Cities are the driving force of the economic development of a country since they are the center of most economic activities. Considering the reality that urban centers are generating economic development for countries, it is essential to understand the level of development of cities. It is possible to evaluate and determine the economic growth of a city in isolation from the performance of the entire country. The economic growth provides essential information for various stakeholders, including urban developers and investors in making critical decisions. The evaluation process allows effective preparation of suitable strategies as well as developmental guidelines for cities (Hiremath, Balachandra, Kumar, Bansode, & Murali, 2013). Hence, the most critical step in the process of evaluating a city’s economy is to have necessary tools and data to measure statistical methods. Therefore, the initial stage is to understand the critical components to use in evaluating the economy of a city.
The Components Needed to Evaluate a City’s Economy
The city’s economy is a collection of various micro and macroeconomic factors that together contribute to its development. One of the most critical components in evaluating the economy of a city is its Gross Domestic Product (GDP). The GDP is a measure of the total production of a region, such as a city. It is the value, in monetary terms, of the produced goods and services in a particular period (Nijkamp, Rietveld, & Voogd, 2013). Another critical component that can be used in the evaluation is productivity versus spending. The element considers the total output of the city against the total expenditure. A growing economy will have a higher production output compared to expenditures. For example, if after working for 44 hours a week for a person in the city produces a 65% productive output, it is expected that an increase to 50 hours a week without a change in the average productivity will increase the production. Consequently, such an output would improve the economic performance of the city.
Job growth and reduced unemployment rate are other measures of economic performance, which are useful in evaluating a city’s economy. Only a growing economy can create more jobs for its citizens (Nijkamp, Rietveld, & Voogd, 2013). For instance, an economy that produces a 10% increase in jobs every year is considered a well-performing economy in growth estimate. Notably, the evaluation of the economic performance of a city should have a holistic approach to these critical factors since they work together in contributing to any change in the economy. Therefore, a single component is not enough to provide a detailed analysis of economic growth.
Numbers and Statistics Needed to Evaluate a City’s Economy
Evaluation process uses data in the form of numbers and statistics to determine the rate of growth in a region such as a city. The percentage change in value provides essential information on the level of development of the area represented by those values. A group’s per capita value is one of the statistics that can be used when evaluating the economy of a city. Job growth and a decline in employment are other important indicators of economic performance of a city. For instance, a city that is developing economically will create more job opportunities for its people. According to NewGeography.com’s job growth calculations, different ranks of job growth, including “Large,” “Midsize,” and “Small” are critical in the evaluation process. The first category includes areas with as many as 450,000 jobs, the second category at a rate ranging 150,000 to 450,000 jobs, and the third group of regions with as many as 150,000 jobs. The ranks indicate the level of economic development of a city.
Besides the data on the GDP (per capita) and Job growth and a decline in employment, various other numbers can be used to evaluate the economic performance of a city. Population’s labor force, including statistical data on the potential participants in employment within the population, is another important measure of economic performance since it is a measure of productivity (Mavrič & Bobek, 2015). Data on the living and quality of life indicators also provide essential information when the evaluation process of a city is considered. While these are some of the most important numbers, other critical indicators of economic performance could be used in the evaluation process.
Predicting a City’s Economy for the Next 5 Years
The surest way of predicting the future is looking at the past. Data is available on the economic performance of a city in the previous years that can be used in anticipating the future. Although a city might develop considerably in the next five years, the development might not deviate with a considerable margin from the historical data. “Time series analysis” is one of the most effective analytical methods to predict the future using economic variables such as the GDP (Mavrič & Bobek, 2015). The model considers the time variation of the historical data to predict the future. “Scenario planning” is an additional tool that can be used together with “time series analysis” in examining the macro environment of the city to make a prediction that is more accurate.
The two methods are useful to avoid potential prediction errors that might result from changes in the environment. For example, the analysis can consider the previous average annual growth in the GDP for the last 3-five-year periods to predict the value of the next five years (Zhu, 2014). If the average yearly growth for the previous 3-five-year periods is 8.7%, 9.5%, and 10.3%, the predictions for the next five years will fall within the range, after error adjustment. However, the forecast should take into account any potential changes in the operating environment.
Requirements and the Methods of Evaluating a City’s Economy for the Next 5 Years
Statisticians use data to predict the future performance of a city’s economy. Therefore, the most critical requirement is data on the past economic performance of the city. For instance, when using the GDP to predict the future economic performance, an analyst will need a series of GDPs from previous similar periods (Mavrič & Bobek, 2015). When using the five-year period, one will require data from at least three to five-year periods to make a correct prediction. Using the time series analysis and scenario planning, one can determine the future from the previous changes (Zhu, 2014). However, the evaluator should collect data from various sources, including government reports, urban planners’ reports, and the Bureau of statistics. In this case, data should come from multiple periods to make comparisons and effectively predict future performance.
Statisticians and urban planners use data and numbers to establish the economic performance of a city. The information is essential for these people as well as investors in making important decisions to invest in the city. The data is also critical for the planners to establish ways of improving the city’s economy. Therefore, it is imperative to understand the requirements and effective methods for the evaluation and future predictions of the city’s economy.
Hiremath, R. B., Balachandra, P., Kumar, B., Bansode, S. S., & Murali, J. (2013). Indicator-based urban sustainability-A review. Energy for Sustainable Development, 17(6), 555-563
Mavrič, J. & Bobek, V. (2015). Measuring urban development and city performance. Retrieved from https://www.intechopen.com/books/perspectives-on-business-and-management/measuring-urban-development-and-city-performance
Nijkamp, P., Rietveld, P., & Voogd, H. (2013). Multicriteria evaluation in physical planning (Vol. 185). Elsevier.
Zhu, J. (2014). Quantitative models for performance evaluation and benchmarking: Data envelopment analysis with spreadsheets (Vol. 213). Springer.