Dr. Michael Shires and Joel Kotkin on "The Best Cities for Jobs 2016" | Forbes

May 10, 2016  | 7 min read

The Best Cities For Jobs 2016

May 10, 2016 | Forbes | By Joel Kotkin and Michael Shires

While speculation is mounting that they’re overheating, the tech boom is still creating jobs at a rapid pace in the Bay Area and Silicon Valley, placing them atop our annual assessment of The Best Cities For Jobs for the third year in a row. A number of secondary tech centers are posting strong growth as well on the back of the boom, as well as spillover from Northern California as high prices push expanding companies and startups to locate elsewhere.

Tech job growth has been strong, but it’s not been equally distributed across the country. For example, U.S. employment in software publishing is up 5.5% from last year to a weighted total of 343,000 jobs, 26% above the sector’s prior peak amid the dot-com bubble in 2001. The twin capitals of the U.S. tech industry have accounted for much of the growth. Employment in the information sector in the San Francisco-Redwood City-South San Francisco metropolitan statistical area expanded 6.8% last year, capping a torrid growth rate of 62% since 2010. At the same time the metro area’s professional business service sector — which employs almost four times as many as information (270,000) at such firms as Salesforce.com CRM +1.54%, Uber and Oracle ORCL +1.52% — has grown an impressive 45% since 2010. Overall, the San Francisco metro area clocked 4.6% employment growth last year, and an impressive 23.8% since 2010, placing it first on our list of The Best Cities For Jobs for the second year in a row.

In the neighboring San Jose-Sunnyvale-Santa Ana MSA, information sector employment has expanded 57% since 2010; its business services sector, smaller than that of San Francisco’s, has posted 36.4% job growth over the same span. Taken together, these two metro areas have been best positioned to take advantage of the growth of social networking and the smartphone economy, which have soared even as many of the older Valley firms — Intel INTC +0.92%, Hewlett Packard, Yahoo YHOO +0.75% — have faced tough times. Job growth in the San Jose metro area was 4.1% last year,  and 20.8% since 2010, placing it second on our list.

Yet the success of the Bay Area, particularly its western strip along the San Francisco Peninsula, also has had a spillover impact on other tech hubs. High housing prices, intensified by the force of California’s regulatory regime, has driven many employers to seek other, more affordable locations. A recent study by California’s Legislative Analyst’s Office found that the area’s top tech executives see high housing prices as the biggest barrier to future growth.

If this is a headache for these tech moguls, it’s manna from heaven for upstart metro areas like Austin-Round, Texas (sixth place on our list of Best Cities For Jobs); Raleigh, N.C. (ninth); Denver-Aurora-Lakewood (seventh) and Portland, Ore. (10th). Although not inexpensive by national standards, these areas are natural catch-basins for tech workers and companies. Employment in Austin’s information sector, for example, has expanded an impressive 34% since 2010, while professional business services jobs have grown 42%. In Raleigh, the tech region with some of the lowest housing costs, information sector employment has increased 18.5% since 2010 and professional business services almost 28%.

Methodology

Our rankings are based on short-, medium- and long-term job creation, going back to 2004, and factor in momentum — whether growth is slowing or accelerating. We have compiled separate rankings for America’s 70 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.)

The Return Of The Sun Belt

 In the wake of the housing bust, many Sun Belt economies suffered, particularly in the Southeast and Intermountain West. Some believed that the half-century-long era of Sun Belt growth was nearing its end. Yet as the latest Census trends reveal, it is precisely to the Sun Belt where Americans once again are moving, taking their talents, ambitions and hopes with them.

This resurgence is epitomized by Orlando, which jumped 14 places this year to third, capping a comeback from its dismal 2010 ranking of 36th among the largest MSAs. Job growth last year was 4.6%, equaling that of the San Francisco-Silicon Valley region.

Orlando’s resurgence has been driven by growth in professional business service jobs (up 26.8% since 2010) , construction-related employment (up 11.5%) and by its largest sector, hospitality, up 22%. The metro area’s population has exploded from 1.2 million in 1990 to 2.3 million today. Much of this recent growth has come from domestic migration, which has accelerated two and half fold since the end of the recession. This has fueled a modest resurgence in construction employment, which expanded 4.6% in the last year in the Florida city.

The growth of domestic migration has sparked job gains in fields such as construction, retail, education and health, as well as steady growth in business services.  This back to the Sun Belt pattern can be seen in the strong performance of No. 4 Nashville-Davidson-Murfreesboro-Franklin, Tenn., and No. 8 Charlotte-Concord-Gastonia, which are also seeing a payoff from the corporate headquarters and manufacturing jobs they have lured from higher-cost metro areas like Los Angeles. Even cities devastated by the housing bubble like Phoenix, which gained 10 places this year to 17th, and Las Vegas, which gained nine places to 22nd, are clearly on the comeback trail. The death of the Sun Belt has turned out to be more the stuff of coastal dreams than reality.

Full List: The Best Big Cities For Jobs 2016

As has been the case for more than a decade, Texas boasts by far the most high-growth hubs of any state. The fifth-ranked Dallas metro area remains a steady fountain of new jobs, attracting many new companies in recent years, most notably Toyota. Besides No. 6 Austin, 12th-ranked San Antonio has also been on a roll, enjoying both strong growth in population (up 11.2% over the past five years and more than 39% since 2000) as well as in jobs.

Decline In The Tangible Economy

But not all the news in Texas is good, with the sputtering of years-long growth in hard industries such as energy and manufacturing, which tend to provide high-paying blue collar work. The recent weakness in energy prices has been felt heavily in Houston, a star performer for much of this decade. The energy capital has descended to 24th on this year’s list from sixth last year, the largest drop of any metro area in the country. Economist Bill Gilmer, head of the Institute of Regional Forecasting at the University of Houston, expects somewhere close to 50,000 local energy jobs will disappear before things get better.

Fortunately, unlike during the early ’80s oil bust, Houston’s economy appears to be diverse enough to weather the storm. Rapid growth in health services (the area is home to the world’s largest medical center), as well as education has kept employment expanding slightly, with 0.7% job growth over the past year, but well off the pace from its five-year increase of 16.4%. Until energy prices rise again, it’s unlikely this dynamic city will get its mojo back entirely.

With an estimated 250,000 energy jobs gone, other energy centers have also been hard-hit. Ft. Worth-Arlington, home to energy giant Halliburton, dropped 15 places to 28th while Oklahoma City slipped four positions to 37th and New Orleans fell five to 48th. Although not as energy-dominated as Houston, oil and gas has been an important producer of high-wage jobs in these metro areas.

Perhaps equally worrisome, there are signs that manufacturing-oriented economies are also losing momentum. Unlike Houston, these metro areas rarely have placed among the top 10 Best Cities For Jobs, but many had been moving up our rankings in recent years. Not anymore.

Much of the worst damage has taken place in the Midwest. For example, Grand Rapids dropped three places to 37th, Cincinnati fell nine to 50th, Milwaukee slipped seven to 61st, and Detroit dipped two to 62nd. But the damage also extends to some of the non-Midwestern industrial centers; for example 65th-ranked Birmingham-Hoover, Ala., dropped 10 places, as did Pittsburgh, which had a strong energy sector as well. Our two bottom feeders, 69th-place Buffalo-Cheektowaga–Niagara Falls and last-place Rochester, N.Y., each dropped seven rungs.

The Big Three

 

 America’s three largest metropolitan areas — New York, Los Angeles and Chicago– also rarely crack the top 10, but this year clear differences have emerged among them. By far the healthiest economy is New York City, which moved up one place to 16th. Since 2010 the Big Apple has added an impressive 530,000 jobs, paced by a 29.7% expansion in hospitality sector employment and 22% growth in professional business services jobs.

The story is not so pleasant in Los Angeles-Long Beach-Glendale. As its longtime Bay Area rival has boomed, Los Angeles employment growth has been mediocre, ranking it 42nd this year. Although leisure and hospitality employment has boomed, up 28.1% since 2010, and business and professional services has grown a decent, if unspectacular, 13.8% in the last five years, growth has been slow in information, barely 3.5% over the same period; employment in L.A.’s manufacturing sector declined 3.4% to 356,100 – still a substantial number but a shadow of its former might.

Full List: The Best Big Cities For Jobs 2016

Doing even worse is Chicago, which dropped three slots to 47th. The Windy City economy has posted modest growth in professional and business services, and its hospitality industry, while on the upswing, has added jobs at a considerably slower pace than either New York or Los Angeles. And like Los Angeles, its industrial sector continues to shrink, down 1.7% since 2010 to 281,000 jobs. In the most recent Census, the Chicago area led the nation in population decline.

If you’ve made it this far, there’s one clear takeaway: the health of the American economy looks very different depending on where you live. Right now, growth momentum belongs to the tech centers and the Sun Belt. Don’t expect a major shift in the pecking order until the tech boom or the housing market weaken, or until manufacturing and energy pull themselves out of the current morass.