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Houston Leads a Dozen U.S. and Canadian Cities in Groundbreaking IIWII Index

Sometimes you start working on a story and the research takes you in a direction that veers off from where you expected to go.

2014 12 02 Employment Graphic

Today’s article is a perfect example.  

I planned to look at leading economic indicators for only the four or five largest U.S. population centers. But that was going to leave out too many others that are significant for either their economic or regional heft.

The number was quickly bumped up to a dozen.

The 12 largest U.S. metropolitan statistical areas (MSAs) are: New York (19.9 million people); Los Angeles (13.1); Chicago (9.5); Dallas (6.8); Houston (6.3); Philadelphia (6.0); Washington D.C. (5.9); Miami (5.8); Atlanta (5.5); Boston (4.7); San Francisco (4.5); and Phoenix (4.4).

Once I realized I’d be ranking them mainly according to “average” measures or percentage changes, there was no reason not to include a Canadian city or two as well.

Only census metropolitan area (CMA) Toronto, with a population of 6.0 million, cracks the U.S. largest dozen. Toronto is tied with Philadelphia, below Houston and marginally above Washington.

Canada’s second largest city, Montreal (4.0 million), doesn’t quite climb above the cut-off point.

Adding Toronto to the Top 12, does bump Phoenix, however. So here are my apologies to you, Phoenix. Maybe I’ll catch you next time. (You are still referred to several times in what follows.)  

MSA and CMA definitions are broad boundary designations that include “sidekick” suburbs with close live-work bonds ˗ that extend in both directions ˗ to the designated urban core. 

The cities are ranked according to ten criteria: 1) year-over-year percent change in population; 2) year-over-year numerical change in population; 3) unemployment rates; 4) year-over-year percent change in employment; 5) average weekly earnings of the employed work force; 6) year-over-year percent change in average weekly earnings; 7) year-over-year percent change in home prices; 8) year-over-year percent change in single-family housing permits/starts; 9) year-over-year percent change in multi-family housing permits/starts; and 10) downtown office building vacancy rates.

The accompanying tables set out the results.

There is also a Table 11 in which each city’s average ranking from the previous ten tables is calculated, set down and, in its own turn, ranked.

In effect, the average of the rankings provides a “composite” index which can also be placed on a scale from one to 12.

The energy-rich state of Texas provides Table 11’s first and third-place finishers, Houston and Dallas respectively.

Houston has an exceptionally good average ranking of 2.4. It comes first, second or third in seven of the 10 categories.

Hi-tech-hub San Francisco also scores well, earning second spot in the ultimate table. 

Canadians will be interested to see that Toronto is seventh, behind Atlanta and Washington, which tie for fifth.

At the other end of the spectrum is a trailing one-quarter grouping made up of Boston (10th), Miami (11th) and Philadelphia (12th). 

That’s the big picture. Let’s now look at some of the detail in Tables 1 through 10.

Also, when their performances really stand out, I’ll mention some other cities beyond the featured dozen.

In Table 1, Houston (+2.2%), Toronto (+1.7) and Dallas (+1.6%) are the leaders in year-over-year population percentage change. Three additional U.S. cities deserve the spotlight ˗ Denver (+1.9%), Seattle (+1.6%) and Phoenix (also +1.6%).

Plus, there’s Canada’s oil capital to highlight. Calgary’s latest year-over-year population change has been a remarkable +3.2%.

There have also been some very large year-over-year numerical increases in residency counts as set out in Table 2.

Again, Houston (+138,000) is in the forefront. Keep in mind that an increase of even 50,000 ˗ which is the equivalent of a small city on its own – will place considerable demands on existing and often-fraying infrastructure.

Extra to the 12 cities shown in Table 2, Phoenix (+71,000), Seattle (+58,000) and Denver (+51,000) have experienced large nominal population increases in the latest year.

With respect to the unemployment rate ranking (lowest to highest) set out in Table 3, Houston (4.9%) was the winner among the 12 dominant cities in September. But there were other major cities, outside the dozen, which recorded even more impressive levels.  

For example, Calgary’s jobless rate in September was 4.6%. Even that “tight” number, however, was beaten by Denver (4.0%) and Minneapolis (3.6%).

Houston (+4.3%) and Dallas (+3.2%) ranked numbers one and two in Table 4’s year-over-year percentage-change-in-employment ranking. But Orlando would have squeezed between them, if its 3.4% gain had been included.

Table 5, focusing on average weekly earnings, is instructional in several ways. It demonstrates that employment in the high-tech sector can yield benefits that compete with and sometimes surpass what’s available in the booming energy field.  

Cities with the highest concentrations of knowledge-based expertise fared best. Washington ($1,146.00) and San Francisco ($1,144.00) virtually tied for highest average weekly earnings.

Renowned college, research and think-tank-harboring Boston ($1,087.00) was a more-than-respectable third.  

There is an interesting sense, having to do with proximity, in which the numbers for both Washington and San Francisco are understated.

MSA Washington, with a population of 5.9 million, is a geographic region considerably more extensive ˗ i.e., because it includes portions of Virginia, West Virginia and Maryland as well ˗ than the District of Columbia (D.C.), which has a resident count of only 650,000.

The average weekly earnings of strictly D.C. workers, who are mainly employed by the federal government, is a knee-straining step higher at $1,382.00.

D.C.’s only competition comes from San Francisco’s “love child”, San Jose – the epicenter of Silicon Valley – where average weekly compensation is also nearly $1,400.00.

Venturing into the subject matter of Table 6, there is a caveat concerning San Jose relative to D.C. The former’s year-over-year average weekly earnings are -2.8% while the latter’s are +0.7%.

Phoenix (-2.9%) is one of the few other large cities in America where average weekly earnings have been backsliding.

Table 6 is where Chicago (+4.7%), in second spot, makes its first strong appearance.

Tables 7 through 9 focus on residential real estate markets.

Atlanta (+10.0%) is the current leader with respect to U.S. year-over-year median house price advances, according to statistics compiled by the National Association of Realtors (NAR).

Toronto’s +9.0% resale price gain, calculated by the Canadian Real Estate Association (CREA), isn’t far behind.

Standing atop Table 8, New York has recorded an impressive 18% year-to-date increase in single-family new home permits. Los Angeles and Atlanta, both with +11.0%, are locked in a tie for runner-up position.

Boston (0.0%) has been flat and four cities ˗ Toronto (-6.0%), Philadelphia (-6.0%), Miami (-8.0%) and Washington (-8.0%) ˗ have recorded declines.  

There have been much larger year-to-date percentage changes in the multi-family market, as shown in Table 9. Houston’s 82% increase leads the American contingent. North of the border, Calgary’s year-to-date multi-family starts have seen a doubling (+110%).

Toronto finally pushes its way to the summit in Table 10. Its downtown office vacancy rate of 5.3% leads four U.S. centers which also have single-digit markets ˗ San Francisco (6.7%), Boston (7.6%), Houston (8.7%) and Manhattan (8.9%).

According to CBRE, the U.S. downtown office vacancy rate in Q3 of this year was 11.3%. The comparable figure for Canada was 8.0%.

America’s metro-wide level (i.e., including suburban office markets) was 14.1%, exhibiting excess capacity well beyond Canada’s 10.3%. 

The “composite” ranking that appears in Table 11 warrants clarification.

As discussed in the foregoing, it’s clearly more than just a labor market listing.

At the same time, though, it’s less than a relative-lifestyle measure.

To accurately reflect “lifestyle”, it would also have to take into account such factors as per capita crime statistics and a personal favorite of mine, availability of top-echelon education.

Actually, all 12 cities would probably score well with respect to leading-edge academic institutions.

Other “lifestyle” measures would include the extent of rapid transit and the amount of pedestrian “green” space.

The level of municipal taxes and the city’s balance sheet would also be worthy of inclusion.

Therefore, while the ranking in Table 11 yields interesting results, it’s not entirely clear what it is that’s being measured. I guess one could say it’s a composite of leading economic indicators, but that’s rather bland. 

Upon reflection, I’ve decided to call it my IIWII index.

And ‘What, pray tell, is an IIWII index?’ you may reasonably ask.

‘It Is What It Is’ would be my rather evasive response.

Think of IIWII as being somewhat analogous to the acronym WYSIWYG (i.e., ‘What You See Is What You Get’) that computer programmers used to be so fond of applying to their output.

Table 1: MSA/CMA Latest Year over Year Table 2: MSA/CMA Latest Year over Year Table 3: MSA/CMA Latest Table 4: MSA/CMA Latest Year over Year
% Change in Population Numerical Change in Population Unemployment Rate % Change in Employment
1 Houston 2.2% 1 Houston 138,000 1 Houston 4.9% 1 Houston 4.3%
2 Toronto 1.7% 2 New York 112,000 2 Dallas 5.0% 2 Dallas 3.2%
3 Dallas 1.6% 3 Dallas 108,000 2 San Francisco 5.0% 3 Miami 2.9%
4 Washington 1.5% 4 Toronto 100,000 2 Washington 5.0% 3 San Francisco 2.9%
5 San Francisco 1.4% 5 Los Angeles 94,000 5 Boston 5.6% 5 Atlanta 2.1%
6 Atlanta 1.3% 6 Washington 87,000 6 Philadelphia 5.7% 6 Los Angeles 1.8%
7 Miami 1.1% 7 Atlanta 69,000 7 New York 5.8% 6 Boston 1.8%
8 Boston 0.9% 8 Miami 65,000 8 Chicago 6.1% 8 New York 1.5%
9 Los Angeles 0.7% 9 San Francisco 62,000 8 Miami 6.1% 9 Chicago 1.0%
10 New York 0.6% 10 Boston 42,000 10 Los Angeles 7.1% 10 Philadelphia 0.5%
11 Philadelphia 0.3% 11 Chicago 23,000 11 Atlanta 7.3% 11 Washington 0.3%
12 Chicago 0.2% 12 Philadelphia 15,000 12 Toronto 7.9% 12 Toronto -1.2%
 
Table 5: MSA/CMA Latest  Table 6: MSA/CMA Latest Year over Year Table 7: MSA/CMA Latest Year over Year Table 8: MSA/CMA Latest
Year over Year
Average Weekly Earnings % Change in Average Weekly Earnings % Change in Home Prices % Change in Single-family Home Permits/Starts
1 Washington $1,145.54 1 Dallas 5.9% 1 Atlanta 10.0% 1 New York 18.0%
2 San Francisco $1,144.06 2 Chicago 4.7% 2 Toronto 9.0% 2 Los Angeles 11.0%
3 Boston $1,087.11 3 Houston 4.4% 3 Houston 8.5% 2 Atlanta 11.0%
4 New York $1,001.75 3 San Francisco 4.4% 4 Los Angeles 7.3% 4 Houston 9.0%
5 Houston $996.63 5 Atlanta 3.9% 5 San Francisco 7.0% 5 San Francisco 8.0%
6 Dallas $975.38 6 Los Angeles 3.1% 6 Dallas 6.7% 6 Chicago 7.0%
7 Toronto $945.45 6 Miami 3.1% 7 Chicago 6.1% 7 Dallas 6.0%
8 Chicago $945.00 8 Toronto 3.1% 8 Miami 3.8% 8 Boston 0.0%
9 Los Angeles $932.75 9 Washington 1.6% 9 Boston 1.6% 9 Toronto -6.0%
10 Atlanta $908.04 10 New York 1.3% 10 New York 1.1% 9 Philadelphia -6.0%
11 Philadelphia $907.06 11 Philadelphia 1.2% 11 Philadelphia -0.1% 11 Miami -8.0%
12 Miami $774.53 12 Boston 0.7% 12 Washington -0.9% 11 Washington -8.0%
 
Table 9: MSA/CMA Latest Year over Year Table 10: MSA/CMA Latest  Table 11: MSA/CMA Composite  Based on
% Change in Multi-family Home Permits/Starts Downtown Office Vacancy Rates Average of Rankings in 10 Previous Tables
1 Houston 82.0%   1 Toronto 5.3% 1 Houston (2.4)
2 Chicago 50.0% 2 San Francisco 6.7% 2 San Francisco (4.7)
3 Washington 45.0% 3 Boston 7.6% 3 Dallas (4.8)
4 Philadelphia 39.0% 4 Houston 8.7% 4 New York (6.2)
5 New York 34.0% 5 New York 8.9% 5 Atlanta (6.5)
6 Dallas 26.0% 6 Washington 11.3% 5 Washington (6.5)
7 Los Angeles 9.0% 7 Chicago 13.8% 7 Toronto (6.7)
8 Atlanta -7.0% 7 Philadelphia 13.8% 8 Los Angeles (6.9) 
9 Boston -12.0% 9 Miami 17.1% 9 Chicago (7.2)
10 Toronto -13.0% 10 Atlanta 19.6% 10 Boston (7.3)
11 San Francisco -24.0% 11 Los Angeles 19.7% 11 Miami (8.4)
12 Miami -31.0% 12 Dallas 23.7% 12 Philadelphia (9.2) 
 
In brackets is the city's average rank across 10 economic indicators. Atlanta and Washington are tied. 
 
The population statistics are 2013 versus 2012; in all other cases, the "latest" reference point is September/October 2014, or Q3 2014 year to date.
Data sources: U.S. Census Bureau, U.S. Bureau of Labor Statistics (BLS), Statistics Canada, National Association of Realtors (NAR), Canadian Real Estate Association (CREA), National Association of Home Builders (NAHB), Canada Mortgage & Housing Corporation (CMHC) and CBRE.
Tables: CMD.
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