The best cities for growing a business and how to follow the signs to thriving markets.
If you know which signs to follow, you'll find thriving markets all over America
What a difference a place makes. Boston's theme song these days could be "Brother, Can You Spare a Dime?" In a grim reprise of its mid-1970s blues, the city has lost tens of thousands of jobs, its unemployment rate nosing toward double digits. Residents of Charlotte, N.C., by contrast, are whistling while they work. Sure, there's a recession on -- meaning that Charlotte's jobless rate has crept up to a still-tight 4%. Between 1988 and 1990 the Charlotte area gained 26,000 new jobs.
Disparities of such magnitude spill into every corner of the business world, affecting the health of existing companies and the life prospects of new ones. A stark symbol of the difference: Blackstone Bank & Trust Co., a four-year-old Boston start-up designed as a high-service community bank, recently went belly-up, its deposits transferred to a larger competitor. Charlotte's not-quite-two-year-old Bank of Mecklenburg, founded on much the same concept, has grown to $52 million in assets; cofounder John Ketner is predicting a profitable 1991, based mainly on loans to small and midsize companies. Quick: which city would you rather be doing business in?
The United States has always been a collection of local and regional markets rather than one big one, and business conditions have always varied from place to place. "People talk about regional recessions as if they're unusual," says Stanley Duobinis, senior vice-president with The WEFA Group, an economics consulting firm in Bala Cynwyd, Pa. "But you can go back to 1946 and you won't find one that doesn't vary from region to region." Today's fax-and-computer communications networks may only intensify the disparities between the haves and the have-nots. Red Rose Graphics Ltd., of Lancaster, Pa., for example, is opening its second branch office in fast-growing Florida rather than in slower-growing areas closer to home, in part because work in process can easily be sent back and forth electronically.
Certainly the current recession has been drastically tilted toward the Northeast. "New England alone will account for one out of every five job losses nationally," predicts Beth Burnham Mace, an economist with DRI/McGraw-Hill Inc., the economic-forecasting and consulting firm. "Yet the region has only 6% of the nation's jobs." While the Boston-to-Washington megalopolis staggers, plenty of cities are growing apace -- and not just in Florida and California. Seattle gained 23,000 jobs between 1988 and 1990, Dallas 66,000, with only modest letups in more recent months. Even the Midwest has held its own, with regional capitals such as Indianapolis and the Twin Cities pausing only slightly from the rapid recovery of the late 1980s. "Indianapolis must have one of the strongest economies in America," brags Scott L. Toussaint, whose temporary-help business is enjoying its best year ever. "If I weren't already in this city, I'd run, not walk, here."
Growth-minded entrepreneurs are always tempted to run to where business is best, whether it's to start a new company or expand an existing one. Before you do any running of your own, however, remember that the nation's metro areas are as volatile as they are different. Not so long ago the New York City area was poised for several years of growth, while Dallas -- though few knew it -- was on the edge of collapse. Today Dallas is sailing out of the economic doldrums, and New York is sinking into them. But how long will either city continue on its current course? And how long will Charlotte or Indianapolis or Seattle stay on the fast track? As mavens of any marketplace know, the past is seldom an adequate guide to the future -- particularly when there's a recession on.
Faced with such uncertainty, Inc. this year is forgoing its customary top-to-bottom ranking of metro areas. Instead, we've assembled a variety of data indicating not only which cities are growing, but why, and which can expect to do best in the future. One result of this investigation: a list of top performers no businessperson can afford to ignore. (See "Editors' Choice," page 5.) These are cities -- two in every region of the country -- that are outpacing their neighbors during the current slowdown and are best poised to take advantage of the recovery when it comes. If awards were handed out for solid, long-term growth, these are the cities that would win the ribbons.
But you don't need to live in a best-of-show region to understand the importance of your city's health to your company's health. What you need to know is what separates the winners from the losers.
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People
A growing economy requires a growing population. That's a truism, but it's been given a twist by the demographics of America in the 1990s. In the past workers went where the jobs were, leaving Mississippi or Appalachia for Chicago and Detroit. In today's labor-short economy, argues MIT researcher David L. Birch, jobs have to follow workers.
"The demographics cut in sharply in the mid-1980s," Birch explains. "That's when the baby boom was finally absorbed into the labor force and we began seeing unemployment rates down around 3% and 4%. Today the work force can dictate the location of employment." Economic growth is thus beginning to follow population movements, rather than vice versa. "The places that are doing well are the places people want to be."
That, says Birch, is why Sun Belt cities such as Las Vegas and Fort Myers, Fla., perennially top the population-growth charts. Forget jobs: people move away from the high costs and cold of the North to places that look cheaper and more pleasant, and feel confident they'll find work once they get there. Businesses then spring up to serve them; others spot an abundant supply of labor and move in. Even in Florida, the influx of residents no longer consists mainly of retirees. The working-age population in Fort Myers and Fort Pierce, for example, has been growing at more than four times the national rate.
