The topic of economic growth in the United States never goes out of style – and may be debated even more frequently, if possible, as we near the 2022 midterm elections and navigate highly volatile markets. Our myriad regional economies can cause strong divergences in local outcomes, however, making the understanding of the dynamics within the U.S. vital to understanding the economic health of the nation as a whole.
Discussions on U.S. regional economic trends are frequently lacking in three key aspects. First, when these subnational economies are examined, current methods of analysis frequently divide the country in ways that fail to accurately capture existing economic ties. Second, the annualized timeframe by which local economic activity is reported leads to debates based on stale data. As an example, the latest measure of county or metro-level GDP covers 2020 and wasn’t released until December 2021, meaning that our discussions miss a full two years of activity. Finally, commonly used measurements for growth, such as gross domestic product (GDP), calculate only economic output, glossing over equally relevant questions of distribution and sustainability.
To solve these problems and facilitate a more accurate discussion of the U.S. economy, the Kenan Institute of Private Enterprise has undertaken the American Growth Project, the first results of which are published in an Oct. 18 report. Broadly, the project seeks to provide more granular, expansive and current data on regional economies within the United States, as well as a thorough analysis of the results. We’re interested in taking a magnifying lens to the multiple interconnected economic spheres in the U.S. to better understand who’s growing, who isn’t, how this growth can be broken down, the trends that seem to have driven this growth until now, and what these regions might be able to expect in future.
Much like the biological taxonomy that extends from a single species to the entire animal kingdom, economies exist on multiple levels – ranging from the individual to the broader global market. This project is particularly interested in the many regional economies that exist somewhere between the city and state level in the United States. Metropolitan Statistical Areas (MSAs), for example, are frequently used to capture a city and the surrounding area with close economic ties, but using MSAs would decompose our home region of Raleigh and Durham – which, along with Cary and Chapel Hill, is recognized as a unified area – into two separate areas. Similarly, the Combined Statistical Area (CSA), created in 2003, is also unsatisfactory for our purposes, as the list of CSAs leaves out major urban areas such as San Diego.
To that end, we have created Extended Metropolitan Areas (EMAs), which represent U.S. urban areas connected in economically meaningful ways; the first wave of analysis examines the 50 largest EMAs by population. The EMAs are generally aggregated from county-level data, the deepest level at which most economic data is reported. The size and characteristics of EMAs can range widely – the EMA around New York City contains more than 24 million people, comprises four states and produces more than $2 trillion of economic activity; by contrast, the EMA around Harrisburg contains just under 1.3 million people. This variety, in and of itself, demonstrates the breadth of unique economic ecosystems that exist under one national umbrella.
The October 2022 report – which contains data through August 2022 – produces a list of the 50 most populous EMAs as ranked by their 2022 rate of growth. In addition, the 10 fastest-growing cities are further explored with an eye toward the trends and sectors that may have pushed those areas to the top.
Several commonalities jump out upon first glance. First, the top 10 is dominated by cities in the South and West regions of the country. Texas and North Carolina are each represented twice, and only three cities, all of them in the West — Denver, Salt Lake City and Seattle — have latitudes north of the Mason-Dixon Line. Second, the growth of tech appears to be a major driver of economic expansion in the fastest-growing EMAs. The list is topped by San Francisco, Austin and Seattle, all major hubs for software development. Finally, the leisure and hospitality sectors also feature heavily, especially as the recovery from COVID-19 and resumption of in-person activities continues. New Orleans and Orlando, which take the ninth and tenth spots, respectively, are buoyed by tourism-related activity and externalities generated by their volume of visitors.
| EMA Name | 2022 GDP Growth | GDP (2022, billions USD) | GDP Share of U.S. Total (2022) | GDP Rank (2022) | Population (2020, millions) | Population Share of U.S. Total (2020) | Population Rank (2020) |
|---|---|---|---|---|---|---|---|
| San Francisco Bay Area, California | 4.80% | 1,383 | 5.50% | 3 | 9.7 | 2.90% | 5 |
| Austin, Texas | 4.30% | 216 | 0.90% | 22 | 2.3 | 0.70% | 33 |
| Seattle, Washington | 3.50% | 583 | 2.30% | 10 | 5 | 1.50% | 13 |
| Raleigh and Durham, North Carolina | 3.40% | 189 | 0.80% | 28 | 2.1 | 0.60% | 35 |
| Dallas, Texas | 3.10% | 682 | 2.70% | 7 | 8.1 | 2.50% | 7 |
| Denver, Colorado | 3.00% | 330 | 1.30% | 16 | 3.6 | 1.10% | 18 |
| Salt Lake City, Utah | 2.80% | 212 | 0.80% | 23 | 2.7 | 0.80% | 24 |
| Charlotte, North Carolina | 2.50% | 233 | 0.90% | 21 | 2.8 | 0.90% | 23 |
| New Orleans, Louisiana | 2.40% | 102 | 0.40% | 40 | 1.5 | 0.50% | 41 |
| Orlando, Florida | 2.40% | 246 | 1.00% | 19 | 4.2 | 1.30% | 15 |
| Portland, Oregon | 2.40% | 246 | 1.00% | 18 | 3.3 | 1.00% | 20 |
| San Antonio, Texas | 2.40% | 163 | 0.70% | 34 | 2.6 | 0.80% | 27 |
| Fresno, California | 2.30% | 71 | 0.30% | 50 | 1.3 | 0.40% | 48 |
| San Diego, California | 2.20% | 290 | 1.20% | 17 | 3.3 | 1.00% | 19 |
| Los Angeles, California | 2.10% | 1,510 | 6.00% | 2 | 18.6 | 5.60% | 2 |
| Oklahoma City, Oklahoma | 2.10% | 93 | 0.40% | 44 | 1.5 | 0.50% | 42 |
| Jacksonville, Florida | 2.00% | 115 | 0.50% | 39 | 1.7 | 0.50% | 38 |
| Nashville, Tennessee | 1.90% | 171 | 0.70% | 33 | 2.1 | 0.60% | 34 |
| Houston, Texas | 1.80% | 598 | 2.40% | 8 | 7.3 | 2.20% | 9 |
| Tampa, Florida | 1.80% | 204 | 0.80% | 25 | 3.2 | 1.00% | 21 |
| Sacramento, California | 1.70% | 189 | 0.80% | 29 | 2.7 | 0.80% | 25 |
| Miami and Fort Lauderdale, Florida | 1.60% | 476 | 1.90% | 12 | 6.9 | 2.10% | 11 |
| Las Vegas, Nevada | 1.50% | 146 | 0.60% | 35 | 2.3 | 0.70% | 31 |
| Phoenix, Arizona | 1.40% | 341 | 1.40% | 15 | 4.9 | 1.50% | 14 |
| Atlanta, Georgia | 1.40% | 559 | 2.20% | 11 | 6.9 | 2.10% | 10 |
| Philadelphia, Pennsylvania | 1.40% | 588 | 2.40% | 9 | 7.4 | 2.20% | 8 |
| Boston, Massachusetts | 1.30% | 808 | 3.20% | 6 | 8.5 | 2.60% | 6 |
| Pittsburgh, Pennsylvania | 1.20% | 197 | 0.80% | 27 | 2.7 | 0.80% | 26 |
| Indianapolis, Indiana | 1.20% | 198 | 0.80% | 26 | 2.5 | 0.80% | 30 |
| Harrisburg, Pennsylvania | 1.10% | 85 | 0.30% | 48 | 1.3 | 0.40% | 50 |
| Minneapolis and St. Paul, Minnesota | 1.10% | 342 | 1.40% | 14 | 4.1 | 1.20% | 16 |
| New York, New York | 1.00% | 2,422 | 9.70% | 1 | 23.6 | 7.10% | 1 |
| Chicago, Illinois | 0.90% | 837 | 3.30% | 5 | 10 | 3.00% | 3 |
| Grand Rapids, Michigan | 0.90% | 86 | 0.30% | 47 | 1.4 | 0.40% | 45 |
| Washington, D.C., and Baltimore, Maryland | 0.90% | 940 | 3.80% | 4 | 10 | 3.00% | 4 |
| Richmond, Virginia | 0.60% | 98 | 0.40% | 43 | 1.3 | 0.40% | 49 |
| Greenville, South Carolina | 0.60% | 87 | 0.30% | 46 | 1.5 | 0.40% | 43 |
| Kansas City, Missouri, and Kansas City, Kansas | 0.50% | 186 | 0.70% | 30 | 2.5 | 0.80% | 29 |
| Columbus, Ohio | 0.50% | 185 | 0.70% | 31 | 2.5 | 0.80% | 28 |
| Louisville, Kentucky | 0.50% | 98 | 0.40% | 42 | 1.5 | 0.50% | 40 |
| Hartford, Connecticut | 0.40% | 136 | 0.50% | 37 | 1.5 | 0.40% | 44 |
| Cincinnati, Ohio | 0.40% | 185 | 0.70% | 32 | 2.3 | 0.70% | 32 |
| Birmingham, Alabama | 0.30% | 83 | 0.30% | 49 | 1.4 | 0.40% | 47 |
| Cleveland, Ohio | 0.10% | 245 | 1.00% | 20 | 3.6 | 1.10% | 17 |
| Greensboro, North Carolina | 0.00% | 100 | 0.40% | 41 | 1.7 | 0.50% | 39 |
| St. Louis, Missouri | 0.00% | 204 | 0.80% | 24 | 2.9 | 0.90% | 22 |
| Detroit, Michigan | -0.10% | 357 | 1.40% | 13 | 5.4 | 1.60% | 12 |
| Memphis, Tennessee | -0.40% | 90 | 0.40% | 45 | 1.4 | 0.40% | 46 |
| Virginia Beach, Virginia | -0.40% | 115 | 0.50% | 38 | 1.9 | 0.60% | 37 |
| Milwaukee, Wisconsin | -0.50% | 143 | 0.60% | 36 | 2.1 | 0.60% | 36 |
As we look ahead to 2023, a foremost concern will be how these fastest-growing cities handle their recent expansion. Will the gains from the influx of new inhabitants be dispersed equitably among new and existing citizens? Many, if not all, of the cities in our top 10 have observed sharp price jumps in their housing markets and cost of living, pricing out many existing residents. On a related note, we also want to consider whether this recent growth will be a long-term development, spurring the EMA to greater heights, or if it’s merely a relatively minor growth spike, from which the area will soon return to normal. Recent news of layoffs and decreased profit margins indicate a tech slowdown, which could hold negative implications for many of the tech-heavy regions that topped our list.
More broadly, if a global or national recession is to occur, how could it affect the economic fortunes of local microeconomies? Will our list shift drastically? Manufacturing and construction are sectors that are particularly vulnerable to the economic damage wrought by a recession; at the same time, demand for cars and houses now vastly outpaces supply, and the U.S. has observed a long-term trend of reshoring, or bringing manufacturing jobs back to domestic soil. Will these trends continue and be enough to buoy industries through any potential downturn, perhaps placing the burden on other classes of workers? And how will the twin specters of rising interest rates and high inflation affect future economic prospects?
Concerns about a possible recession highlight two additional challenges to our work. Since we are reliant on annual GDP data to build our models, our growth estimates are subject to the vagaries of annual data, which can muddle the timing of slowdowns. More specifically, upturns or slowdowns that occur in the latter half of the year are muted by strength in the first half of the year. This means that even if we were in a recession right now – something we think is unlikely – annual growth could still appear to be strong.
A second challenge stems from the work-from-home trend. Our models try to incorporate these trends, but their fast-moving nature is hard to measure. Thus, some economic activity currently attributed to the Bay Area may actually be occurring in Boise. In general, our EMAs should capture most of this – as most people working from home remain within their EMAs. We are working to resolve both of these challenges with future analysis.
Whether we know it or not, nearly every time we talk about the economy, we’re touching – even if only tangentially – on deeper questions around what makes an economy grow; what form that growth takes; and how any resulting gains are distributed among society. With the American Growth Project, we’re aiming to more explicitly draw out these connections by applying rigorous analysis to questions that every American citizen asks around where the U.S. economy is headed.
In some sense, the two major industries we find to be the largest current drivers of American growth –technology and hospitality – could be viewed as reflecting one of the most fundamental debates in all of economics: the trade-off between future and current consumption. Vacation expenditures (current consumption) and technology investments (future consumption) both hold potential to be highly positive forms of economic activity, and each has proved essential to the economic fortunes of different cities in our top 10. The trick is finding the precise balance of the two, such that the scales don’t tip too heavily toward either R&R or R&D.
This initiative is designed to facilitate a greater level of knowledge around the specifics of growth within the U.S. economy and to develop methods to measure real-time economic activity. While our efforts will continue to develop as new questions around American growth arise, we already have a roadmap set out for the initiative’s direction. Over the coming months, the project will continue to publish regular reports on a variety of aspects around U.S. growth in a mission to further probe the questions outlined above. For our next topic of interest, we will turn to the question of productivity on a localized level, a measure that holds the key to increases in our standards of living.
Additionally, as we move forward, the project is designed to question the sustainability and distribution of growth. We plan to develop measures around skills, wages, labor flexibility, and potential for future growth and opportunities. These measures will be used for forecasts of future growth that can then be utilized by business leaders and policymakers to inform their decision-making.
To submit ideas, or to request additional data or information, please reach out to Kenan Institute Director of Research Services Ashley Brown. Press inquiries may be directed to External Affairs Associate Rob Knapp.