THE AVENUE JUNE 17, 2011
Last week, Republican presidential candidate and former Minnesota governor Tim Pawlenty set a “big, positive goal” of 5 percent annual economic growth for a decade. Donald Marron points out that the nation as a whole hasn’t achieved this goal since the 1958-1968 decade and explains why it’s highly unlikely to do so in the near future.
But maybe Pawlenty, drawing on his gubernatorial experience, is extrapolating from the growth records of states, and especially metropolitan areas, which have sometimes achieved 5 percent growth even during periods of sluggish national growth.
Take the 2001-2009 period, when the nation’s inflation-adjusted GDP growth averaged 1.6 percent a year and never topped 3.6 percent in any single year. During that time, 21 states--mostly in the South, Great Plains, and Mountain West--had at least a year of inflation-adjusted output growth of 5 percent or more. (See map here.) Seven (Arizona, Florida, Idaho, Nevada, North Dakota, Utah, and Wyoming) had at least two consecutive years of at least 5 percent growth, and two of those (Nevada in every year from 2003-2005 and Utah in every year from 2005-2007) had three consecutive years of such rapid growth. No state, though, came close to averaging 5 percent annual growth over the whole period. (The closest was Wyoming, which averaged 4.2 percent.)
The metropolitan picture is more optimistic. Of the nation’s 366 metropolitan areas, 215 had at least a year of 5 percent (or higher) output growth during the 2001-2009 period and 77 had at least two consecutive years. Thirty-eight had at least 3 consecutive years of 5 percent annual growth. (See map here.) Twenty-one of these are in the South--with nine in Florida alone--and nearly all the rest are in the Mountain West or inland California. (None is in Minnesota.) Most are small; among the 100 largest metro areas, only Austin, Baton Rouge, Las Vegas, Orlando, Palm Bay (FL), Provo (UT), Raleigh, Riverside, Salt Lake City, and San Jose make the list.
Thirteen metro areas (Baton Rouge, Coeur d’Alene (ID), Fayetteville (AR), Huntsville (AL), Lake Charles (LA), Las Cruces (NM), Ocala (FL), Orlando (FL), Panama City (FL), Pascagoula (MS), Port St. Lucie (FL), St. George (UT), and San Jose) met the 5 percent growth goal for at least four years in a row during 2001-2009, while two (Coeur d’Alene in every year from 2002-2006 and Pascagoula in every year from 2005-2009) did so for five years in a row. Pascagoula, along with Casper (WY) and Corvallis (OR), averaged at least 5 percent annual output growth during the entire 2001-2009 period.
The state and metro economic growth experience has some lessons for the nation as a whole.
It’s easier to achieve rapid growth in a small region or state than in the nation as a whole. Simple arithmetic guarantees that the addition of a new plant or office, or the expansion of an existing one, will have a greater impact on economic growth in a small economy than in a bigger one. The kinds of tactics that governors and local officials use to grow their state and local economies have to be done on a proportionally larger scale to have a similar impact on the nation as a whole.
Labor force growth makes a big difference. The states and metro areas that had several consecutive years of rapid economic growth were overwhelmingly ones that rapid population growth during the last decade. (That’s why so many of them are in the South.) That population growth meant that the available labor force grew quickly, too. At the national level, we can’t count on immigration from other countries to grow our labor force as rapidly as some states and metro areas grew theirs through in-migration from other states and regions (as well as countries). Even if the economic recovery picks up steam, we also can’t count on much growth in the percentage of people who are employed, since retired people will account for an increasing share of the population. The nation as a whole, then, doesn’t have one of the important means by which states and metro areas can grow their economies quickly.
Rapid growth is difficult to sustain or achieve beyond the first few years of recovery from a recession. Most of the metro areas that had at least three consecutive years of 5 percent growth had them immediately following the early 2000s recession. Of the 38 metro areas that met that target, 17 had their high-growth periods beginning in 2002 (and ending no later than 2005), while another nine had them beginning in 2003 (and ending no later than 2006).
The upshot? If you’re running for mayor of Pascagoula, 5 percent annual growth, maybe even for a decade, isn’t that far-fetched a goal. If you’re running for president, it’s a much tougher promise to keep.