An Economic Performance Index for U.S. Cities

Abstract

Economists and city leaders have long confronted a tradeoff between timeliness and accuracy when searching for a measure of the economic performance of cities. Personal income is a good measure of economic growth, but these estimates for metropolitan statistical areas are only available with a 2-year lag. Job data are timely, but do not distinguish between high- and low-paying jobs. An alternative method of measuring economic growth is to construct an earnings-weighted job index, which weights the number of jobs created each quarter by wages paid in various industries within the metropolitan area. Changes in this economic performance index coincide closely with changes in metropolitan area personal income, and the data are available with only about a 3-month lag. To illustrate, an economic performance index for 75 metropolitan areas in the United States is presented and used to gauge economic growth over the period 1988-1990.