By Bryan Bezold
RCGA Director of Research and Chief Economist
The single statistic that economist most commonly use to measure
economic output is Gross Domestic Product, or GDP. GDP measures
the final value of goods and services produced within an economy’s
borders during a given year. This statistic has been estimated
by the Federal Government’s Bureau of Economic Analysis (BEA)
for the United States and for individual states for decades.
This past September, however, the BEA released a new series
of GDP estimates for metropolitan areas. This allows economists
to compare the size and growth of metropolitan economies with
the one measure that economist generally prefer to use to assess
the size and growth of an economy.
The figures for the 16 county St. Louis metropolitan area paint
a picture that isn’t surprising to observers of the St. Louis
economy. The GDP estimates show that St. Louis has a large ($105
billion) economy that is diverse, but also slow growing. Looking
at the top 20 metropolitan areas in the U.S. by population (in
the table on the next page), we see that St. Louis is the 18th
biggest metropolitan area measured by population, and also places
18th among that group when measured by GDP and GDP per capita.
Inflation adjusted, or “real,” GDP growth in the St. Louis MSA
lags the U.S. average and most of the other metropolitan areas
in the top 20. In one sense, this isn’t surprising. For decades,
the St. Louis region has added people and workers at a slower
pace than the U.S. average and many other large metropolitan
areas. If the number of workers and people grows more slowly
in St. Louis than in the U.S., then we would expect that output
would grow more slowly, as well.
Unfortunately,
the region’s slow demographic growth does not explain all of
its underperformance in GDP growth. If we look at GDP per capita
(GDP divided by the number of people living in the metropolitan
area) we again see slower growth than the U.S. average and a
lower level than many other metropolitan areas. So something
else is going on.
Across metropolitan areas, there are many structural variations
that could cause economic growth to be slower or faster. Things
like industry mix and demographic factors come to mind right
off the bat. The mix of employment by industry—that share of
workers in manufacturing, finance, construction, etc.—in St.
Louis is fairly similar to the U.S. as a whole, so industry
mix may not be the problem. To be sure, events related to St.
Louis’ industry mix, such as the closure of Ford’s Hazelwood
plant, no doubt had a large and negative effect on the growth
of GDP and GDP per capita in the St. Louis region.
St. Louis can rightfully claim to have a skilled workforce.
The production of sophisticated goods ranging from missiles
to pharmaceuticals takes place here because of the smart and
productive workers. As the St. Louis and U.S. economies evolve,
however, the kind of skills that workers need are changing.
The skills one develops through post-secondary education are
becoming more important to regional economic growth than manufacturing
skills. When it comes to college education, St. Louis’ workforce
isn’t moving as rapidly as many other large metropolitan areas.
It is true that the share of St. Louisans with a BA or BS degree
is increasing, but it’s not keeping pace with some of our civic
rivals.
That fact is significant because it may be related to the region’s
slow growth. The level of GDP per capita and college attainment
for the 50 largest metropolitan areas in the U.S. St. Louis
is in the middle of the pack, both in terms of college attainment
and GDP per capita. The best performing area in terms of GDP
per capita is Bridgeport, Conn., where 42.9 percent of the adults
over 25 have a college degree. Riverside-San Bernardino has
the lowest GDP per capita, at just $23,146, and only 18.9 percent
of the population there has a college degree. Statistically,
college attainment explains about half of the difference between
metropolitan GDP per capita.1
The implication for St. Louis is that although we have a large
and diverse regional economy, in order to continue to grow the
region must increase the share of workers with a college degree.
That implication, an awareness of the shift in the St. Louis
economy toward knowledge based industries, is reflected in a
number of the RCGA’s economic development efforts.
1
In a single regression model with GDP per capita as the dependent
variable, college attainment is positively correlated with GDP
per capita at the .01 level. The adjusted R-squared is .52.
