Tag: Best Cities 2016

From the earliest days of the Republic, banking and finance has largely been the purview of what one historian calls the “Yankee Empire.” Based largely in New York and Boston, later on financial centers grew along the main route of Yankee migration to Chicago and San Francisco.

Yet, if you look at where financial jobs are now headed, perhaps it’s time, as the Dallas Morning News cheekily suggested recently, to substitute Y’all Street for Wall Street. Finance, increasingly conducted electronically, is no longer tethered to its traditional centers. Large global financial companies like UBS, Deutsche Bank , Morgan Stanley and Goldman Sachs are all committed to relocating operations to less expensive locations.

In the U.S., this has benefited the South the most. This year’s list of the metro areas that are increasing employment in financial services at the fastest rate is led by first-place Nashville-Davidson-Murfreesboro-Franklin, Tenn., No. 2 Dallas-Plano-Irving, Texas, No. 4 Austin-Round Rock, Texas, and No. 5 Charlotte-Concord-Gastonia N.C.-S.C.

Financial service employment is important, particularly since the recovery from the 2008 financial meltdown. The industry is second in the U.S. only to the professional and business services sector in terms of the number of people it employs in high-paying jobs (average salary: $62,860), and its recent growth has been spread across the country. Of the 70 large metro areas we studied, only three have lost financial jobs since 2010.

Methodology

To generate our ranking, we looked at employment growth in the 366 metropolitan statistical areas for which BLS has complete data going back to 2005, weighting growth over the short-, medium- and long-term in that span, and factoring in momentum — whether growth is slowing or accelerating. (For a detailed description of our methodology, click here.)

The South Rises Again

The shift to the South seems to be based on several factors: lower costs (including for housing), less regulation and expanding markets, driven by rapid population growth. As population has shifted to the South, most notably low-tax states like Tennessee and Texas, it has clearly increased local demand for financial services. But there’s also another factor: the migration of financial jobs from traditional centers such as New York, Chicago and Los Angeles.

Our top emerging financial superstar, Nashville, has all these characteristics.

Since 2010, the area’s financial workforce has expanded 24.5 percent to 60,900. Population growth and in-migration rates have been spectacular.

Between 2010 and 2014, in-migration accounted for 65.4 percent of local population growth, the fifth highest proportion among the nation’s top 25 metro areas that added more than 100,000 people, while the overall population soared 10 percent.  Since the recession ended in 2009, employment has grown 21 percent while per capita income has risen 4 percent. Financial sector growth has come from firms with U.S. headquarters in the New York area, such as Switzerland-based UBS, as well as from locally based financial firms, like the investment bank Avondale Partners.

But the biggest raw job gains, as we also found in professional and business services, are in No. 2 Dallas-Plano-Irving, where financial employment has expanded 23.2 percent since 2010 to 226,100 jobs, making the metro area the third-biggest financial services hub in the nation behind New York and Chicago. If the adjacent Ft. Worth area is added in, the region boasts a total of 282,000 financial job, behind only New York. Unlike Houston, slowed by the oil industry downturn, Dallas is on a super-sized roll.

The Big D’s drive to become “y’all street” also stems from the recipe of large-scale population growth, low taxes, affordable housing and business friendliness. Large corporate relocations, such as Toyota from California, creates new demand both from business and consumers.

To be sure, a New Yorker could scoff at the idea of Dallas replacing Manhattan as a financial center as something akin to the old Texas insult: all hat and no cattle. Yet it might behoove uppity Gothamites to pay more attention to the big Texas metroplex. The area’s dispersed financial institutions may not look like those associated with Manhattan, but they are growing more quickly, and in a place where middle managers can thrive on modest salaries. Then there’s the advantages of its central location, one of the things that led Comerica to move its headquarters to Dallas in 2007. More recently, State Farm and Liberty Mutual have opened large operations in the northern suburbs.

But it’s not just Texas and Tennessee that are dominating the dispersion of financial services jobs. Before the recession, No. 5 Charlotte, N.C., had risen to become the second-largest financial center in the country, home to Bank of America and Wachovia. Wachovia fell hard in the financial crisis, and was swallowed by Wells Fargo, but BofA soldiers on, and the area clearly has recovered from the recession doldrums. Since 2010, the metro area’s financial workforce has grown 14.2 percent to 86,100 jobs, with 5 percent growth last year alone.

The Rise Of The Mormon Belt?

Outside the south, the other big growth area for financial services lies in the Intermountain West, the vast region between California’s Sierras and the Rockies. Two metro areas stand out in terms of financial growth: No. 3 Salt Lake City area and No. 6 Phoenix. Like the Texas cities, these metro areas offer middle managers a huge housing advantage; home prices, adjusted for incomes, are roughly half those in New York, Los Angeles and San Francisco.

Salt Lake City’s financial services job count has grown 19.9 percent since 2010 to 55,200 jobs, with 6.2 percent growth last year alone. The Utah capital has gained particular renown as Goldman Sachs’fourth-largest global hub, and is slated to keep growing. Particularly attractive for Goldman is the language skills of returning Mormon missionaries.

Rapid financial growth is now common across the “Mormon belt” that stretches from Arizona to Idaho. Among mid-sized metro areas (those with less than 450,000 nonfarm jobs),  Boise ranks second for financial services job growth, followed byProvo-Orem, Utah, and No. 5 Clearfield-Ogden. With young and well-educated workforce, and relatively low (particularly compared to California) housing prices, these areas are creating a whole new archipelago of financial centers.

At the southern end of the Mormon belt sits Phoenix. Like the southern financial boom towns, the Valley of the Sun is booming both demographically and in terms of jobs; financial positions are up 19.7 percent since 2010.

Much of this follows the movement of people from other parts of the country, notably California and the Midwest. Financial companies, too, are migrating south such as Chicago-based Northern Trust, which moved 1,000 jobs last year to Tempe, a close in Phoenix suburb. Growth in financial services has helped bring some life back to the long torpid office market, attracting new investors.

The Big Boys

Despite the growth in the top cities on our list, the central position of New York remains unassailable. After hard times amid the financial crisis, employment has risen a modest 6.3 percent since 2010 to 461,500, over 200,000 more than second-place Chicago, and salaries are on the rise again.

What has changed is where the challenges may come from. Its onetime main rivals, 56th place Chicago-Naperville- Arlington Heights and Los Angeles (57th) are not even keeping pace, and seem destined to fall even further behind. Similarly,  other likely financial rivals, like No. 21 San Francisco-Redwood City-South San Francisco, No. 39 Boston-Cambridge-Newton or No. 49 Seattle-Bellevue-Everett aren’t growing fast enough to mount a major challenge.

If New York’s supremacy is to be challenged, it will instead likely be from the lower-cost places that dominate our list in the South and Intermountain West. With the exception of Dallas, no single one of these metro areas could conceivably grow to be big enough to threaten Gotham’s leadership, but over time they could in aggregate weaken its predominance, spreading financial power to what are largely relatively youthful financial centers.

This piece originally appeared in Forbes.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Michael Shires, Ph.D. is a professor at Pepperdine University School of Public Policy.

The information sector may have glamour and manufacturing, nostalgia appeal, but the real action in high-wage job growth in the United States is in the vast realm of professional and business services. This is not only the largest high-wage part of the economy, employing just under 20 million people at an average salary of $30 an hour, it’s also one the few high-wage sectors in which employment has expanded steadily since 2010, at more than 3% a year, adding nearly 3 million white-collar jobs.

In many ways, the business and professional service sector may be the best indicator of future U.S. economic growth. It is not nearly as vulnerable to disruption as energy, manufacturing or information employment, and more deeply integrated into the economy, including professions like administrative services and management, legal services, scientific research, and computer systems and design.  In a pattern we have seen in other sectors, much of the growth is concentrated in two very different kinds of places: tech-rich metro areas and those that offer lower costs, and often more business-friendly atmospheres.

To generate our rankings of the best places for business services jobs, we looked at employment growth in the 366 metropolitan statistical areas for which BLS has complete data going back to 2005, weighting growth over the short-, medium- and long-term in that span, and factoring in momentum — whether growth is slowing or accelerating. (For a detailed description of our methodology, click here.)

Tech Strikes Again

There is a growing confluence between technology and business services, as more companies use the Internet to conduct commerce.

This can be seen in several of our top-ranked large cities. Business service employment in the San Francisco-Redwood City-South San Francisco MSA has grown a remarkable 45% since 2010, placing it second on our list, slightly faster than third-ranked Austin-Round Rock, which clocked 42% growth over the same span, and No. 4 San Jose-Sunnyvale-Santa Clara, where business services employment expanded 36%.

It’s questionable whether this pattern will continue, particularly in the high-cost Bay Area. There are signs of a slowdown in Silicon Valley and San Francisco, with more space being subleased and property prices seeming to have peaked, albeit at extraordinary high levels. In contrast the future for less expensive areas — increasingly attractive to millennials as well as companies — may be far brighter, as companies shift employment to places their employees can live decently.

Resurgence In Middle America

This pattern can be seen in the balance of our top-performing regions. It starts with our top-ranked metro area, Nashville, Tenn., which has seen business service employment grow 47.2% since 2010 to 152,700 jobs, with 7.7% growth last year alone. Some of this comes from the establishment of branch offices of Silicon Valley companies like Lyft and Everbright, as well as the expansion of the area’s strong health care and entertainment industries.

Nashville’s appeal to millennials is unsurpassed, with the strongest growth rate in net migration of college-educated people aged 25-34 of any metro area in the country, and the reasons are not hard to find. It’s a charming city located in a temperate part of the country, with both excellent, and affordable, urban and suburban options.

But if Nashville is the belle of the business service ball, fifth-ranked Dallas-Ft. Worth is now the beast. The Texas powerhouse’s business services workforce has expanded 28.9% since 2010 to 458,200. The Dallas-Ft. Worth area has plenty of appeal to big companies with a large cohort of middle-income managers, as a paper to be published this fall by Southern Methodist University’s Klaus Desmet and Cullum Clark well describes. These jobs pay well enough to live well in Dallas’ nicer suburbs, such as Plano and Frisco, but not remotely enough to buy a house, or even a condo, in Los Angeles, San Francisco or New York.

This accounts, in part, for the relocation of Toyota America’s headquarters from Torrance, Calif., to the north Dallas suburbs, and likely plays a role in the plans of Jacobs Engineering, a longtime fixture in Pasadena, to relocate its headquarters to downtown Dallas.

In many ways, argues urban analyst Aaron Renn, Dallas is becoming the new Chicago. It is anchored by a large airport, a diverse economy and a location in the middle of country. Even as downtown Chicago has attracted some notable new corporate headquarters in recent years, these generally employ relatively few people, while companies that need access to a large white-collar workforce, like Toyota and Jacobs, have been gravitating to the Big D.

How About The Big Boys?

As manufacturing has declined in our largest cities, professional and business services have become the prime generator of high-end jobs. Yet among the country’s largest business service centers there is a growing divergence between the winners and laggards.

The most impressive performance among metro areas with over 500,000 business and professional service jobs has been New York. With 714,000 business service jobs, the Big Apple is without question the leader in the field, but more importantly it continues to grow. Since 2010, New York has grown its professional and business service employment by an impressive 22%, helping it rank 14th on our list. This reflects the city’s continued preeminence in such fields as law, design, marketing, public relations and advertising.

But the other traditional business service leaders have not fared nearly as well. Gotham’s traditional rival, Chicago-Naperville-Arlington Heights, still has 673,000 business service jobs but has seen only a modest growth just under 15%, ranking 43rd. Whatever may have been gained in generally small scale “executive headquarters” has not been enough to make the vast Chicagoland region a big winner.

Things are even less positive in 60th place Los Angeles-Long Beach-Glendale, the third largest business service area. Since 2010, its 13.8% growth is well below the national average. Nor is the slack in the Southland being picked up by the area’s sprawling suburbs, with Santa Ana-Anaheim-Irvine ranking a modest 39th and San Bernardino-Riverside clocking in at 52nd. The Bay Area business services world may be still booming, but south of the Tehachapi, progress is slow.

Will Business Services Continue To Disperse?

Those who suggest dense concentrations have efficiencies that overcome higher costs can take some solace from our numbers, but not too much. Many of the fastest growing business service centers are hardly paragons of dense urbanism, including No. 7 Orlando-Kissimmee-Sanford, Fla., and No. 8 Richmond, Va., where employment jumped 10% last year. Even sprawling Atlanta, which has lost some of its ‘90s era luster, is now growing its business service sector at a faster pace than New York and light years ahead of much denser Chicago and Los Angeles. It ranks 13th.

The shift to less expensive places seems certain to continue, in part due to the growing role of Internet communications, which breaks down formerly insurmountable distance barriers. Looking at the full list of the 366 metro areas we examined, the fastest-growers include many smaller communities, led by overall No. 1 New Bedford, Mass., where business services employment has grown 58.5% since 2010 to 6,200 jobs, as well as No. 3 Monroe, Mich., No. 4 Lake Charles, La., and No. 6 Lawton, Okla.

Essentially business service growth seems destined to break down into three types: (1) large and expensive metro areas — San Francisco-Silicon Valley and New York — whose economic dynamism is strong enough to counter high costs; (2) less expensive, but still large metros such as Nashville, Dallas-Ft. Worth, Richmond and a host of Florida cities that can be expected to garner a lion’s share of the new growth; and (3) smaller communities where business service sector jobs, particularly at the lower end, may be increasingly attracted as employers pursue an affordable quality of life. While the short term has favored the largest cities, the long term is pointing toward more migration to midsized and smaller destinations.

This piece first appeared at Forbes.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Michael Shires, Ph.D. is a professor at Pepperdine University School of Public Policy.

Photograph: Downtown Nashville from BigStockPhoto.com