Weekly Economic Trends and Indicators

The Headline:

This week, we look at the recent history of economic growth in the Quad Cities area. Gross Domestic Product (GDP) is the most widely cited indicator of economic growth. By definition, GDP is the total market value of all goods and services produced in a country in a year. Because of its comprehensive nature, GDP is a good measure of both total spending and total income in the national economy. Regional GDP is also calculated by the Bureau of Economic Analysis at the state level as well as the level of metropolitan areas, micropolitan areas, and counties. While national GDP is reported every quarter (at a seasonally adjusted annual rate), regional GDP is only reported annually, with a year lag. Currently the most recent data for regional GDP is 2021.

Another term you will frequently see in discussions of economic growth is “real GDP.” The adjective “real” means that it has been adjusted for the effects of inflation. In the calculation of real GDP, we reference a base year for comparison. Currently, the base year we use is 2012. Thus, the real GDP statistics you will see are stated in terms of 2012 dollars, or in other words, in terms of the buying power that the dollar had in 2012. With our recent bout of inflation, it is important to make this adjustment to avoid inflating economic growth figures simply because things cost more today.

The Details:

In the 20 years since 2001, real GDP growth in the Quad Cities Chamber service area has averaged about 0.8% per year, growing from about $21.3 billion to $24.9 billion (in 2012 dollars) over that period of time. Nationally, real GDP increased at about a 2.0% rate per year over the same period.

The Context:

It should be noted, however, that real GDP is calculated for a geographic or political area (e.g. states, counties, countries). If the population is changing, then we should also adjust for that in our figures. When we adjust for population, it is called real GDP per capita. Because the population of the six-county area has stayed relatively stable (mostly around 468,000 plus or minus a couple thousand over that period), our per capita real GDP has also grown at 0.8%, Nationally, real GDP per capita grew at about a 1.1% rate over that period. Generally speaking, national real GDP per capita tends to grow on average between 1.0 and 1.5% per year. Locally, we have been just slightly below that range.

The level of real GDP per capita is often used as an indicator of the overall economic well-being of an area. Real GDP per capita increased from $45,000 to $53,000 since 2001. This is a good rate of growth during a period of time that saw both a national financial crisis and a global pandemic. Going forward, it is likely that per capita real GDP growth would continue at a similar pace, possibly faster if we can avoid any national crises such as these. At this historical rate, we would reach $26.7 billion in real GDP and just under $57,000 in real GDP per capita by the end of this decade.

Small changes in economic growth rates can have large implications when played out over decades. Adding or subtracting just a couple tenths of a percent on average over many years has a measurable impact on average income for the region.

Next week: A historical perspective on labor force and employment in the local economy