Economic Recovery Lagging in Largest US Cities

(7 December 2020) Our communities may be the life blood of our national economies, but you'd never guess as much from the paucity of data readily available to support local businesses and city officials. An abundance of official national level economic indicators published anywhere from weekly to annually fuels relatively high velocity analytics compare to cities, where what limited data is available may only be published on a lag of as much as two years.

The scarcity of timely socioeconomic statistics becomes especially distressing during periods of instability and recession, like the current corona-crisis. In a move to support local businesses and governments make better informed decisions, the Opportunity Insights project at Harvard University collected a database of high frequency indicators for largest US cities based on data offered by the likes of Affinity, Google, Womply, and Burning Glass. Below are just a few takeaways from this high frequency city level economic data.

• The Weekly Economic Index from the New York Fed shows that the US economy continues to recover from the corona-crisis but largely outside of major cities. Data on the labor market, consumer demand, mobility, and small businesses for the largest US cities shows that most cities have under performed the national average during the recovery period.
• While government stimulus and low interest rates have helped consumer demand recover, credit/debit card spending data shows that household expenditures remain about 5-15 percent below January 2020 levels. Washington D.C. is an outlier, with consumer spending still 30 percent below the January 2020 level.
  
• The recovery looks grim so far for the US labor market and small businesses. Not one of the 20 largest US cities has seen employment return to pre-crisis levels. And, by the end of November 2020, there were 24 to 45 percent fewer small businesses operational compared to the start of the year.

One possible explanation of subdued economic recovery in largest cities would be the increased share of employees who work remotely. More stringent anti-covid restrictions could also contribute to relatively slow recovery in largest cities. More data (and time) will help to illuminate these underlying dynamics.