Big Tex is reflected in Simone Elices’ sunglasses in Dallas on Sept. 23, 2016. (Paul Moseley/Fort Worth Star-Telegram/TNS via Getty Images)
By Joel Kotkin and Michael Shires
Among America’s largest metropolitan areas, the economic leaders come in two flavors: Southern-fried and West Coast organic. The first group flourishes across a broad range of industries, fed by strong domestic in-migration and a friendly business climate. The other is driven largely by technology and high-end business services clustered around expensive but highly desirable urban areas.
However, the trend lines certainly favor the former approach, which is epitomized by America’s Best City For Jobs in the 2018 edition of our annual ranking. After years of domination by the tech-driven San Francisco area, Dallas-Plano-Irving has secured the No. 1 spot for the last two years by dint of consistency: 2.8% job growth last year, 19.6% since 2012 and an impressive 25.6% since 2006. Its 2.02% population growth last year is the highest rate of any of the 10 largest metro areas while net in-migration trails only retirement haven Phoenix among the big cities. Simply put, this Energizer bunny just doesn’t stop.
Big D’s domination is all the more secure because of the diverse sources of its job growth. Dallas has logged double-digit percentage job growth since 2012 in almost every major economic sector we measured, from information to construction, energy, finance, and professional and business services. Key to Dallas’ success: It’s a great value proposition, with affordable housing, a favorable regulatory climate, low taxes and an increasing array of cultural amenities beyond the Dallas Cowboys.
Perhaps nothing proves this more than the large number of companies that have either moved whole hog to the Big D or sited significant operations there in recent years, including the likes of Toyota’s North American headquarters and Jacobs Engineering, both from Southern California, as well as Jamba Juice, Pei Wei and JetSuite. Many more have announced major expansions there, including Boeing, Oki Data and Luis Vuitton.
Our rankings are based on short-, medium- and long-term job creation, going back to 2006, and factor in momentum — whether growth is slowing or accelerating. We have compiled separate rankings for America’s 71 largest metropolitan statistical areas (those with nonfarm employment over 450,000), which are our focus this week, as well as medium-size metro areas (between 150,000 and 450,000 nonfarm jobs) and small ones (less than 150,000 nonfarm jobs) in order to make the comparisons more relevant to each category. (For a detailed description of our methodology, click here.)
Here Come The Little D’s
Texas may not be the role model for most regions, but the Lone Star State’s growth formula has formidable logic for areas that don’t have the huge venture capital connections of the Bay Area. Second-ranked Austin, Texas, is certainly a booming tech hub, but its rapid job growth — 3.4% last year and 39% since 2006 — is more diversified than commonly believed. In fact, the big driver in terms of high-wage jobs is not tech but professional and business services, an area in which employment has grown 37.1% since 2006.
Like Dallas, Austin’s expansion is paced by strong population growth. The metro area last year had the strongest population increase and rate of domestic in-migration of any in the country with a population over a million. This population growth has translated into many things, most particularly growth in retail sales, construction jobs, financial services and trade, helping boost diverse jobs growth.
But you don’t have to be in the Lone Star state to enjoy Texas-style growth. Other affordable areas like No. 3 Nashville-Davidson-Murfreesboro-Franklin, Tenn., No. 5 Charlotte-Concord- Gastonia, N.C., and No. 6 Orlando-Kissimmee-Sanford, Fla., all enjoy the same pattern of rapid population growth and mounting in-migration from the rest of the country. These areas have enjoyed strong tech growth as well, with Orlando actually now adding STEM jobs at a faster clip than the Bay Area metros. Central Florida could well emerge as a serious tech competitor over the next few years, helped by low taxes, affordable housing and a benign business climate.
The High-End Tech Hubs
Yet for all the competition and their high costs, the big three West Coast technology hubs remain ensconced in the top 10 for job growth. The San Jose-Sunnyvale-Santa Clara metro area, aka Silicon Valley, continues to sizzle in fourth place, although the expansion has slowed, with 3% job growth last year. Business and professional services, as well as finance, appear to be slowing down, but strong job growth continues in the information sector — the business of Google, Facebook, Netflix and Apple — up 11% last year and 59% since 2006.
Much the same pattern can be seen in No. 8 San Francisco-Redwood City-South San Francisco, which has become the Valley’s urban annex. Yet there are clear signs of a slowdown, with the metro area dropping from No. 2 last year. Information job growth last year was 8.7%, down from the torrid 12% pace enjoyed since 2006, while business and professional services, which logged 4% job growth, is down from the 5.6% rate enjoyed over the decade.
Right behind in ninth place is Seattle, where the information sector and professional business services continue to grow at a healthy pace, although somewhat slower. To be sure, Seattle’s jobs picture, like that of its Bay Area counterparts, remains the envy of almost every region. The biggest problem looming for these areas is high costs, which in the Bay Area has slowed population growth and accelerated out-migration. Over time there is concern that Seattle, too, may be in the process of pricing out potential new residents, as well as less well to do longtime ones.
The Three Heavyweights Lose Ground
Much is written about the inevitable ascendancy of large global cities, but in terms of job growth none of the three largest in America — New York, Los Angeles and Chicago — are burning down the barn right now. New York, at No. 24, is doing the best by far, with 1.7% job growth last year and 19.5% growth since 2006. The employment expansion has been paced by such high-wage sectors as professional and business services and information, as well as low-wage fields like leisure and hospitality.
But New York seems to be slowing from its breakneck pace after 2010, particularly in information, professional and business services, and its core finance industry. At the same time, the demographic evidence since 2010 shows population growth, impressive earlier in this decade, now ranks among the lowest in the nation. Brooklyn, the reinvented hipster capital, last year suffered its first population decline since 2006. Gotham’s resurgence seems assured but its trajectory points to slower growth ahead.
Meanwhile, Los Angeles and Chicago are doing considerably worse. Los Angeles places a mediocre 48th in our ranking, with meager 1.3% job growth last year and 5.7% growth since 2006. L.A. has expanded employment robustly largely just in lower-wage categories like leisure and hospitality and transportation, both up 25% since 2012. Gains in higher-wage sectors like business and professional services has been modest compared not only to places like Dallas but also New York. Perhaps more disturbing, it’s now losing jobs in traditional high-wage sectors like information, which includes entertainment, as well as manufacturing, where there’s been a decades-long decline.
Like New York, Los Angeles’ demographics reflect this slowing, with high levels of out-migration and a population growth rate of 0.13% last year, among the lowest in the nation. The L.A. area’s rate of outmigration in 2016-17 was 40% over the annual average since 2010. Given the region’s high costs, the lack of high wage jobs growth could place a long-term damper on its future trajectory.
But as is often the case in urban economics, it could be worse. Take Chicago, which places 55th with weak 0.4% job growth last year and 4.4% growth over the past decade. The Windy City’s leisure and hospitality industries continue to grow, but the critical business and professional services sector, the linchpin of its claim to global city status, is now shrinking, after enjoying decent growth earlier in the decade of nearly 2% per annum. The information sector, greatly promoted by Mayor Rahm Emmanuel, has continued to lose jobs, and at an accelerated rate.
With its magnificent lakefront, Chicago likes to see itself as a destination for the ambitious, but this is not reflected in either its high rate of out-migration, only slightly better than New York’s, or its population trajectory, which is actually negative. It may be a glamor town in certain sections, but overall the metro area looks more Rust Belt than it may like to admit.
Mixed Messages In Midwest
If Chicago once loomed as the role model for the country’s mid-section, that is no longer the case. Although none of the region’s metro areas cracked the top ten, several have performed respectably. The surprise leader in the region has been 21st-ranked Grand Rapids, where total nonfarm employment expanded 1.7% last year and is up 13% since 2012.
Although Grand Rapids’ growth has included healthy gains in information, finance and professional and businesses services, the real stars here are typically blue collar. Manufacturing employment in the metro area is up 20% since 2012 and wholesale trade 18%. The area is the global headquarters for such companies as Amway, Steelcase, Herman Miller, Haworth, Wolverine Worldwide, and Bissell; its strategy seems to be focused on becoming a world-class center for advanced manufacturing and life science innovation.
Grand Rapids is not the only promising performer in the Heartland. No. 25 Indianapolis-Carmel, Ind., No. 28 Columbus, Ohio, and No. 35 Kansas City all performed above the median. Intriguingly, all four ascendant heartland burgs now enjoy more rapid population growth than their California or East Coast counterparts, and, unlike them, they are logging net domestic in-migration.
Yet, sadly, the modest success of these towns is not, as yet, evidence of a region-wide recovery. Many of the old Rust Belt cities still inhabit the basement of our best cities list: Pittsburgh places 58th, Buffalo is 60th, Detroit is 61st and St. Louis places 62nd, Milwaukee is 66th, and last out the 71 largest metro areas is Cleveland. All these areas suffer stagnant population growth and high levels of out-migration. Hopefully, in the long run, the modest resurgence seen in other parts of the Heartland will someday extend to these areas as well.