Bloomberg News

Austin, Atlanta Give ‘Middleweight’ U.S. Cities Global Punch

April 17, 2012

Mid-size U.S. cities such as Austin, Texas, and Atlanta will join New York and Los Angeles to drive more than 10 percent of the world’s growth from now to 2025, McKinsey Global Institute said in a report.

Home to almost 70 percent of the U.S. population, so-called middleweight cities generated more than 70 percent of the nation’s gross domestic product, about 20 percentage points more than Western Europe’s 183 cities of similar size, according to McKinsey, the international consulting firm.

“The extent to which the middleweight cities contribute to the strength of U.S. economic clout was surprising,” Jaana Remes, a senior fellow of the institute who helped write the report, said in an interview. “It’s really these cities and their high per-capita income that drive U.S. economic strength.”

The findings, released today, reinforce the need for policy makers to adopt strategies to attract skilled workers and deal with unemployment and an aging population, the authors said. It called on cities to cooperate with other urban centers and build alliances to share ideas and reduce costs.

“Consolidating and sharing services among cities and between cities and counties can free up badly needed funds,” the report stated. Sharing costs of such functions as finance, public safety, administration, education and social programs could produce savings of $300 billion to $600 billion a year, the authors said.

L.A. Rising

New York’s economic output is on course to remain second to Tokyo through the first quarter of the 21st century, and Los Angeles is poised to rise from sixth to become the fourth- largest city by gross domestic product, the institute said.

Even as New York and Los Angeles “grow strongly,” the mid-size cities will outpace them, the study said. It predicted New York and Los Angeles would post 2.1 percent growth rates to 2025, while the top 30 middleweights would average 2.6 percent, topping the U.S. rate of 2.5 percent.

Beijing and Shanghai will overtake Chicago, the third- largest U.S. city, in GDP during the next 15 years, McKinsey said. The report predicted that Miami would fall out of the top 30, measured by economic impact, within 15 years.

U.S. metro areas of more than 10 million, such as New York and Los Angeles, and 257 urban centers of at least 150,000 -- such as Chicago, Dallas-Fort Worth, Philadelphia, Boston, San Francisco and Detroit -- accounted for 85 percent of U.S. GDP in 2010. In Western Europe it was 65 percent, and in China 78 percent, the institute found.

Austin, Raleigh

Of the so-called middleweights, Austin and Raleigh, North Carolina, have outperformed the rest of the U.S. in achieving above-average population gains and per-capita economic growth, benefiting from collaborations with local universities, the report said.

Dallas, Atlanta and Salt Lake City beat the national average in attracting new residents as affordable places to live, even though their per-capita growth was below average, the report said.

Paris and London account for 9 percent of Western Europe’s total GDP, compared with the 13 percent contributed by New York and Los Angeles, the report found.

“The higher share of U.S. urbanites -- and the fact that they command a larger per-capita premium over U.S. smaller towns and rural areas than do their European counterparts -- explains three-quarters of the per capita gap between the two economies,” the authors said.

To contact the reporter on this story: Henry Goldman in New York City Hall at hgoldman@bloomberg.net.

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net.


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