WASHINGTON (Reuters) - Retailers moving into old downtown buildings, an abundance of freshly planted greenspaces, and a stream of new jobs in Knoxville, Tennessee, are all signs to Mayor Madeline Rogero that for the last year prosperity has been blooming in her city.
“We feel very good about how we’re coming out of this recession,” Rogero said. “We see new interest. We see new development that’s occurring. We’re optimistic that this recovery is going to continue.”
Knoxville is a member of a very small club. Three and a half years since the 2007-09 economic recession ended, only three major U.S. metropolitan areas are experiencing an economic recovery, according to the Brookings Institution.
The Washington-based research group has also deemed Dallas and Pittsburgh in recovery after analyzing their employment levels and gross domestic product per capita.
The United States has the most major metropolitan economies of all countries - 76 - according to an annual report on the 300 largest metropolitan economies worldwide that Brookings released on Friday.
“It was still better than last year when the U.S. had no metro recoveries,” Brookings Associate Fellow Emilia Istrate said.
Istrate said the three cities had two features in common: strong local services such as healthcare, and business and financial services that cater to specific industries.
The recession came late to many city budgets. Their primary revenue source - property taxes - took time to fall because of lags in real estate valuations. By the time they dropped, cities were also contending with falling sales and income taxes resulting from job losses.
Many of the splinters the downturn drove into their budgets remain deeply lodged, and cities of all sizes worry about federal spending cuts that are part of the “fiscal cliff.”
“Cities are emerging slowly from the Great Recession,” said Robert Zahradnik at Pew’s American Cities Project, which tracks fiscal conditions and budgets. “In many cities revenues are gradually recovering but there are still some risks out there.”
Rogero has only been in office for a year. But she remembers, as a resident and as director of the city’s community development office, when the recession hit. Sales tax revenues fell. The building inspections department that had always funded itself from fees had to tap the city budget.
“People were losing their jobs. People were losing their homes,” she said.
Nonetheless, the city continued investing in infrastructure and fostering private investment, often using funds from the 2009 federal stimulus plan. The goals were to attract businesses and to keep people working on construction jobs such as a housing project for the elderly.
The Pittsburgh skyline partly tells the city’s economic story, said Mayor Luke Ravenstahl. A major bank just finished building one skyscraper and started construction on another.
“In my mind, it’s already recovered. We employ more people in Pittsburgh than we ever have,” he said.
Pittsburgh built up industries before the recession, mostly in what Ravenstahl calls “eds and meds” - universities and healthcare. Then the shale gas boom put its business services in high demand.
“The opportunity that exists with shale is really something that most cities don’t have. It really is going to be the economic engine in the future,” he said.
All three cities created long-term stability with local services and the public sector, and growth with business and financial services, said Istrate.
“People always want to know what metros are recovering, what they are doing, so they can replicate it. There is no single industry that can help, but there is an industrial structure that can help you grow year to year,” she said. “More and more metropolitan areas are looking at the export sector, at foreign investors, at infrastructure.”
She noted that many U.S. metropolitan economies are doing better than some major cities in other countries.
In terms of Dallas, she said, the city’s business services easily cater to the commodities sector.
Analysts at the firm IHS track employment in U.S. metropolitan areas and found almost all cities in Texas have returned to their pre-recession employment peaks, with Dallas reaching those levels in the last quarter of 2012.
The state was not hit hard by the housing bubble, said IHS Economist Steven Frable. Its industry diversity, which includes energy, business services, and trade and transportation, has attracted workers to the state.
Looking to 2013 and 2014, IHS expects more than 75 metropolitan areas to regain their peak employment, mostly large cities such as New York and Seattle.
“It’s been almost four years since the recession happened and only a few metro areas...have been able to recover in terms of employment,” Frable said. “Recessions these days seem to be deep, long and drawn out.
Any improvements could take a while to impact budgets, said Christy McFarland, who researches fiscal issues for the National League of Cities.
“We’re going from worse to a little bit better, but it’s still bad,” she said.
Editing by Cynthia Osterman