Friday, August 13, 2010

US Metro Prosperity

I've been asked to make the case for Pittsburgh, explain why I'm so bullish on the region. My argument boils down to per capita income. A commenter at Null Space spills the beans:

According to a custom chart I generated at the BEA, we also caught up with the average per capita personal income for the U.S. Metropolitan Portion in 2008, closing a gap that had persisted since the very early 1980s. And in 2009 we moved out well ahead.

Exceeding the US metro average might not seem like that big of a deal. But consider Brian Kelsey's analysis of Austin:

Slide 4 worries me. In 1999, at the apex of the go-go technology days, per capita income in the Austin region peaked at 110.4 percent of U.S. per capita income. By 2009, we had fallen to less than 91 percent, which we haven’t seen since 1989. Yes, cost of living in Austin is relatively low compared to other leading metro areas, such as Seattle, San Jose, or Washington, DC. And, no, this is not a dig at economic development efforts in the region. The Austin-Round Rock-San Marcos economy has performed admirably during the recession and the environment for entrepreneurship here is as strong as ever.

Slides 2 and 3 provide the jobs and population pictures, respectively. Austin scores well in these two metrics. Pittsburgh does not. Those shortcomings have come to define Pittsburgh's image, one of a poor economic performer.

Among the 52 metro areas with populations of more than one million, in only three did both net earnings and the broader measure of personal income both rise.

All three had strong ties to the federal government: the Washington, D.C., area and two areas with a large military presence, San Antonio and Virginia Beach, Va. In all three, the biggest gains were among workers in the federal government and the military; private sector compensation fell.

The same picture was reflected nationally, as private employers froze and in many cases reduced workers' pay and hours.

The only other big metro areas with rising personal incomes—Baltimore and Pittsburgh—had falling net earnings but a sharp increase in government checks, such as unemployment benefits.

This isn't the first time that I've read someone disparaging improving prosperity in Pittsburgh. How can a place with a shrinking population and anemic job growth sport such strong gains in per capita income? As Kelsey demonstrates, there isn't necessarily a connection. Yet that doesn't stop critics from claiming that the good numbers are deceiving. It's not real prosperity.

That's not to say that job and population growth aren't important. They are and Pittsburgh knows it has work to do. The rising per capita income is also significant. It wasn't accomplished with smoke and mirrors. Also, Pittsburgh isn't a state government center. Nor is it the host of a flagship state university. The cynics don't bother to mention these things. They also ignore the impressive rise in educational attainment rate.

Better per capital income isn't a surprise if your population has more college graduates in the workforce. The case for Pittsburgh has been evident all along. No one could see past the shrinking population headlines (and the brain drain hysteria). The supposed flight of the creative class from Pittsburgh to Austin has had ironic results.

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