Moody’s: Chicago Tops List of Economically Diverse Cities

Chicago came out on top in a new Moody’s survey on the economic diversity of U.S cities, scoring a 95.1 out of a possible 100. The score means that Chicago’s economy perfectly matches the components of the national economy.

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Runners-up were Little Rock, Ark., followed closely by Baltimore.

New York was ranked No. 69 with a score of 80.6, while Los Angeles scored only slightly better at No. 60 with a score of 84.7. Surprisingly, Washington, D.C., which many view as the nation’s strongest office market, scored poorly on the survey as No. 90. Wichita, Kan., came in last place in the survey with a score of 16.9 out of 100.

Changes to Moody’s economic diversity model were prompted by changes in U.S Department of Commerce data. Also, the U.S is calibrating its statistics with those of Canada and Mexico, as required by NAFTA. "Although most industry groups remain virtually unchanged, there are some differences," says Sally Gordon, a Moody’s analyst and author of the report.

One thing is clear from the survey: geographic diversity does not equal economic diversity. "The size of a city does not guarantee diversity. By definition, a city is deemed to be more diverse when the distribution of employment among various industries more closely matches that in the national economy as a whole," says Gordon.

The Moody’s survey assesses three dimensions of economic diversity for a pool of loans in a CMBS transaction. First is Industry Mix, which provides a gauge of the degree of concentration in any particular industry, compared to the concentration of the industry in the economy as a whole. The second component is MSA (Metropolitan Statistical Area)-level diversity, which calculates the combination of industries in a city’s employment base. And the third dimension is geographic dispersion, which measures whether a concentration of a particular industry is broadly dispersed among many cities or is highly concentrated and in very few cities.

"These three aspects of diversity are then ‘rolled up’ into a composite diversity score so that pools can readily be compared to one another in terms of their overall diversity," says Gordon.


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