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18 Comments
Topics: Economic Development

18 Responses to “Midwest Metro GDP, Unemployment”

1. Alon Levy says:

   October 2, 2009 at 5:55 am

   If you use personal income instead of GDP, the Midwest looks better.
2. cdc guy says:

   October 2, 2009 at 7:39 am

   If you look at purchasing power of personal income (PI with cost of living adjustment factor), the Midwest looks even better.

   Even though the stats were much harder to dig up in those days, that very comparison helped me decide to move to the Midwest from the East Coast several decades ago…during the last "great recession".

   Of course, the disadvantage of spending one's adult life in a place where housing is consistently "affordable" (i.e. consumes a smaller portion of household income) is that changing cities is pretty much out of the question without a big bump in salary unless it's to a similarly affordable place elsewhere in the Midwest.
3. Anonymous says:

   October 2, 2009 at 7:39 am

   In my opinion, the defining characteristic of the last expansion was the finance and housing bubbles, and Hispanic immigration. Places like Chicago created a lot of on paper wealth with their finance industries. That's counted on the top line (although it shouldn't be, in my opinion). The Mexicans who came to build the houses, condos, and high rises counted in the bottom line. Chicago's not at the top of your GDP per capita list, so I guess the bottom line won. Most of the rest of the Midwest didn't participate in this.
4. The Urbanophile says:

   October 2, 2009 at 7:42 am

   I agree that some variant of personal income (and personal income growth) is another key urban scorecard metric.
5. Alon Levy says:

   October 2, 2009 at 8:13 am

   CDC Guy, the problem is that a lot of the living adjustment factors make questionable assumptions about lifestyle. The problem is that those adjustments are based on the lifestyle of a corporate executive, which means owning a car and living in a detached home or a newly built condo. In cities like New York and Chicago this isn't how most people live, so the transportation, housing, and utility costs used in the adjustment are much higher than what is normal for local residents.

   For example, the official adjustment says New York's transportation costs are 1.4 times the national average. In reality, per capita transportation expenditure in the city is 4% of income compared with 12% nationwide. This crops up again and again: if you live in a rental building and ride public transit to work, then your rent will be lower than the adjustment expects, and your utilities bill will be small due to low energy consumption.
6. Mark Arsenal says:

   October 2, 2009 at 11:18 am

   {{I think GDP per capita is one of the most important economic variables out there. How much output per person is this metro area creating? It's effectively a measure of the productivity or wealth creation ability of a region. It's not perfect}}

   I'll say. The biggest issue I have with this generalization is that places with high GDP/capita are places that waste much of their output on housing costs – not an incredibly productive use of resources, especially when you consider that high-income regions like San Jose have relatively new housing stock which is unlikely to be as durable as the cheap, old housing stock in many Midwest and Northeast urban centres.
7. The Urbanophile says:

   October 2, 2009 at 1:10 pm

   Mark, when you say people "waste" their output on housing, that's a valid statement of values, but that's all it is. Anyone could make similar statements about the worth of financial engineering on Wall St., web 2.0 apps like Twitter, gas guzzling SUV's and pickups, or contemporary art. GDP simply measures where consumption and investment actually are, not what we would like them to be.
8. The Urbanophile says:

   October 2, 2009 at 1:13 pm

   Alon, that may be, but no one can say with a straight face that it's on average as cheap to live in NYC, SF, Chicago, etc. as it is Kansas City or Columbus. In particular, those transit systems drive up the cost of housing enormously by raising land values.

   It may be that you can rent a cheap room in the outer boroughs somewhere for what someone could pay for a new four bedroom home with a garage in Fishers, Indiana, but that lifestyle difference is to some extent involuntary. People in NYC might like to have a single family detached house with a nice yard, etc. They simply can't afford it.
9. Alon Levy says:

   October 2, 2009 at 1:47 pm

   Alon, that may be, but no one can say with a straight face that it's on average as cheap to live in NYC, SF, Chicago, etc. as it is Kansas City or Columbus.

   It's not cheaper, but it's closer. The official cost of living adjustment overstates rents, utility costs, and transportation costs in those cities. If you make more reasonable assumptions, even for Manhattan, then the cost of living index drops from 205% the US average to 125%.

   In particular, those transit systems drive up the cost of housing enormously by raising land values.

   That's relevant if you buy, not if you rent. Those cities all have higher price-to-rent ratios, especially near the train stations, because they're perceived as safer investments than the Indy exurbs. The rents are still higher, but not by that much. For example, if you compare Manhattan and Houston, the rents in Manhattan for the same number of bedrooms are about twice as high. The cost of living index says they should be five times as high citywide.
10. cdc guy says:

    October 2, 2009 at 4:50 pm

    Alon, the valid comparison is rent per year for an apartment of a certain size.

    Nice, upscale secure downtown apartments in Indy in the 1000 sf range would go for $15,000/yr.

    Midtown Manhattan? $40-45,000 appears to be the range after doing a quick online search by specification on Apartments.com.

    By my calculation that's 2.6 to 3 times the housing cost comparing a "standard" product from "downtown" to "downtown".

    Like Aaron, I don't think one can assert a living cost difference of only 25%, considering that huge residential cost differential.
11. Alon Levy says:

    October 3, 2009 at 2:20 am

    Manhattan's upscale area is much larger than Midtown. On the Upper East Side, I know that $20,000/year gets you about 600-700 ft^2. As a neighborhood it has all the amenities of an upscale downtown – easy access to cultural attractions, high density, good transit access, walkable streets, very low crime rate (lower than Indy, probably – Indy has 14 murders per year per 100,000 people, New York 6). And that's one of the more expensive upscale dense neighborhoods. If you go to the comparable areas in Brooklyn and Queens, rents drop like a stone.

    Mind you, the official cost of living adjustment says rents in Greater New York are 5 times what they are in low-cost cities like Houston and Indy, so even 2.6-3 times for Manhattan is far lower than what the adjustment says.
12. Anonymous says:

    October 3, 2009 at 12:48 pm

    Mahattan. About three times more expensive? That screams affordable.

    Manhattan is expensive relative to much of the rest of the country, but when compared to LA, SF, Chicago, and DC it does not appear to be much different. And I find the city lovely, and you get a lot for what you pay for. If you didn't, it would not be a desirable place for people all over the world to want to move to. I would be willing to pay slightly higher taxes in my city in exchange for improved public transit, city planning, parks maintenance, and other general city beautificaiton.
13. cdc guy says:

    October 5, 2009 at 7:58 am

    Alon, I picked the highest market rent, which is for brand-new apartments within easy walking distance of the downtown core, IUPUI, and IU Med. It also includes on-site covered parking, which is a whole separate issue.

    It is likely that the nationwide statistical bundle includes some parking cost in rental housing, and that is likely skewed by the very high cost of parking in NYC. In most cities, cars are not optional; nationwide, upwards of 80% of workers commute to work alone in a personal vehicle.
14. Mark Arsenal says:

    October 5, 2009 at 12:14 pm

    {{Mark, when you say people "waste" their output on housing, that's a valid statement of values, but that's all it is. }}

    To some extent, but I am specifically referring to the difference between Victorian-era brick housing in Pittsburgh versus the wood-stucco-and-paper housing in Los Gatos. The wood and paper housing is 20-40 times more expensive per sqft, but objectively inferior in quality, no? Isn't this a misallocation of the productive energy of people?
15. cdc guy says:

    October 6, 2009 at 8:47 am

    Mark,

    One branch of my family is from a farm my ancestors settled about two hours west of Pittsburgh.

    The family home-place is a hill-banked stone house, facing south, next to a spring, built cut stone blocks two feet thick. It's 165 years old already and there is no reason its shell wouldn't stand for 500 more. Family lore says it cost $200, which is maybe $5000 in today's dollars (by FRB COLA estimates). Far from a waste. And it's now heated by natural gas from a well on the property, after years of using local wood and coal.

    But is it the "best" house in America because it was built at low cost per square foot in what we would today call a "sustainable" manner to outlast all the rest with minimal maintenance?

    No, because it's still in the middle of Amish country in Ohio.

    The price of housing within a market reflects quality differences, but from market to market, similar residences will have wildly different selling or rental-equivalent prices (or prices per square foot) because of local demand.

    The fair comparison to the Pittsburgh Victorian is a SFO Victorian…and the only thing you'll really be comparing is the demand curves for the same thing in two different markets…which is essentially meaningless because we do not have a national market for housing.

    Ultimately that analysis doesn't illuminate anything about the "value" of a particular home or style of home (or the "wasted" investment in it)…it only addresses the perceived value of living in a particular place.

    "Waste" of money on housing is indeed a value judgement. Given my family/historical frame of reference, I could perceive almost all houses to reflect "waste".
16. Mark Arsenal says:

    October 6, 2009 at 7:16 pm

    @CDC:

    Well, I guess my perspective is this: if you have X amount of brain/muscle energy to expend over the course of your life, and expending it in Silicon Valley will create Y amount of personal consumption, but expending it in Ohio will create Z amount of personal consumption, you can objectively measure whether Y or Z are more beneficial to your health or longevity, no?

    If I'm capable of producing $25k per year in Silicon Valley or $15k per year in Ohio, it's a no-brainer that I should do Ohio, since I'll be able to actually eat and clothe myself on $15k in Ohio, something I would not be able to do entirely adequately on $25k in Cupertino.

    Thus my thesis that housing costs soak up productive energy in an inherently inefficient manner, considering that they are not priced based on quality or durability but rather asset speculation.
17. Alon Levy says:

    October 6, 2009 at 10:15 pm

    CDC: well, in Manhattan owning a car is optional and not recommended, so cost comparison standards shouldn't try to include the cost of parking in the local cost of living.

    Mark: California's housing prices are uniquely weird, in that Prop 13 has skewed the market. Elsewhere, a property value rise will raise taxes, which will somewhat limit how high it can go. In California, it won't. Property values are based on what a new buyer is willing to pay now, knowing that his taxes will forever be based on the current price.

    Outside bubble conditions, property values are based on more solid issues like local rents, and local rents are based on such factors as size, amenities, desirability of area, predicted desirability of area in the next few years, and how high rents can go up in the future (that's what makes rent-stabilized apartments in gentrifying neighborhoods so hot).
18. Josh says:

    October 7, 2009 at 12:55 pm

    Its sickening to think how poorly Louisville fares in these statistics…Near the bottom of the barrel.