Measuring a region’s economic performance is the next critical step to a corporate site location analysis. Again, population growth, regional Gross Domestic Product growth, market size and other factors are critical to measuring the economic attractiveness of a market. The population size of a market is an important measure of a region’s overall attractiveness. The larger the population, and the growth of that population, the more attractive that market is from a consumer and workforce standpoint.
Source: US Census Bureau
The federal government has identified 382 Metropolitan Service Areas (MSAs) in the United States. MSAs are a geographical region with a relatively high population density at its core and close economic ties throughout the area. These regions are not legally incorporated as a city or town would be, nor are they legal administrative divisions like counties or separate entities such as states. However, MSAs are worthy of analysis as they are often a basis for regional economic markets. As the chart above illustrates, the population growth rates of MSAs illustrates the relative strength of these regions. From 2010-16, the following MSAs had population growth rates of:
- Detroit grew only .39% but still remains the 14th largest MSA in the United States;
- Cincinnati barely gained population in their MSA and Cleveland actually lost population;
- Columbus grew over 9% and is moving to become the largest MSA in Ohio;
- Indianapolis grew over 7% and still dominates the Indiana marketplace but is facing challenging regional competition; and
- Raleigh is booming with an 18% population growth rate and is by far the fastest growing market in this analysis.
Gross Domestic Product (GDP) is the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production and is equal to the sum of personal consumption expenditures, gross private domestic investment, net exports of goods and services, and government consumption expenditures and gross investment. As an example, Raleigh is a top fifty market from a population standpoint with a Metropolitan Service Area (MSA) ranked 44th largest in the US. Austin is the only top fifty market with population growth higher than Raleigh’s 15% growth rate since 2010. [i] Wake is one of 100 counties in North Carolina. It is part of the Raleigh, NC Metropolitan Statistical Area. Its 2016 population of 1,046,791 ranked 2nd in the state.[ii] Raleigh’s MSA is the 44th largest in the United States as measured by GDP and has a regional GDP of $79,843,000,000 growing from $37,313,000,000 in 2001.[iii] From an economic standpoint, Raleigh’s MSA at 44th is smaller than Cincinnati, Cleveland, Columbus, Pittsburgh, Nashville and Seattle.[iv]
Measuring a region’s GDP growth over time illustrates trends in growth. Comparing the GDP growth overtime illustrates how a region compares from an economic growth standpoint with like competitors. As the chart below illustrates comparing the Raleigh MSA GDP recent growth with competitor communities, the Pittsburgh region has not grown as quickly as competitor regions. From 2001-2016:
- Raleigh’s MSA GDP grew 113%;
- Columbus’ MSA GDP grew 77%;
- Detroit’s MSA GDP grew 81%;
- Indianapolis MSA GDP grew 83%;
- Cincinnati’s MSA GDP grew 84%; and
- Cleveland’s MSA GDP grew 84 %.[v]
Again, much like its population growth, Raleigh is a slightly smaller market than many of its competitors, but its recent economic growth rate is extraordinary. This recent growth rate makes Raleigh an attractive market even though it is currently a relatively small size market.
Personal income includes net earnings by place of residence, dividends, interest, rent, and personal current transfer receipts received by an area’s residents. Personal income is an important measure that illustrates the spending power of consumers in a market. As an example, in 2016, Wake County had a per capita personal income (PCPI) of $54,063.[vi] This PCPI ranked Wake 3rd in the state and was 128 percent of the state average, $42,244, and 110 percent of the national average, $49,246.[vii] The 2016 PCPI reflected an increase of 1.5 percent from 2015.[viii] The 2015-2016 state change was 2.1 percent and the national change was 1.6 percent.[ix] In 2006, the PCPI of Wake was $44,583 and ranked 3rd in the state.[x] The 2006-2016 compound annual growth rate of PCPI was 1.9 percent.[xi] The compound annual growth rate for the state was 2.2 percent and for the nation was 2.6 percent. State personal income grew 0.7 percent on average in the second quarter of 2017, after increasing 1.4 percent in the first quarter, according to the Bureau of Economic Analysis. Personal income grew in 2016 in 2,285 counties, fell in 795, and was unchanged in 33, according to the U.S. Bureau of Economic Analysis. On average, personal income rose 2.5 percent in 2016 in the metropolitan portion of the United States and rose 1.0 percent in the nonmetropolitan portion. In 2016, Wake County had a personal income of $56,592,270. This personal income ranked 2nd in the state and accounted for 13.2 percent of the state total. In 2006, the personal income of Wake was $34,954,963 and ranked 2nd in the state.
Wake County Personal Income Growth Rate Comparison
|Area||2015-2016 percent change||2006-2016 Compound Annual Growth Rate|
Growing Industry Analysis
A strong American economy does not mean that all regions will share in the wealth or that all industries will produce the high-wage jobs regions need to grow. The American economy remains the strongest in the world but technology advances are expected to have a major impact on a range of American industries as illustrated by the table below.
Source: U.S. Bureau of Labor Statistics
Current economic projections see overall job growth in professional services, educational services, and health care while most other industry job growth remains steady or declines. Large declines are anticipated to continue in manufacturing, financial services, and government jobs.
An industry cluster analysis provides a snapshot of what industry strengths a region has and further illustrates what industries are likely to succeed in a region as like industries tend to locate near each other for workforce and other economic benefits. Again, a location quotient is a method of measuring the industries that are a strength of a region and that are growing. A location quotient above 1.0 indicates economic strength of that industry in a particular region.
Raleigh offers an example of a highly successful economic market based upon strengths in advanced services, high-tech and manufacturing jobs. Raleigh has nearly 500,000 workers making an average wage of over $50,000, totaling $6.5 B in total wages.
Raleigh Industry Cluster Analysis
|Natural resources and mining||86||1,074||16,300,194||1,177||0.16||0.16|
|Trade, transportation, and utilities||6,041||95,555||1,181,071,697||953||0.95||0.99|
|Professional and business services||9,546||104,904||1,860,424,721||1,368||1.40||1.32|
|Education and health services||3,599||67,108||822,170,328||947||0.81||0.84|
|Leisure and hospitality||2,859||62,377||300,531,869||377||1.08||0.95|
The industry cluster analysis above illustrates the off-the-chart economic strength of the information technology industry in the Raleigh market. Wake County’s IT strength is off the charts compared to their regional competitors. Only Tampa’s Hillsborough County is above the 1.0 mark for the IT worker location quotient and the low level of success in the IT worker space for Detroit spell long-term economic challenges. Maybe even more interesting is the lack of general strength in the tech sector for successful regions like Columbus, Indianapolis and Louisville. This data point illustrates these regions are more likely a success because of their advanced service and white-collar jobs but are likely positioned to succeed in IT and high-tech if they can develop the workforce and capital access for these growing industries.
Measuring the strength of regions in the trade and transportation sector also offers interesting insights and illustrate the logistics success of Columbus, Detroit and Tampa.
[i] U.S. Census Bureau
[iii] St. Louis Federal Reserve Bank
[v] U.S. Bureau of Economic Analysis