.
New York City, Los Angeles, and Chicago top the list of metro areas ranked by gross metropolitan product. Washington D.C. and Houston round out the top five.
“Other cities, however – particularly whose GMPs fall in the middle of the rankings – will be the ones to watch over the next decade,” he says. Examples include Atlanta (#10); Phoenix (#15); St. Louis (#20); Riverside (#25); and Cincinnati (#30), to name a few. Cities that rely on a single industry to buoy their economies will likely find themselves in a more precarious position than those with a diverse economy.
“The viability and sustainability of these mid-tier metro areas will be influenced by administrative, budgetary, and policy decisions that are being made in ’the new normal.’”