Fans of The Who will recognize the title of their 1988 album, Who's Better, Who's Best, in the title of this post. The situation is not just a salute to my favorite band; it also applies to economic analysis.
Tracking the relative performance of the region's metro areas is something the staff here at the Atlanta Fed does as part of our regular surveillance of the district's economy. Knowing which areas are doing better, and which are lagging, gives us insight into how the nation's overall economic recovery is progressing. It also helps equip us with the necessary background when we meet with business leaders throughout the region. Talking with a firm in an area where economic performance is positive will likely yield a different picture than speaking with one from an area that is more negative.
We tend to rely on basic employment data when determining metro area economic performance. There are other indicators, such as home sales, income, sales tax reports, etc., but employment data have high frequency (monthly) and a single source: the U.S. Bureau of Labor Statistics (BLS). Basic employment data include both payroll employment, which is derived from the establishment survey, and unemployment statistics, which is compiled from the household survey. We'll look at payroll employment in this exercise, and we'll employ the methodology of employment momentum to determine which metro areas are doing better and which are doing best.
"Employment momentum" is a tool to gauge the relative strength of direction of employment. For example, if a data point shows a positive percent change in its short-term measurement (the three-month percent change) and a positive percent change in its longer-term measurement (the year-over-year percent change), we can say that momentum is strong. Data points showing this pattern are in the "Expanding" quadrant. Figures with both short- and long-term negative percent changes are seen as reflecting weak momentum and fall in the "Contracting" quadrant. Those deemed as "Slipping" show a positive long-term percent change, but the short-term measurement has turned negative. "Improving" reflects a negative long-term percent change, but a positive short-term movement.
The chart below shows employment momentum for all metro areas in the six states of the Sixth District that the BLS tracks. The following table lists the coordinates for the plotted metro areas. Data from the BLS through February 2011 are used to calculate the coordinates.
Some metro areas where employment momentum coordinates are in the contracting quadrant include Atlanta, Montgomery, and Fort Myers. Many metro areas find themselves in the slipping quadrant—Chattanooga and Jacksonville, to name two. Eight areas are in the improving quadrant, including Birmingham and Baton Rouge. Twenty-five metro areas are in the expanding quadrant—Orlando, Gulfport-Biloxi, and Miami, for example.
So who's better? Who's best? Review the chart and table to see where your metro region falls. I guess only a real Who fan and a true data nerd like me could figure out a way to combine the two.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department