December 15, 2009 (The Bookings Institute) - Nationwide, the recession is technically over. Or at least that is the view of most economists. They note that real U.S. gross domestic product (GDP) finally expanded in the third quarter of 2009, growing at a 2.8 percent annual rate after four consecutive quarters of contraction. They point to a significant slowing of job losses in November, rising housing prices, and a slight downtick in unemployment as other positive signs. Their conclusion: Economic recovery is at last underway.
And yet, the pace of renewal seems tentative and its geography patchy. Most notably, the aggregate national story of recovery and expansion overlooks the fact that just as the American economy varies from region to region, and metropolitan area to metropolitan area, so does the recovery.
Consider, for example, the economic landscape of the Intermountain West and its metros, as depicted in this inaugural edition of the Mountain Monitor-a companion product to Brookings' national MetroMonitor and a production of the new Brookings Mountain West initiative, a partnership between Brookings and the University of Nevada at Las Vegas.
Drawing on data covering the third quarter of 2009 (ending in September), the new Monitor documents that no multistate region has been hit harder by the last year's economic crisis than the six-state Intermountain zone.
Across the region, the deflation of a massive housing "bubble," widespread job losses, and the onset of a significant public-sector fiscal crisis have wreaked havoc on many communities. In many Intermountain region locations, the sheer abruptness of the shift from hyper-growth early in the decade to a severe contraction in the last year has spawned a sense of almost existential whiplash.
As the findings below highlight, even within the region the effects of the recession and recovery have not been uniformly felt. Phoenix, Boise, and Las Vegas, for example, remained three of the most troubled metropolitan areas in the entire nation in the third quarter, with all residing in the weakest quintile of metros on a combined measure of overall economic performance. Still, metros like Colorado Springs, Albuquerque, and Denver have only been moderately affected by the recession and seem poised to renew their upward trajectory as the pace of recovery quickens. The upshot: While the Intermountain West is an increasingly distinct region in national affairs, it remains disparate-a still-loosely linked network of individual metropolitan economies, some of which remain mired in recession and many of which are clearly recovering.
Which is the point of the Mountain Monitor. Designed to serve as a barometer of the health of the Intermountain West's metropolitan economies, this Western monitor looks beneath the single account of the national statistics to draw into clear light the diverse metropolitan landscape of America's New Heartland as originally highlighted in the Brookings report "Mountain Megas." In this fashion, the Mountain Monitor aims to distinguish the particular contours of the Great Recession and its aftermath in the Mountain region from those elsewhere, and so contribute to the region's growing self-understanding.
To that end, we examine data on employment, unemployment, output, home prices, and foreclosure rates for the region's 10 large metropolitan areas, the nation's 100 largest metros, and 17 smaller metros dispersed around the Intermountain region. This exercise finds that:
• In aggregate, the 10 large Intermountain West metros have suffered disproportionately in the Great Recession compared to the rest of the country and other large metros. Average percentage job loss for the region's metro areas ran to 7.0 percent from pre-recession employment peaks through the third quarter of 2009, as compared to just 4.3 percent for the largest 100 metros across the nation. Gross metropolitan product (GMP) has also declined more among Mountain West large metros than in the typical large metro, while home prices have also slid inordinately. On that front, the average real price of a home in the 10 large metros of the Intermountain region declined by 8.5 percent between the third quarters of 2008 and 2009, compared to the 3 percent average decline registered in the 100 largest metros nationwide. Put it all together, and the region is struggling more than most in terms of job loss, loss of output, and declines in housing prices. Despite that, the aggregate unemployment rate across the 10 big Mountain metros remained a percentage point lower than that across the largest 100 metros nationally and has not increased as much during the recession.
• In terms of recovery, the region also lags but is largely moving in the same direction as the rest of the country in that GMP rose from the second quarter to the third in every metro, though job growth remains elusive. GMP expanded during the third quarter in every metro, with output growth ranging from Denver's tepid 0.3 percent increase to Ogden's robust 1.7 percent growth. However, employment growth has yet to materialize in the region. Not one of the largest 10 metros in the region posted employment gains in the quarter (only 13 major metros did nationally), and in fact job losses proceeded twice as fast as the national average. Ogden and Phoenix, for example, were hit especially hard with new job losses of over 1.5 percent in the quarter, and for their part, metropolitan Salt Lake City, Las Vegas, and Boise each saw employment slide by another point. With that said, nine of the 10 larger Mountain metros (Ogden was the exception) were losing jobs at a slower rate in September than they had been in the quarter before. In short, recovery seemed on its way in September but had not fully begun.
• Overall the major metros of the Intermountain West have been registering highly uneven economic performance even as the nation began an economic recovery. Las Vegas, Boise, and Phoenix have all seen massive job losses and contend with the highest unemployment rates in the region, languishing among the bottom quintile among large U.S. metros in terms of overall performance during the recession. On the more fortunate side, Colorado Springs and Denver escaped a collapse in housing prices and have seen only modest increases in unemployment. Albuquerque has maintained its pre-recession level of output and has lost a smaller share of its jobs than most metros. Colorado Springs and Ogden, UT, have also weathered the downturn better than the average U.S. metro.
• Heavily influencing the region's below-average aggregate profile on economic performance is the severe distress afflicting Las Vegas, Phoenix, and Boise-three metros that have been heavily hit by the collapse of the housing bubble. These westernmost large metros in the region remain three of the most severely distressed metros in the nation, and they inordinately define the region's recession landscape. Each of these metros has been devastated by the bursting of the housing bubble inflated by years of easy credit and a proliferation of exotic and usually subprime mortgages. Without these locales' acute distress, the region would still look hard-hit on employment loss, but it would appear rather typical on GMP and housing price declines, and it would actually look better than average on foreclosures. Construction and real estate industry concentration tells the story. Specifically, the share of employment in the main construction industries and real estate ran to 13.4 percent of all non-farm jobs in Las Vegas in 2006, and 12.8 percent for both Phoenix and Boise. By comparison, the average for large metros around the country on this remained just 8.0 percent, and it was 10 percent for the other Intermountain West metros.
• More broadly, metropolitan education levels and concentration in such industries as health services and related social services seem to have protected some metros from the worst economic stress. Most notably, those metros with a more educated workforce-such as Denver and Colorado Springs-have weathered the recession significantly better than other Mountain metros on almost every measure. High concentrations in health and social related services have also protected areas against economic decline on a variety of measures, with Albuquerque and Tucson being indicative. These findings underscore the critical roles human capital levels and sectoral composition play in regional economic performance.
• House prices have not yet stabilized in the Intermountain West, and the region's aggregate rate of bank owned properties remains high, although it is highly concentrated in Las Vegas and Phoenix. To be specific, only metropolitan Denver and Colorado Springs among the 10 large Mountain West metros had registered slim year-over-year home price increases by the end of the third quarter, while in September the incidence of real estate-owned (REO) properties remained disturbingly high. On this front, the region's aggregate large-metro REO rate (measured in REO properties per 1,000 mortgageable properties) of 8.15 nearly doubled the large-metro rate nationally. However, it bears noting that that showing was largely driven by the difficulties of Las Vegas and Phoenix, where the REO rates continued their upward trend-albeit at a slower rate-to 17.40 and 12.19 REOs per 1000 properties, respectively, in the third quarter while elsewhere the variation was on a more moderate plane.
• Patterns of recession and recovery among the smaller metropolitan areas of the region, finally, generally track with those engulfing their larger neighbors. Job losses and output declines were at once varied and inordinately severe in some of the West's smaller places, and unemployment rates continued to trend upwards. On the one hand, employment and output were off their pre-recession peak only modestly in the third quarter in places like Fort Collins, CO or Las Cruces, Farmington, and Santa Fe in New Mexico, but these indicators were hugely diminished in places like Lake Havasu-Kingman, AZ; St. George, UT; and Reno-Sparks, NV as these metros contended with double-digit losses on multiple indictors. Here as elsewhere, variations in industry composition and educational attainment are significantly affecting local performance. Smaller metros that have avoided the worst dislocations of the Great Recession-such as Las Cruces, Santa Fe, or Fort Collins-have frequently benefited from high industry concentrations in sectors like medical services, nursing care, and social assistance, or the arts, as well as high educational attainment. By contrast, the hardest hit metros have frequently been those most heavily specialized on real estate, construction, and the building trades (Reno, Prescott, and St. George) or those with low educational attainment (Lake Havasu, Yuma).
In sum, the arrival of widespread output growth among the metropolitan areas of the Intermountain West in the third quarter of 2009 reflected the arrival in the region of the nascent national recovery. However, the strength and durability of the nascent recovery remain uncertain. Quarterly job gains have yet to materialize, and large inventories of foreclosed homes and vast differences in performance levels (not to mention a major slump in household consumption and interstate migration) weigh heavily on the region's resilience.
These difficulties are going to require patience and creativity and also require that careful attention be paid in Washington-as Congress and the Obama administration consider new proposals to improve the nation's dismal jobs picture-to the particular stamp of the recession in the metropolitan areas of the Mountain West.
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