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Simbha

Some economic comparisons - Houston vs Other US metros

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I'm a business consultant, and one of my analysts recently took on the task of looking at some macro-level data on large metropolitan areas in the US. I thought some here might find a few of the basic comparisons interesting. Most of this won't be surprising to 'people in the know', however.

Method: To conduct this portion of the analysis, we looked at data from the Bureau of Economic Analysis on the breakdown of US GDP by metropolitan area (MSA). Data is available from 2001 to 2009. We also included population data estimates from the US Census Bureau for 2000 to 2010. Comparisons were made between the top 25 MSA's as ranked by 2010 population. All GDP figures are nominal (i.e., don't account for inflation). The Consumer Price Index (CPI) for US urban consumers was used to estimate inflation rates.

Basic findings (about Houston):

1. From 2001 to 2009, the Houston-Sugar Land-Baytown, TX MSA's portion of GDP grew from about $233 billion to about $363 billion (56%). This was the highest growth rate of the MSA's examined.

2. Houston's population grew by 1,231,393 from 2000 to 2010, the most of any MSA examined. Second was the DFW MSA, at +1,210,229. Also, Houston's population grew by 126% over this period. This is the third-highest growth rate of the MSA's examined - behind Riverside-San Bernardino-Ontario, CA (130%) and Phoenix-Mesa-Glendale, AZ (129%).

3. Houston's share of the total US GDP has grown from 2.54% in 2001 to 2.88% in 2009. The latter is the fifth highest of the MSA's studied. Also, the increase in this share - +13.29% - is the highest of the MSA's studied. (Washington was second, with an increase of +12.57%.)

4. Houston's per capita GDP (i.e., attributed GDP divided by MSA population) ranked 6th of the largest MSA's in 2009, at about $62k. The top 5 were: San Francisco ($78k); Washington ($74k); Seattle ($67k); Boston ($65k); and New York ($63k). Other peer cities to Houston in terms of population are: Philadelphia (#11 -- $56k); DFW (#12 -- $55k); Atlanta (#16 -- $48k); and Miami (#18 -- $46k).

5. Houston fell in the middle of the pack (11 of 25) in terms of its per capita GDP growth from 2001 to 2009. This figure grew by 29% over this period. Compare this to the top 5: San Diego (+41%); Washington (+39%); San Francisco (+36%); Los Angeles (36%); and Baltimore (+35%). Five large MSA's exhibited per capita GDP growth of less than the total inflation rate of 21% from 2001 to 2009: Riverside-San Bernardino; Dallas-Fort Worth; Phoenix; Atlanta; and Detroit.

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What was interesting is that Dallas keeps pace with Houston by most metrics, particularly in terms of population and employment. It is in the same state, affected by the same regulations. It is very nearly the same size. There are few geographic barriers to entry. It is also perceived as being more luxuriant a city, and I think rightly so. Yet its GDP per capita is not on par and is SHRINKING!?

I'd sooner say that there's something gone awry with the GDP calculation than that Dallas is on a different trajectory from Houston.

I'm vaguely reminded of something that Bart Smith told me about this dataset, probably around 2003. He condemned the finer points of attempting to measure "gross regional product" in this dataset or any other. The creation and flows of wealth are just too diffusive to be able to glean anything meaningful at a small geographic scale. When money crosses international boundaries, at least there are good records. But when Exxon's Baytown refinery is particularly profitable due to commodity price changes, it doesn't affect employment or earnings very much in such a way as benefits our region. The productivity occurs here, but the earnings are captured far and wide. This is a key difference from GDP, where economic production equals aggregate income.

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What was interesting is that Dallas keeps pace with Houston by most metrics, particularly in terms of population and employment. It is in the same state, affected by the same regulations. It is very nearly the same size. There are few geographic barriers to entry. It is also perceived as being more luxuriant a city, and I think rightly so. Yet its GDP per capita is not on par and is SHRINKING!?

I'd sooner say that there's something gone awry with the GDP calculation than that Dallas is on a different trajectory from Houston.

I'm vaguely reminded of something that Bart Smith told me about this dataset, probably around 2003. He condemned the finer points of attempting to measure "gross regional product" in this dataset or any other. The creation and flows of wealth are just too diffusive to be able to glean anything meaningful at a small geographic scale. When money crosses international boundaries, at least there are good records. But when Exxon's Baytown refinery is particularly profitable due to commodity price changes, it doesn't affect employment or earnings very much in such a way as benefits our region. The productivity occurs here, but the earnings are captured far and wide. This is a key difference from GDP, where economic production equals aggregate income.

Two words: Energy industry - including the port activity. The energy boom has definitely pumped up our GDP per capita and incomes. DFW has a more diffuse set of companies/industries that more reflects the national average. All the cities that are shrinking GDP/capita just means lots of low income people are moving in looking for jobs - which also diluted the Houston numbers down to the middle of the pack. Those cities with the highest GDP/capita gains represent high cost-of-living cities that are driving out the poor and not attracting new ones (CA) or, IMHO, the largess of federal govt spending and pay increases (DC, Baltimore).

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What was interesting is that Dallas keeps pace with Houston by most metrics, particularly in terms of population and employment. It is in the same state, affected by the same regulations. It is very nearly the same size. There are few geographic barriers to entry. It is also perceived as being more luxuriant a city, and I think rightly so. Yet its GDP per capita is not on par and is SHRINKING!?

I'd sooner say that there's something gone awry with the GDP calculation than that Dallas is on a different trajectory from Houston.

Perhaps Dallas being "landlocked" is some kind of factor.

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Perhaps Dallas being "landlocked" is some kind of factor.

No. We're comparing metropolitan areas, not municipalities.

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No. We're comparing metropolitan areas, not municipalities.

Ah... your statement "It is also perceived as being more luxuriant a city" invoked a different image.

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