Fed Economist Briefs Construction Council on Economic Productivity of St. Louis MSA

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By Kerry Smith, Editor – St. Louis Construction News & Review Magazine

The St. Louis metro region’s economy is in step with the nation relative to hourly labor productivity, according to Charles S. Gascon, a regional economist with the Federal Reserve Bank of St. Louis.

Gascon was the guest presenter at the St. Louis Council of Construction Consumers’ event at the Fed on Feb. 22.

The senior research support coordinator in the Fed’s Eighth District – which includes St. Louis – offered expertise and insights to more than 50 St. Louis Council of Construction Consumers members including commercial contractors, architects, subcontractors and others.

Major metropolitan statistical areas, or MSAs, were the focus of Gascon’s early morning message.

“MSAs define the economic borders of our cities,” said Gascon. “As such, they determine where people live and where they work.” The economist’s historical data included real Gross Domestic Product (GDP) data as well as data from the Fed’s St. Louis Activity Index; the index tracks broad economic activity such as production and income, employment, personal consumption, housing, manufacturing, trade sales, inventories and orders across the Eighth District.

St. Louis’ MSA encompasses the city of St. Louis, St. Louis County and St. Charles County, as well as Madison County and St. Clair County in Southwestern Illinois. Of the 380 defined MSAs in the U.S., Gascon said St. Louis is one of 50 that have a regional population in excess of one million.

“The St. Louis MSA ranks as the 20th largest MSA in the U.S.,” Gascon said. “Denver and Baltimore are considered to be similar-sized MSAs. We study MSAs when studying workforce-related issues because 90 percent of the economic activity in the U.S. is concentrated in metro areas. Sixty-four percent of all U.S. economic activity (real GDP) comes from the top 50 MSAs.”

In St. Louis, 41 percent of all real GDP output in the state of Missouri is generated within the St. Louis MSA, according to Gascon, who shared the term “agglomeration economics” (coined by Harvard economist Edward Glaeser) with his construction audience. “This term helps us understand why our U.S. economy is primarily composed of metro areas,” he said. “Historically people have located in metro areas because trade is easier than in rural areas, and also because of the huge pools of labor, the economies of scale and the capability of spreading innovation more quickly.”

Citing population densities of various large MSAs, Gascon said there’s a positive relationship between density and hourly worker productivity. “St. Louis has the economic profile of a smaller metro area, which we quantify as between two million to five million people,” he said. “In terms of population density, St. Louis peaks at three miles from the core (city hall), which is approximately as far out as Tower Grove and the Central West End.”

Understanding how population density impacts worker productivity is essential for St. Louis area employers, including those in the construction industry, so they can effectively recruit and retain enough quality workers to meet the challenges and opportunities inherent in the St. Louis region, Gascon said. Factors such as a stagnant, aging population – which St. Louis continues to face – require employers to up the bar on their efforts to bring and keep talent in the region. High-profile commercial construction projects that St. Louis is already building and those it is anticipating breaking ground on in 2018, 2019 and beyond necessitate a large, qualified, available workforce. Gascon’s real-time survey of the Feb. 22 construction audience confirmed that available workforce is a tangible concern.

“Attracting workers to a low cost-of-living area may require paying high-cost wages,” he said. “The employers who realize this are the ones who have been able to attract workers. Those who keep the offer of higher wages in their back pocket may miss out on attracting the workforce they need in our region.”

A recognizable challenge that the St. Louis MSA faces, as compared to other similarly sized MSAs, is specific to public transportation limitations and correspondingly commuting congestion. “St. Louisans spend an average of 25 minutes commuting to work, but we have a higher percentage of drivers than comparable MSAs,” said Gascon. “Per worker per year, St. Louisans experience $5,000 to $8,000 in lost productivity due to commuting. Our public transit is not efficient, and this presents real challenges for employers in Edwardsville and St. Charles whose residents may drive to work but whose local workforce is often dependent upon public transportation. It may take 15 minutes to drive from South City to Ferguson, for example, but it’s a two-hour trip via public transit.”

The St. Louis metro region’s economy is in step with the nation relative to hourly labor productivity, according to Charles S. Gascon, a regional economist with the Federal Reserve Bank of St. Louis.

Gascon was the guest presenter at the St. Louis Council of Construction Consumers’ event at the Fed on Feb. 22.

The senior research support coordinator in the Fed’s Eighth District – which includes St. Louis – offered expertise and insights to more than 50 St. Louis Council of Construction Consumers members including commercial contractors, architects, subcontractors and others.

Major metropolitan statistical areas, or MSAs, were the focus of Gascon’s early morning message.

“MSAs define the economic borders of our cities,” said Gascon. “As such, they determine where people live and where they work.” The economist’s historical data included real Gross Domestic Product (GDP) data as well as data from the Fed’s St. Louis Activity Index; the index tracks broad economic activity such as production and income, employment, personal consumption, housing, manufacturing, trade sales, inventories and orders across the Eighth District.

St. Louis’ MSA encompasses the city of St. Louis, St. Louis County and St. Charles County, as well as Madison County and St. Clair County in Southwestern Illinois. Of the 380 defined MSAs in the U.S., Gascon said St. Louis is one of 50 that have a regional population in excess of one million.

“The St. Louis MSA ranks as the 20th largest MSA in the U.S.,” Gascon said. “Denver and Baltimore are considered to be similar-sized MSAs. We study MSAs when studying workforce-related issues because 90 percent of the economic activity in the U.S. is concentrated in metro areas. Sixty-four percent of all U.S. economic activity (real GDP) comes from the top 50 MSAs.”

In St. Louis, 41 percent of all real GDP output in the state of Missouri is generated within the St. Louis MSA, according to Gascon, who shared the term “agglomeration economics” (coined by Harvard economist Edward Glaeser) with his construction audience. “This term helps us understand why our U.S. economy is primarily composed of metro areas,” he said. “Historically people have located in metro areas because trade is easier than in rural areas, and also because of the huge pools of labor, the economies of scale and the capability of spreading innovation more quickly.”

Citing population densities of various large MSAs, Gascon said there’s a positive relationship between density and hourly worker productivity. “St. Louis has the economic profile of a smaller metro area, which we quantify as between two million to five million people,” he said. “In terms of population density, St. Louis peaks at three miles from the core (city hall), which is approximately as far out as Tower Grove and the Central West End.”

Understanding how population density impacts worker productivity is essential for St. Louis area employers, including those in the construction industry, so they can effectively recruit and retain enough quality workers to meet the challenges and opportunities inherent in the St. Louis region, Gascon said. Factors such as a stagnant, aging population – which St. Louis continues to face – require employers to up the bar on their efforts to bring and keep talent in the region. High-profile commercial construction projects that St. Louis is already building and those it is anticipating breaking ground on in 2018, 2019 and beyond necessitate a large, qualified, available workforce. Gascon’s real-time survey of the Feb. 22 construction audience confirmed that available workforce is a tangible concern.

“Attracting workers to a low cost-of-living area may require paying high-cost wages,” he said. “The employers who realize this are the ones who have been able to attract workers. Those who keep the offer of higher wages in their back pocket may miss out on attracting the workforce they need in our region.”

A recognizable challenge that the St. Louis MSA faces, as compared to other similarly sized MSAs, is specific to public transportation limitations and correspondingly commuting congestion. “St. Louisans spend an average of 25 minutes commuting to work, but we have a higher percentage of drivers than comparable MSAs,” said Gascon. “Per worker per year, St. Louisans experience $5,000 to $8,000 in lost productivity due to commuting. Our public transit is not efficient, and this presents real challenges for employers in Edwardsville and St. Charles whose residents may drive to work but whose local workforce is often dependent upon public transportation. It may take 15 minutes to drive from South City to Ferguson, for example, but it’s a two-hour trip via public transit.”

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