Demographics are a big part of the story here. Our analysis from Praxis Strategy Group shows that Raleigh and Charlotte, are among the biggest magnets for young, educated workers, particularly those in their late 20s and early 30s.
"People are coming here for basic reasons and taking their families with them," observes Sociologist John D. Kasarda, director of the Kenan Institute at the University of North Carolina at Chapel Hill. "They are coming for jobs, particularly from the Northeast, and an affordable quality of life."
To some extent, Kasarda adds, Raleigh and Charlotte are well-known success stories, but he points to wider, less documented successes in the region. Driven by gains in tourism, logistics, manufacturing, and technology, more and more midsize Carolina cities are joining the party. These emerging players include Charleston, S.C. (No. 6); Asheville, N.C. (No. 7); Durham, N.C. (No. 11); Greenville, S.C. (No. 18); and Columbia, S.C. (No. 19). These cities made considerable gains over last year and should be seriously considered for new business opportunities.
The Pacific Northwest-Intermountain West Surge Continues
Like last year, the northwestern quarter of the country did very well. Three of the top 11 big metro areas in the region between the foggy West Coast and the high mountains, including Salt Lake City (No. 3), Seattle (No. 10) and Portland, Ore. (No. 11), all gained ground. This ascendancy was even more evident at the midsize level, with the success of cities such as Provo-Orem, Utah (No. 1); Tacoma, Wash. (No. 2); Ogden, Utah (No. 8); Boise, Idaho (No. 12); and Spokane, Wash. (No. 14). Small cities, including St. George, Utah (No. 2), Coeur d'Alene, Idaho (No. 3), Bend, Ore. (No. 7) and Grand Junction, Colo. (No. 9), also saw gains.
In many ways, the gains here parallel those in the Carolinas. Places like Salt Lake City, Seattle, and Portland, according to the Praxis Strategy Group analysis, all continue to gain educated residents from other parts of the country. The lure, in many cases, lies with strong and diverse job growth and low housing prices compared to coastal California and the Northeast.
Seattle continued its strong growth, notes economist Paul Sommers, due largely to the success of two companies -- Microsoft and Boeing. These companies have been expanding, providing high-wage jobs, and attracting skilled talent to the area. Another key advantage in this high energy cost environment: the Northwest's prodigious supplies of cheap and clean hydroelectric power. This helps everyone, from people building airplane parts to dot-com firms sucking copious amounts of electricity to run their servers.
Some of the other areas in this vast region benefit from what might be called "grey power." Older, often more educated and affluent, baby boomers are flocking to the smaller towns and cities in this region, bringing capital and, in some cases, entrepreneurial know-how. Like the Carolinas, the area between the foggy Pacific Coast and the Rockies seems poised for sustained growth.
Revenge of the Superstars?
Perhaps the most surprising shift in the 2008 rankings, and in some ways the most subtle, has been the improvement in a host of very expensive, highly regulated urban regions that Wharton economist Joe Gyourko calls "superstar cities." For many years these cities -- New York, San Francisco, San Jose, Boston -- have clustered at the bottom of our growth-oriented list, all suffering big losses from the 2000-2001 dot-com bust.
This year has seen the revenge of the "superstars." Although not surpassing Texas, the Carolinas or the Northwest, these elite cities have made a strong showing. In just one year, New York (No. 22) propelled itself 21 places while San Francisco (No. 29) and San Jose (No. 33) gained at least 25 places, and Boston (No. 40) went up 19 places.
The main reason for this modest, but significant turnaround, suggests David Shulman, former managing director of Lehman Brothers, is simple: the powerful financial sector expansion of the past few years. These are all cities where big money plays a big role, either financing new dot-com start-ups or simply serving as the places where multimillion-dollar bonuses are spent on a host of high-priced services.
Yet, Shulman notes, these gains may be short lived. The impact of the subprime and mortgage meltdown hit first in places like California and Florida, and is only beginning to affect the major financial centers. Spurred by the credit crisis, Shulman fears new regulations will limit financial innovation and wipe out whole sections of industries like mortgage-backed securities and some derivatives.
"A lot of these gains are going to rewind," suggests Shulman. "New York is losing jobs as we speak. Anyplace with exposure to financial services is going to suffer over the next two years."
