By Hope Yen The Associated Press

WASHINGTON – Higher productivity and more jobs fueled growth in the nation’s urban areas in 2004, but declines in manufacturing could spell trouble for the Midwest, according to a new report.

The study by Global Insight, released yesterday by the U.S. Conference of Mayors, paints a mixed picture for the nation’s 361 metropolitan areas. It found that cities’ economic output rose 4.4 percent in 2004, the highest in a decade, accounting for much of the nation’s 4.2 percent rise in gross domestic product.

But declines in manufacturing due in part to outsourcing will contribute to a softening of the nation’s overall output, with blows to cities such as Chicago, Cleveland, Detroit and Pittsburgh.

“While metros drive the economic health of our nation, and we are pleased that the nation as a whole is growing, many of our metros are still struggling with global competitive pressures that will challenge us in the coming decade,” said Detroit Mayor Kwame M. Kilpatrick.

“We need a stronger partner in the federal government to help us through the period,” he said.

The report found that workers in the top 10 sectors that lost jobs through the end of 2003, including manufacturing, retail trade and utilities, earned average wages of $43,629.

But the top 10 sectors that gained in the jobs recovery from 2004-2005 – including health care, construction, retail trade and state government – averaged $34,378. That 21 percent decline in average wages for the nation’s top sectors will contribute to a softening in the growth of the gross domestic product in 2006 – to an estimated 3.4 percent from 3.6 percent last year, the report said.

The nation’s recession sparked by the collapse of the tech bubble in the late 1990s ended in 2001, but the jobs market remained stagnant until 2004, as the recovery spread unevenly across the nation.

The report found that by the end of 2004, 220 of the nation’s 361 metropolitan areas had recovered the number of jobs they lost during the recession. Another 42 cities, including Atlanta, Dallas, New York and Seattle – will have regained their jobs by the end of this year.

That leaves 99 metropolitan areas – including Boston, Denver, San Francisco and cities in the Midwest – still lagging.