As we discuss in our latest report from the American Growth Project, economic productivity (the level of income generated by a given amount of labor) may be the most substantial determinant of a society’s economic wellbeing. This makes intuitive sense; the quantity of available resources is generally less important than the ability to efficiently use those resources and translate them into outcomes.
On a national level, the U.S. has been experiencing below-average productivity growth for much of the last two decades. The metric spiked briefly during the COVID-19 pandemic—which was likely caused by the distortions occurring in labor markets—but has fallen in three of the last five quarters. . 2022 will likely mark the largest decline in American productivity in roughly fifty years. And yet, the nationwide productivity numbers mask large differences that different regions in the U.S. have experienced. It behooves us, then, to look under the hood at who’s seen their productivity jump relative to other U.S. cities, as well as the forces that may be causing these jumps.
The raw productivity numbers in the full report show that the EMAs with the highest productivity numbers are many of the usual suspects: the 2022 rankings are topped by San Francisco, Seattle, New York, and Houston. These cities—San Francisco in particular—generate massive amounts of GDP by virtue of their extensive knowledge-based, high-income sectors, which in turn drive their outperformance in productivity.
However, we were also interested in exploring which cities made the largest jump in productivity rankings from 2007 to 2022, otherwise known our “Top Gainers.” These are listed below.
MOST PRODUCTIVE U.S. CITIES: TOP GAINERS 2007-2022
1 New Orleans, Louisiana
2 Pittsburgh, Pennsylvania
3 Salt Lake City, Utah
4 Portland, Oregon
5 Columbus, Ohio
6 Fresno, California
7 San Antonio, Texas
8 Cincinnati, Ohio
9 Oklahoma City, Oklahoma
10 Cleveland, Ohio
At first glance, this list may seem surprising; New Orleans and the Rust Belt rarely come to mind when discussing the country’s economic powerhouses. However, all these areas have gradually seen an increase in high-productivity sectors—which has subsequently caused them to climb the productivity rankings.
In New Orleans, jobs in highly productive industries such as electric power generation have been growing rapidly during the 2010s; at the same time, venture capital funding per capita doubled between 2010 and 2014. And, of the 50 largest EMAs, New Orleans experienced the largest shift toward knowledge-based sectors such as education and health services industries, seeing a boom in hospital employees that outpaced all other cities between 2007 and 2017. As a result, in New Orleans has actually consistently outpaced national productivity averages since Hurricane Katrina; between 2007 and 20122, the city reported 35% productivity growth. To be sure, the city still struggles with high levels of crime and inequality—which also demonstrates the limits of productivity in communicating overall societal health.
Meanwhile, in the Rust Belt, investments in high-technology sectors have fueled something of a Rust Belt resurgence. Pittsburgh’s robotics industry and Columbus’ smart technology sector serve as examples of burgeoning tech-based areas that have spurred the growth of high-earning jobs in those fields. Connections among the public, private, and nonprofit sectors have been key in both these instances. Pittsburgh has recently become one of the world’s top robotics hubs thanks in part to the Pittsburgh Robotics Network—an organization that brings together the city’s robotics ecosystem and connects over 100 robotics companies with top research and academic organizations. Similarly, Ohio’s Smart Mobility Corridor is an initiative spurred by government, industry, and academia, providing a testing ground for connected vehicle technology that spans over 35 miles. Strengthening and leveraging these partnerships thus seems to be a crucial step for cities looking to improve their workforce’s productivity.
One important caveat when interpreting our productivity rankings: the 2008 financial crisis and COVID-19 pandemic caused widespread labor distortions near the beginning and end of our 15-year analysis. Since productivity is calculated by dividing GDP by the total workforce, the productivity metric of a given area or sector increases not only with the addition of high-productivity jobs, but also with the removal of low-productivity jobs. The uneven impact of the COVID-19 pandemic—in which many high-earning sectors could work from home, while many lower-earning sectors saw massive job loss—may be driving some of the numbers we observe.
Still, productivity remains an important metric for assessing the ability of an area or sector to generate economic output. Our Top Gainers demonstrate that by developing new industries, as well as nurturing cross-sector networks in those industries, cities can build back even after periods of sustained economic hardship. If the tech slowdown continues unimpeded into 2023, we may see productivity’s significance on full display as the continued loss of these high-earning jobs affects the U.S. economy. And, as we continue to analyze the universe of microeconomies that exist within the United States, we will continue to contextualize and explore these findings in our quest to understand the country’s economic regionality.
To read the full report from the American Growth Project, entitled “The Power of Productivity,” click here.