Cities in South, West to Grow Faster - Xango Location to Benefit


June 22, 2014 7:35 p.m. ET

The U.S. economy seems headed to a long-run growth rate well below 3%, but some metropolitan areas will see their economies surge above 4% annually for the rest of this decade, according to a study released by the U.S. Conference of Mayors.

Metro areas—which include cities along with surrounding suburbs—are already doing better than smaller nonmetro areas, according to the study, compiled by economists at IHS Global Insight.

Last year, metro areas saw better economic growth and hiring than smaller regional areas. Looking at 2014, the IHS economists forecast payrolls in metro areas will rise 2.0% versus 1.6% in nonmetro areas, according to the report, released Friday in conjunction with the mayoral group's annual meeting in Dallas.

The employment gains will allow almost half of all metro areas to return to their prerecession employment levels by the end of this year. The report also projects 20% of metro areas will have unemployment rates below 5% by the end of 2014. The U.S. jobless rate stood at 6.3% last month.

Looking further ahead, metro economies will be where the growth is.

While the Federal Reserve last week projected the U.S. economy's long-run growth at 2.1% to 2.3%, the mayors' report says 21 metro areas will post growth averaging more than 4% from now through 2020. Heading the list is Midland, Texas, with growth projected at 5.8%. The study says agriculture, construction and mining industries will boost Midland's expansion.

In fact, almost all the big-growth areas are in the South and West. Of the 21 growth-leading metro regions, six are in Texas and four in Florida. Construction, energy, computer jobs and professional business services will be major sources of the growth, the study says.

But the report warns that when it comes to job gains, "the low paying administrative and support-services division is expected to be the fastest grower, significantly outpacing the more lucrative management and technical sectors."

The influx of residents into the Southwest isn't without problems. A 2013 study by the University of Arizona showed the area lacks sufficient water to meet the needs of all its citizens, businesses and agriculture.

The biggest loser will be upstate New York. In the IHS forecast, five of the 10 slowest economies will be in New York state. At the very bottom, Utica-Rome and Binghamton will grow just 1% a year through 2020.

The concentration of U.S. economic growth in larger metro areas is causing a shift in the population. A study released in March by the U.S. Census Bureau showed that larger metro areas, along with areas rich in oil and gas, gained population last year, while nonmetropolitan areas lost residents on net.

The mayors' report predicts that shift will continue. From 2013 through 2014, it says, "population growth in metros will dwarf that of nonmetros, averaging a 0.9% compound annual gain compared to 0.3% for nonmetros."

Source: The Wall Street Journal