How are we doing?
Growth Rate of Real GDP (2018)
The Tucson Metropolitan Statistical Area (MSA) generated inflation-adjusted GDP growth of 3.6% in 2018. That growth ranked Tucson eighth out of the 12 MSAs in the fuel gauge above, just behind Denver and far below the 6.1% growth posted by Las Vegas. Tucson’s growth fell just barely below the Arizona rate (4.1%) but was above the national rate (2.9%) in 2018. This is an improvement on Tucson’s negative or slow GDP growth since the Great Recession. As illustrated in the fuel gauge, Tucson’s GDP growth of 3.6% was a slight decline over the 4.0% growth posted in 2017.
GDP data is often used to illuminate the industrial structure of an MSA. Tucson has an unusually large share of GDP related to government activity, compared to Arizona and the nation. This reflects the concentration of federal civilian and military installations in the area, as well as the presence of the University of Arizona, which boosted activity in the state government sector.
Why is it important?
Gross domestic product (GDP) provides important information on the value of goods and services produced by labor and property located in a geographic area during a period of time. It is also one key measure of income flows to factors of production, like labor and capital. After adjustment for inflation it tells us how economic output is growing (or not) over time. It also provides key information on the industrial mix of regions, so that we know what sectors are larger or smaller. In turn, this gives us key insights into how global and national events (like the federal sequester) may impact local growth compared to other areas.
How do we compare?
The Tucson MSA’s industry mix was heavily weighted toward government activity, compared to the nation. In 2018, 18.8% of Tucson’s GDP was in the government sector, compared to 12.4% for the nation, which made government one of the largest sectors in the local economy. The financial activities sector was the largest in both Tucson and for the nation, representing approximately 21.0% of GDP in 2018.
The government share of GDP in the Tucson MSA was larger than the U.S. because the local area had larger shares in federal civilian, federal military, and state and local activity. Federal civilian and military activity in Tucson was roughly double the national average, as a share of GDP in 2016. The state and local GDP share was also larger in Tucson, reflecting the presence of the University of Arizona.
What are the key trends?
The Great Recession hit real GDP growth in the Tucson MSA hard, with a huge 7.0% decline in 2009. That was much worse than the U.S. decline of 2.5%, but slightly better than the 8.1% decline for Arizona. Tucson’s real GDP growth rebounded in 2010, but remained below both the Arizona and national rates until 2016 when Tucson exceeded the national rate and was nearly even with Arizona's real GDP growth.
How is it measured?
Gross domestic product at the national level is measured both by spending and by income to factors of production (labor and capital). At the state level, measurement is by income to factors of production only. Thus, these data provide measures of GDP by industry, but not by the traditional spending components (consumption, investment, government, net exports). It is “gross” in the sense that it includes funds set aside to replace capital equipment that is wearing out. In other words, it includes depreciation. Metropolitan area data are derived from the state estimates by “sharing out” state activity by industry. Advance estimates use local data on wages by industry for this purpose, while revised estimates using earnings estimates. Advance data are subject to large revisions. GDP data come from the U.S. Bureau of Economic Analysis and is available annually for states and MSAs.