10 Cities That Beat the Recession

The economy is in the midst of a strange and slow recovery. This week, the S&P broke through its 2007 pre-recession high, and yet, only 14 major metropolitan areas have regained the jobs they lost during the recession.

The Brookings Metro Monitor reviews how much the 100 largest metropolitan areas declined during the recession, and how much they have recovered in key metrics — unemployment, home prices, employment and gross domestic product (GDP) — since their worst point. Some metro areas, including Portland, San Jose and Austin, have seen major economic growth since their bottom in the late 2000s. Based on Brookings Metro Monitor data for 2012, 24/7 Wall St. reviewed the 10 cities that have improved the most since the recession.

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The cities fall into two categories. In places like Houston and Austin, the local economy was not hit as hard as rest of the country. Often, the economy actually has returned to above pre-recession levels. In San Jose, for example, output is up 16.5%, compared to the city’s pre-recession peak. In Austin, employment is now 6.6% higher than its pre-recession high in 2006.

In other cities, recovery has been strong, with major gains in employment and housing prices, but the gains reflect a bounce from the declines during the recession. For example, in Bakersfield, Calif., home prices have increased substantially since their trough, but they still remain more than 50% below their pre-recession peak.

In an interview with 24/7 Wall St., Brookings senior research analyst Alec Friedhoff explained why this recovery is better in some areas. According to Friedhoff, one criticism of the pre-recession economy was that it relied on consumption, and not production or generating income from other domestic and international markets. Talking about San Joses, Portland and Austin “those are markets where skills are high and they produce goods that are highly tradable, where they produce goods beyond their small borders.”

For those metropolitan areas that have recently seen growth in construction and home prices, like Detroit (which ranked 11th for recovery) and Bakersfield, Friedhoff added, it is unclear whether their recovery will last, unless the nature of their economies change.

To determine the 10 metropolitan areas bouncing back from the recession, 24/7 Wall St. considered data published by the Brookings Institution for the most recent edition of its Metro Monitor. This index tracks quarterly data on four key indicators to determine economic improvement. Two of these, employment and gross domestic product, were provided to Brookings by Moody’s Analytics. Seasonally adjusted unemployment rates are from the Bureau of Labor Statistics. Data on home prices come from the Federal Housing Finance Agency’s Home Price Index, which Brookings adjusts for inflation.

10. Bakersfield-Delano, Calif.
> GDP recovery: 6.5% (48th lowest)
> Employment recovery: 8.7% (4th highest)
> Unemployment recovery: -2.8 percentage points (35th largest decline)
> Home price recovery: 5.6% (6th highest)

Only three metro areas have seen a larger increase in employment from their respective low points than Bakersfield, where employment rose 8.7% from the fourth quarter of 2009 to the fourth quarter of 2012. Home prices in Bakersfield declined 55% from their pre-recession peak in the fourth quarter of 2006 through the fourth quarter of 2012, one of the largest declines in the nation. However, the trend in more recent months has been largely positive; from the second to the fourth quarter of 2012, the area’s home price index rose 5.6%. This was one of the largest home price recoveries in the nation.

9. Salt Lake City, Utah
> GDP recovery: 12.6% (11th highest)
> Employment recovery: 7.2% (10th highest)
> Unemployment recovery: -2.9 percentage points (32nd largest decline)
> Home price recovery: 4.3% (15th highest)

Since the second quarter of 2009, Salt Lake City GDP has grown by 12.6%, among the largest recoveries in the nation from a recessionary low. Additionally, total employment in the area has risen 7.2% since bottoming out in late 2009. Employment rose by 1.3% just in the most recent quarter. Salt Lake City has not seen the same scale of recovery in its unemployment rate, though. At its worst point, the area’s unemployment rate was only 8.0% — hardly among the worst in the nation at the height of the recession. As of the fourth quarter of 2012, 5.1% of area residents were unemployed, the sixth-lowest percentage in the nation.

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8. Grand Rapids-Wyoming, Mich.
> GDP recovery: 12.5% (12th highest)
> Employment recovery: 6.0% (14th highest)
> Unemployment recovery: -5.3 percentage points (the largest decline)
> Home price recovery: 2.5% (40th highest)

According to Alec Friedhoff of Brookings, the Grand Rapids area is a manufacturing center. In the last quarter of 2012, manufacturing made up 16.4% of all employment in the area, versus 8.5% nationally. However, in the fourth quarter of 2012, employment in manufacturing rose just 1.6% from the year before, roughly in line with industry growth nationwide. Despite recent struggles — in the last quarter of 2012 employment in the Grand Rapids area declined by 0.5% — the area’s unemployment rate has shrunk dramatically. Since reaching its worst point in late 2009, unemployment has declined from 11.6% to 6.3%, the largest such decline in the nation.

7. Houston-Sugar Land-Baytown, Texas
> GDP recovery: 15.0% (6th highest)
> Employment recovery: 8.1% (5th highest)
> Unemployment recovery: -2.5 percentage points (46th largest decline)
> Home price recovery: 4.7% (12th highest)

Since Houston reached its recession low point in the third quarter of 2008, output in the area has risen by 15% — the sixth-highest such increase in that time. Although GDP began its recovery before employment, which did not bottom out until the last quarter of 2009, the area has rapidly recovered jobs since then. In the past three years, employment has risen by more than 8%, the fifth-largest rebound in the nation. One large driver of employment is likely the commercial construction boom in Houston. In the fourth quarter of 2012, construction jobs were up 9.8% from the year before, versus 0.7% nationwide.

6. Portland-Vancouver-Hillsboro, Ore.-Wash.
> GDP recovery: 21.5% (3rd highest)
> Employment recovery: 4.0% (36th highest)
> Unemployment recovery: -3.4 percentage points (22nd largest decline)
> Home price recovery: 4.1% (19th highest)

Between the second quarter of 2009 and the last quarter of 2012, the Portland area’s GDP rose more than 21% — the third-largest increase from a metropolitan area low in the U.S. Additionally, the Portland area’s unemployment rate in the fourth quarter of 2012 was 7.8% — in the bottom half of all cities reviewed by Brookings. Home prices in the fourth quarter of last year were up 4.1% from their pre-recession lows, and up 1.8% in the most recent quarter, versus 0.8% and 0.3% growth, respectively, for the U.S. overall. However, real estate, rental and leasing employment was down by 4.3% in 2012 and 2.1% in the final quarter.

5. Boise City-Nampa, Idaho
> GDP recovery: 9.6% (21st highest)
> Employment recovery: 4.9% (24th highest)
> Unemployment recovery: -2.8 percentage points (36th largest decline)
> Home price recovery: 11.4% (2nd highest)

Since reaching a low in the second quarter of 2011, home prices in the Boise metropolitan area have risen 11.4% — the second-highest increase-from-trough in the nation. In the fourth quarter of 2012 alone, home prices were up more than 3% — one of the highest increases in the nation. By comparison, home prices nationwide are up just 0.8% since the second quarter of 2012. According to NPR, much of the recent increase in home values has been due to a reduction in inventory throughout the area.

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4. Austin-Round Rock-San Marcos, Texas
> GDP recovery: 17.2% (4th highest)
> Employment recovery: 9.6% (2nd highest)
> Unemployment recovery: -2.1 percentage points (41st smallest decline)
> Home price recovery: 4.9% (11th highest)

Since hitting its recession low in the third quarter of 2009, output in the Austin area has increased by 17.2%, among the highest in the nation. This continued in the last quarter of 2012, when GDP rose 1.2% from the quarter before, the highest increase in the nation. A similar pattern was present for employment, which has risen 9.6% over the three years since its recession low in the last quarter of 2009. Hiring was up by 1.2% in the most recent quarter — one of the largest increases in the nation. One sector that had considerable hiring was professional and business services, which grew employment by 10.3%, versus just 2.7% nationwide.

3. Phoenix-Mesa-Glendale, Ariz.
> GDP recovery: 8.9% (25th highest)
> Employment recovery: 5.3% (21st highest)
> Unemployment recovery: -3.4 percentage points (18th largest decline)
> Home price recovery: 15.0% (the highest)

As of late 2012, home prices were down nearly 50% from their peak in the third quarter of 2007, one of the largest declines in the nation. However, since reaching their low point in the second quarter of 2011, home prices have rebounded by 15% — the largest increase from a recessionary low in the nation. This increase likely has helped boost job growth in the area. In the most recent quarter, employment in the real estate and rental and leasing professions rose by 5.4% over the year before, while the number of construction jobs rose 5.5%.

2. San Jose-Sunnyvale-Santa Clara, Calif.
> GDP recovery: 22.4% (2nd highest)
> Employment recovery: 9.4% (3rd highest)
> Unemployment recovery: -3.7 percentage points (13th largest decline)
> Home price recovery: 6.2% (5th highest)

Since the third quarter of 2009, GDP has risen 22.4% and employment has risen by 9.4%, both among the largest increases in the nation. Between the first and fourth quarters of 2012, the San Jose area’s home price index rose by 6.2% — fifth most among the 100 metro areas considered. But while home prices in the area rose in 2012, they are still down by 30% since late 2006. Also, according to the Silicon Valley Index, the area may experience “a disruptive shift” with regards to how innovation and technology start-ups are financed, as venture capital investment fell by 17% in 2012.

1. New Orleans-Metairie-Kenner, La.
> GDP recovery: 23.8% (the highest)
> Employment recovery: 20.0% (the highest)
> Unemployment recovery: -1.8 percentage points (32nd smallest decline)
> Home price recovery: 1.8% (49th highest)

From its low point in the fourth quarter of 2005 through the fourth quarter of 2012, New Orleans’ GDP increased 23.8% — a larger recovery from a relative low point than any other area. Additionally, in that time the number of area jobs has risen by 20%, also the most of any metro area. However, New Orleans benefits from the fact that growth and employment reached their low point years earlier than any other metropolitan area, due to the destruction caused when Hurricane Katrina flooded New Orleans, displacing 250,000 people and costing billions in damages.

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