A guy stops me on the street and asks: “How’s the economy doing?”
“As good as can be expected,” I answer.
What else can I say? Who knows what he expects or what he has experienced? Also, which economy is he talking about? The local, state or national?
It doesn’t really matter. He passes by as Fergus, the dog, and I continue in the other direction.
I ponder: What indicators should I use to answer his question? The unemployment rate, the stock market, the rate of growth in consumer purchases, the percentage change in the number of jobs? What time period is appropriate? The past month, quarter, year, decade?
You can see how that innocent, polite question rang my anxiety chimes. Economists are often overcome by insecurity about the appropriate metrics at their disposal.
What’s the best measure of economic performance? At the national level, we use the rate of growth for the inflation-adjusted (real) gross domestic product (GDP),the value of all goods and services produced in the current period.
Sometimes we compare nations in terms of real GDP per capita. That way China could have a larger economy than the U.S., but we’d come out ahead because our population is smaller than that of China.
Recently, I have been calculating real GDP per job for metropolitan areas. It indicates the value of output in a regional economy compared with the number of jobs generating that output. It’s a proxy for labor productivity that might be useful to economic developers.
When I look at GDP per job between 2001 and 2013 for the 15 metro areas that include Indiana counties, I get some surprises.
I didn’t expect the Indianapolis metro area to rank 20th among the 381 metro areas in the U.S. with GDP per job in 2013 at $96,729.
The Chicago metro area (which includes Jasper, Lake, Newton and Porter counties in Indiana) comes in 21st, nearly $500 per job below Indy. Altogether, eight of our 15 metro areas are in the top 100 of the nation.
The rate of growth (2001 to 2013) in real output per job for Kokomo ranked sixth and Elkhart-Goshen ninth in the country. Two of the top 10 growth-rate leaders in Indiana! Plus, we had three more in the top 100 metro areas: Columbus, Terre Haute and South Bend-Mishawaka!
Perhaps, the booster band should be muted before we are overcome by excessive enthusiasm. Only Columbus had a higher rate of growth in jobs than did the nation. The other 14 Indiana metro areas were below the 11.8 percent U.S. job growth rate. In fact, seven of our 15 metro areas lost jobs in that period.
Thus, we have to ask: “Is a local economy better off when output per job rises, while the number of jobs falls?”
There is no simple answer to that question. As a wise man once told me, “It’s not what you have done recently, but what you do next.”