After four quarters of decline, GDP finally grew, and at a pace--3.5 percent annually--not seen since the summer of 2007. As my colleagues Alan Berube and Bill Galston point out, and as I argued last month, signs of economic growth don’t necessarily mean a rapid recovery, a sustained recovery, or even a recovery that feels meaningful to the vast majority of Americans. But that’s not the horse I want to ride today. Instead, I want to read the tea leaves (the details of the GDP numbers for the third quarter of this year) to see what they suggest about the geography of the recovery--which metro areas are likely to be recovering and which aren’t.
First, the obvious.
- The cash for clunkers program temporarily boosted auto sales and, most likely, the economic fortunes of the 62 metro areas (mostly in the Great Lakes and South Central regions) that depend heavily on making cars and auto parts.
- The first-time homebuyer tax credit, now set to expire at the end of November but possibly up for renewal, probably boosted housing sales and prices (or at least kept prices from sliding further) in the metro areas of Florida and the Southwest that were hit hardest by the collapse of the housing bubble. (The most recent Case-Shiller house price numbers bear this out, showing house prices rising over the summer in Los Angeles, Miami, Phoenix, San Diego, and Tampa and slowing their pace of decline in Las Vegas.)
- Federal government spending grew (although not by as much as in the second quarter of this year), largely as a result of the economic stimulus. That should especially benefit Washington, D.C., and metro areas such as Virginia Beach that have large military installations.
Now, the not-so-obvious.
- There’s good news for metro areas that specialize in a broad range of services. Consumer spending was up in the third quarter for health care (good for such places as Pittsburgh, Boston, and Rochester, Minnesota) and finance and insurance (good for banking centers such as New York and Jacksonville, Florida, and insurance centers such as Hartford). Consumer spending on food services and accommodations was up (although not as much as in the second quarter) and spending on recreation services grew briskly (after falling in the second quarter). That could give an economic boost to the hard-hit tourism-dependent metros of Florida and the Southwest.
- There’s also good news for some goods-producing places outside of auto country. Exports of goods were up because of the weakened dollar, giving a boost to most manufacturing centers. Consumption of domestically produced natural gas, electricity, gasoline, and other energy-related products rose sharply. That should be good for the metro economies of Texas and nearby states, which have already gotten off relatively easily during the recession. Consumers also increased their spending on U.S.-made clothing and footwear, potentially good news for such centers of textile manufacturing as Greensboro, North Carolina.
Where’s the bad news?
- State and local government spending fell as those governments moved to balance their budgets, suggesting that state capitals, which have been spared the worst impacts of the recession, may be taking a bigger economic hit than they did when the nation was in recession.
- Consumer spending on U.S.-made food and beverages (not including spending in restaurants, bars, and fast-food outlets) fell for the third quarter in a row. This could be bad news for food manufacturing metro areas such as Lancaster, Pennsylvania.
- Consumers cut spending on U.S.-made furnishings and durable household equipment, perhaps delivering an additional blow to the hard-hit furniture (and auto parts) manufacturing center of Grand Rapids, Michigan.
- Consumer spending on goods and recreational vehicles continued to decline, bad news for Ekhart, Indiana, the nation’s leading RV manufacturing center.
- Despite the general increase in goods exports, exports of civilian aircraft, engines, and parts fell, perhaps to the detriment of Seattle.
- Computer sales fell sharply, probably harming computer manufacturing centers such as San Jose, Boston, and Portland.
How will these trends all add up for regional economies? In December, with more detailed data, we will tell you. Until then, remember that prediction is easy, unless you’re taking about the future.