Large US cities suffered
most in recent recession
A report by Global Insight prepared for the US Conference of Mayors

22 January 2005: Large US metropolitan areas were particularly hard hit by the recent US recession. Cities like Los Angeles, New York and Chicago all lost more than 100,000 jobs between March 2001 and November 2004. A full recovery to pre-recession employment levels is not likely to occur before 2007.

Between the start of the recession in March 2001 and November 2004 total employment in the United States fell by 878,000 jobs or 0.66 per cent of the American workforce. Even though employment started growing again in the summer of 2003, the subsequent jobs recovery has been uneven across the states, and the employment growth rate low by post-war standards when coming out of a recession.

Since US metros contain about 84 per cent of total US employment, there were also clearly significant job losses in many of them during the same period. Global Insight on behalf of the US Conference of Mayors analyzed the change in employment between March 2001 and November 2004 for 318 US metro areas to see if there were any patterns in the changes, and also to determine the number of metros whose November 2004 employment was above their March 2001 levels.

The analysis shows that during this period, US metro employment fell by 0.74 per cent, slightly above the national drop of 0.66 per cent. About 93.6 per cent of the employment decline in all 50 states and DC during this period occurred in metro areas. Virtually all of the metro job losses were in the largest metros (i.e., those with populations of more than one million people). By contrast, metro areas with populations of 500,000 persons or less actually gained 272,000 jobs during this period.

November 2004 employment had returned to March 2001 levels in 181 metro areas, however the gainers were generally smaller metros as they accounted for only 47.661 million jobs in November 2004, or 43.2 per cent of total metro employment. November 2004 employment was still below March 2001 levels in 137 metro areas; these were primarily large cities as they had total November 2004 employment of 62.6 million jobs, or 56.8 per cent of total metro employment.

Global Insight next analyzed employment growth rates for the 318 metros during the last year to determine the extent to which metros were benefiting from the gradual rise in employment in the US economy. The consensus estimate is the US economy needs to add at least 150,000 jobs each month to keep the unemployment rate stable by absorbing growth in the labor force, which translated to an annual employment growth rate of 1.38 per cent between November 2003 and November 2004, which the report’s authors refer to as the ‘threshold’ employment growth rate.

They compared metro employment growth rates over the last year to see how many were above and below the threshold. Trends between November 2003 and November 2004 showed that 268 metro areas recorded in increase an employment over the last year; including 138 that had an employment growth rate above the threshold, and 130 with a growth rate below it. Some 50 metro areas saw their employment decline over the last year, with a total loss of just over 100,000 jobs.

Total employment in the 318 metros rose by just over 1.256 million jobs or 1.15 per cent, just below the 1.18 per cent national increase. Large cities accounted for 55.5 per cent of the total increase in employment in the 50 states and DC over the same period.

Finally, Global Insight examined its fall 2004 metro economic forecasts for the 137 metros whose November 2004 employment was still below pre-recession levels. The researchers also determined the year when their total employment would return to pre-recession levels, defined as employment during the first quarter of 2001. The metros whose total employment will take the longest to return to their March 2001 levels are primarily smaller and midsize metros located in the Midwest and Great Lakes states that were historically dependent on manufacturing employment. It is forecast that by 2010 there will be still some 43 metro areas whose employment levels will have failed to reach the levels of early 2001.

Between March 2001 and November 2004, Los Angeles suffered the loss of more than 100,000 jobs or 2.45 per cent of the city’s workforce. Global Insight believes that Los Angeles will not recover its 2001 level of employment until 2007.

Job losses in New York City between march 2001 and November 2004 amounted to almost 180,000 or 4.18 per cent of the workforce. Job recovery to 2001 levels is not expected until 2009.

Chicago lost more than 154,000 jobs between March 2001 and November 2004. The report prepared for the US Conference of Mayors states that recovery is not expected until 2008.