If you're looking for cities large, medium, and small where job growth is robust and economies are strong, head to the ones on this year's Top Cities list. Fort Lauderdale, anyone?
Frank Sinatra never wrote a song about Newark or Green Bay, nor has Madonna ever bought a house in either city. But these are among the unexpected places where businesses are adding jobs most rapidly and many people are moving in search of new lives, creating tremendous opportunities for entrepreneurs.
The Top Cities in America for doing business are not at all where most people think, and there's good data to back that up. This year Inc. publishes an exclusive Top Cities list, using a brand-new methodology that we believe to be the most objective, reliable system used anywhere for ranking fertile ground for companies.
For the most part, the top cities aren't found on the fashionable coasts, nor in the biggest, most famous metro areas, but in more prosaic places, including many in the Midwest, that found a way to grow in a tough economy and now seem poised for rapid expansion as the recovery comes in. Especially notable are cities--large, medium, and small--spread throughout the still booming Southeast, including No. 1 ranked Atlanta and a score of Florida cities of various sizes.
"Atlanta is amazing," notes Ray Wallace, president of W. Ray Wallace & Associates, an Inc. 500 firm that does financial consulting from suburban Alpharetta, Ga. "The opportunities are here and small businesses are here. People from all over the South come to Atlanta like to Mecca."
If the late 1990s were all about a gold rush--quick success, stock market fireworks, sex and the city--the prevailing trends almost midway through the more somber 2000s suggest a whole other dimension to what makes the entrepreneurial economy hum in such underhyped business havens as No. 5 (small city) Sioux Falls, S.D., No. 4 (medium) Fresno, Calif., and No. 11 (small) Bismarck, N.D.
Of course, there are some high-tech, high-priced holdovers relatively high on the list, including No. 15 (large) San Diego, No. 19 (large) Austin, and No. 13 (large) greater Washington, D.C., but those places have been high up on the growth curve for more than a decade. Perhaps most revealing are those denizens at the bottom of the list (see "10 Worst Metro Areas" on page 97), including No. 9 worst Boston, No. 8 worst Portland, Oreg., No. 7 worst San Francisco, and No. 6 worst New York City. Dead last (the No. 1 worst large metro area) is San Jose, home of Silicon Valley, the megawatt center of late '90s business hype. In the bygone era, these were the cities that had the sizzle. No more.
The Rankings
For a complete ranking of 277 large, medium, and small cities, and a separate ranking of the top cities by major industries, see our best cities index.
How did Inc. arrive at these conclusions? Not by subjective criteria, such as proximity to research universities or a hospitable climate. The central premise behind the Top Cities rankings is that current and historical job growth is the most objective indicator of a region's economic vitality for entrepreneurs. More than three-quarters of all new jobs are created by small business, according to the Small Business Administration, so a region showing strong job growth is in all likelihood a hotbed of entrepreneurship. The impact on business of a city's educational and training systems, housing and living costs, taxes, regulatory burdens, and quality of life--factors commonly measured by other "hot lists" to identify strong economies--are all ultimately reflected by job growth.
A strong history of creating new jobs means that regional businesses have expanded, created new demand, and pushed up areawide disposable incomes. In contrast, companies don't form or hire new workers when a region's regulatory climate, costs, or work force capabilities aren't conducive to expansion.
Regions that consistently generate jobs in a broad range of industries rank at the top of the list. Those with poor and worsening job growth and increasingly undiversified economies do less well in the rankings. As the recent technology bust and manufacturing cutbacks indicate, overreliance on a single sector risks painful, long-term setbacks. Unbalanced growth can also indicate whether even once prospering areas are developing anti-industrial land use or other slow- or no-growth regulatory policies.
Inc. measured current-year employment growth in more than 250 regions (as defined by the Bureau of Labor Statistics) as well as current trends in the annual average growth over the past three years, and compared employment expansion in the first half versus the second half of the last decade. Job growth factors account for approximately two-thirds of the final score for each city and the balance among industries accounts for approximately one-third of the final score.
So what kind of places are working best in George Bush's America? They are predominantly suburban and, perhaps most importantly, relatively affordable, particularly in terms of housing prices, cost of living, and business costs. These are places, notes Brookings Institution demographer William Frey, where younger families, including many well-educated people as well as upwardly mobile immigrants and even singles, are now migrating in large numbers.
Perhaps the most predictable bottom line in this current economic expansion is, well, the bottom line. Places kindest to business costs, whether in terms of office rents, taxes, or regulatory environments, seem to be doing best. "When people depend on debt to finance operations, they look at things differently than when it's equity," suggests Andrew Segal, of Boxer Property, a Houston-based real estate investment firm with holdings in several "second tier" cities. "Business now has to look for a more reasonable place. The ugly ducklings are beginning to look better."
Few people in the growth areas, of course, would consider themselves "ugly ducklings," but they certainly tend to have economies that are grayer and less specialized than the '90s hotshots. Total dependence on high tech, once considered a boon, has turned out to be a disaster.
In the mid to late '90s, suggests Leslie Parks, former economic development director for San Jose, inflated stock prices created a false economy that drove up real estate prices and the cost of managerial and technical talent while driving out more middle-class, blue-collar activities from the region. "Economic diversity is a constant challenge here," Parks adds. "A lot of people did not want basic industries. They thought high tech could solve everything."
