GDP by Industry

How are we doing?

Growth Rate of Real GDP (2016)

The Tucson Metropolitan Statistical Area (MSA) generated inflation-adjusted GDP growth of 0.2% in 2016. That growth ranked Tucson last out of the 12 MSAs in the fuel gauge above, just barely below the San Diego MSA and far below the 4.9% growth posted by the Austin MSA. Tucson’s growth also fell below the Arizona rate (2.1%) and the national rate (1.5%) in 2016. Tucson’s real GDP fell rapidly during the Great Recession and has since remained negative or slow with the exception of rapid growth during 2012. As illustrated in the fuel gauge, Tucson’s GDP growth of 0.2% was a substantial improvement over the decline posted in 2015.

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 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 2016, 21.7% of Tucson’s GDP was in the government sector, compared to 12.3% for the nation, which made government the largest sector in the local economy. The education and health services sector was also relatively large in Tucson, at 11.3% of GDP, compared to 8.5% for the nation.

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 2015. 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 6.3% decline in 2009. That was much worse than the U.S. decline of 2.7%, but slightly better than the 7.6% decline for Arizona. Tucson’s real GDP growth rebounded in 2012, but has remained below both the Arizona and national rates.

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, this data provides 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 is 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.