The global financial crisis of the late 2000s precipitated an economic downturn of such magnitude and reach that many now refer to the period as the “Great Recession.” According to the International Monetary Fund, global economic output, which had grown at an annual rate of 3.2 percent from 1993 to 2007, actually shrank by 2 percent from 2008 to 2009. A precarious economic recovery is now underway.
Aggregate views of the global economy, however, mask the distinct experiences of its real hubs—major metropolitan areas. Metro areas are economically integrated collections of cities and their surrounding areas, and are centers of high-value economic activity in their respective nations and worldwide. And because metros form the fundamental bases for national and international economies, understanding their relative positioning before, during, and after the Great Recession provides important evidence on emerging shifts in the location of global economic resilience and future growth. The Global MetroMonitor examines data on economic output and employment in 150 of the world’s largest metropolitan economies, located in 52 countries, from 1993 to 2010, and makes the following findings.
The Global Economy Is Metropolitan-led
The 150 metropolitan economies profiled in the Global MetroMonitor exhibit highly diverse stages of development. Their per capita measures of Gross Value Added (GVA) range widely, from under $1,000 in Hyderabad and Kolkata, to roughly $70,000 in San Jose, and Zurich.
What is consistent about these metropolitan areas, however, is their function as locations for high-value economic activity in their respective nations and world regions. Nearly four in five boast per capita Gross Value Added (GVA) measures that exceed averages for their nations. This is particularly true in rapidly emerging areas of Eastern Europe and Asia, where major metro incomes exceed those for nations by average margins of at least 80 percent.
As a result, these metro areas punch above their weight in national and global economic output. In 2007, they accounted for just under 12 percent of global population, but generated approximately 46 percent of world GDP.
Downturn and Recovery Are Shifting Growth
Virtually no place completely escaped the effects of the global financial crisis and ensuing economic downturn in the late 2000s. Yet impacts across the 150 global metropolitan areas were highly uneven, as illustrated through the Global MetroMonitor’s focus on the employment performance of these places during three distinct economic periods from the past two decades.
Between 1993 and 2007, roughly half of the metro areas that achieved the strongest growth in income and employment were located in rising nations of Asia, Latin America, and the Middle East that benefited from new heights of global economic integration. Metro areas such as Shenzhen and Bangalore roughly tripled their income, and employment in Singapore and Belo Horizonte grew by more than half over the 14-year period.
Portions of the world’s more industrialized regions, including the United States and Europe, also registered strong metro performers during that time. Eastern European metros such as Sofia and Krakow, as well as Dublin in Western Europe, achieved rapid growth in income. In the United States, Las Vegas, Phoenix, and Austin posted major employment gains over the same period. Overall, however, U.S. metros on average ranked slightly behind their European counterparts, and well behind their counterparts in the rest of the world, on economic performance through much of the 1990s and early- to mid-2000s.
The negative impact of the global economic downturn, commencing in 2008, was widespread among the 150 metro areas. Seven in eight lost either employment or income in at least one year between 2007–2008 and 2009–2010.
But for several global metropolitan areas, the late 2000s marked more of a temporary slowdown than a Great Recession. The top metro performers for the most part experienced no decline in either employment or income from 2007 to 2010. Fully 28 of the 30 top-ranked metros during that period were located outside of the United States and Europe, with China accounting for the top five. Australian metros (Melbourne, Brisbane, and Sydney) registered strong performance, due to their important economic linkages with stable East Asian economies. Latin American metros proved resilient as well, with Lima, Buenos Aires, Bogotá and three Brazilian metros ranking among the top 30.
By contrast, many of the metros in the United States and Europe that flew highest before the recession experienced tremendous falls. Dublin, Madrid, and the three Baltic capitals (Riga, Tallinn, and Vilnius), along with Las Vegas and Riverside in the United States, moved from the top 30 spots pre-recession to the bottom 30 spots during the recession. These regions exhibited significant asset bubbles in the 2000s, as evidenced by the fall in home prices in their respective nations in recent years. Overall, the Great Recession appeared to hit U.S. metros hardest, while it improved the relative position of metros outside the United States and Europe.
The most recent year, from 2009 to 2010, appears to have further strengthened the relative economic standing of metro areas in the rising nations of Asia, Latin America, and the Middle East. Of the top 30 ranked metros, a diverse group of 29 was located outside the United States and Europe. China and India alone accounted for ten, Latin America registered seven, and the Middle East recorded four. Most of these metros posted annual growth rates of at least 2 percent in employment, and 5 percent in income, in the first year of worldwide recovery.
While the recession hit U.S. metros harder than their European counterparts, the recovery seems slower to take hold in European than American metros. Metros along Europe’s western, eastern, and northern peripheries, from Porto and Valencia, to Thessaloniki and Sofia, to Helsinki and Stockholm, anchor the bottom 30 economic performers from 2009 to 2010. Meanwhile, several U.S. metros that suffered severe declines during the recession, such as Detroit and Cleveland, posted significant rebounds in their rankings on the strength of robust output growth, even as Atlanta and Las Vegas await signs of growth.
The upshot: The past two decades have seen lower-income metro areas in the global East and South “close the gap” with higher-income metros in Europe and the United States, and the worldwide economic upheaval has only accelerated the shift in growth toward metros in those regions of the world.
Other Factors Shape Metro Performance
Beyond indicating economic opportunities within broad world regions and different stages of development, metros’ recent performance also reflects intrinsic factors such as their industrial base, and the impact of national fiscal, monetary, and trade policies.
First, the presence and magnitude of certain industries within metro areas related strongly to economic performance, though these differed by period and world region. Metros with high shares of their output in construction performed much better than average in the pre-recession period, particularly in the United States, but much worse than average in the recovery, particularly in Western Europe and other high-income regions. Before the recession, energy and manufacturing was associated with strong performance of lower-income metro areas, particularly in China and the Middle East, and weaker performance of U.S. metros. And high output in non-market services, such as government, health, and education, was a boon for European and American metros in the recession, signaling that those industries remained relatively healthy amid market turmoil.
Second, national context does matter. In any given period, roughly half to three-quarters of metro economic performance was associated with respective national economic performance. The analyses above point to distinct economic dynamics across U.S. metros that made their recession generally deeper than in other world regions, but that may also account for the stronger rebound some U.S. metros are posting compared to their European counterparts. Examining national economies alone, however, overlooks the important variations in metro performance that separated nearby metros such as Leipzig (#77) and Berlin (#144) in the pre-recession period; Abu Dhabi (#16) and Dubai (#97) during the recession; and Cleveland (#49) and Buffalo (#120) in the recovery.
As global metro areas emerge from the shadow of the Great Recession, they also find themselves in markedly different places along their own growth trajectories. Many in Asia and Latin America were scarcely affected by the recession at all, or have posted a full recovery. Several in the United States and other high-income regions have rebounded to their prior employment or income level, but not yet both. About half of the 150 continue to lose ground on one of the key measures, in most cases employment, and the bulk of these metros are in Western Europe and the United States. A small handful of metros, most in Europe, continued to decline in employment and income through 2010 as the recession raged on.
The Global MetroMonitor thus portrays a world economy whose continued transition will be driven in large part by the distinct experiences of its powerful network of major metropolitan economies. As metropolitan leaders worldwide confront the challenges and opportunities that accompany continued global economic integration, and many seek new growth models to replace the old ones, the shifting metro map points toward an emerging array of productive, metro-based economic relationships that could drive regional and national prosperity in the decades to come. On the following page, 150 of the largest metropolitan economies worldwide are ranked by their performance before, during, and after the Great Recession.