“Tax cuts, low unemployment, and rising wages point to more spending power to fuel economic growth,” says Dr. Christine Chmura, CEO and chief economist at Chmura Economics & Analytics. “Increased investment by businesses in new plants and equipment resulting from corporate tax cuts and reductions in regulations has been supporting economic growth and should support future growth. If economic growth lasts 15 more months, it will hit record territory in July 2019, when it would surpass the longest expansion on record at 121 months.”
As was the case last year, northern California — especially the San Francisco Bay area — and the Pacific and Mountain regions made a good showing in this year’s report. In fact, 14 of the top 20 metros in the survey are in the Pacific or Mountain regions. The top three are San Jose-Sunnyvale-Santa Clara, San Francisco-Redwood City-South San Francisco, and Oakland-Hayward-Berkeley. These locations benefit from clusters of high-tech and biotech companies and renowned institutions of higher education, including UCSF, Stanford, and UC Berkeley, that provide a steady stream of skilled workers and R&D.
“High technology and an educated workforce will always be key factors that differentiate the leading locations for firm expansion,” comments Chmura. “The most profitable firms rely on a creative and productive workforce. Technology underpins a firm’s ability to be more productive, and education supports a worker’s ability to perform at high levels.”
Showing a particularly upward swing is Oakland-Hayward-Berkeley, which rose from a 25th position in 2016 to 3rd in both 2017 and 2018 based on improved economic strength and workforce. The location benefits from less expensive and more available real estate compared to San Francisco and Silicon Valley locations.
Other northern Pacific locations made overall strong showings. Most noteworthy, Portland-Vancouver-Hillsboro, OR-WA received its highest overall ranking (7th) in the eight years of the survey. Helping the area is its tech boom and desirable lifestyle. Here both hardware and software sectors are growing strongly.
Chmura adds: “Many metro areas in the Pacific Northwest and Mountain regions were hit harder than other areas around the nation during the Great Recession. Home prices, for example, were down significantly. Economic growth in these regions lagged the nation in the first few years after the recession as they worked through the imbalances.”
Bucking Workforce Trends
In recent years, there’s been plenty of news about the skilled labor shortage. The Leading Locations analysis shows that more attractive tax structures support employment growth in the first few years after taxes are lowered. “Other factors, such as quality of life and a strong public K-12 education system, are important as well,” says Chmura.
According to the report, a number of cities are bucking the labor shortage trend and rising in their overall ranking. Among those showing significant upswings are Philadelphia and Salt Lake City. Philly ranked an overall 47th in 2018 up from 141st in 2017. Salt Lake jumped to 12th this year from 32 in 2017. Both cities attribute their improved marks to increasingly attracting educated workers. It doesn’t hurt that Philadelphia is home to University of Pennsylvania with its Wharton School of Business as well as Drexel University and Temple University.
Stalwarts like Columbus, Ind., and San Jose, Calif., have consistently shown high rankings, although the two places could not be more different from one another. The point here is one does not have to be a tech haven or a large city to score well year after year. What keeps the small Midwest city of Columbus, Ind., among the top-10 MSAs year after year is its ability to attract an educated workforce — the MSA ranks fourth among the top metros for Prime Workforce.
Also making Columbus attractive has been its ability to revitalize the city through architectural excellence, a task that began in the mid-20th century when the Cummins Foundation made it a mecca of modern architecture. Economic development efforts, widespread beautification innovations, various tax incentives, and increased law enforcement have helped Columbus overcome downward economies.
Besides Columbus, other small cities that show noteworthy marks for their Prime Workforce include Bend-Redmond, Ore., Auburn-Opelika, Ala., and St. George, Utah. Mid-size metros scoring high for their Prime Workforce include Olympia-Turnwater in Washington State, Reno, Nev., and Gainesville, Fla.
While some locations are economically sound and offer many attributes, those that show both year-over-year and longer-term growth receive higher marks in this analysis. In the past, there have been numerous booming growth cities in the South and Southwest – e.g. Austin, Texas, and Nashville, Tenn. But in recent years, overall rankings for these cities have slipped. The Nashville MSA fell to 26th from the No. 7 spot in 2017, and Austin dropped from a 10th place ranking in 2015 to 46th in 2016, 47th in 2017, and 50th for 2018.
Many locations fair well due to industry clusters that set up shop in regions around the country. For example, the South Atlantic has over the years become a magnet for auto and advanced manufacturing, particularly along the Interstate 75 corridor. This location has been beneficial to Dalton, Ga., best known as being home to the carpet and floor covering industry. While ranked 196th overall as a Leading Metro Location, Dalton made a particular strong No. 3 showing for Five-Year Economic Growth, thanks to its innovation in cutting-edge technology, applied science, global marketing, and services. These have led to new high-tech products and patents.
Year-Over-Year Growth rankings indicate some surprises. Kankakee, Ill., which ranked 54th overall, ranked first in Year-Over-Year Growth. Kankakee County is regarded among the fastest-growing metros in Illinois and benefits from its geographic location 45 miles south of downtown Chicago along the I-57 corridor. In 2014–2016 the total capital investment in Kankakee County exceeded $1.2 billion. Its website emphasizes “ready access to the interstate, rail, all utilities, fiber, and workforce” in a “diverse business community, including Fortune and Global 500 companies.” Additionally, two Enterprise Zones provide property tax abatement, sales tax exemptions, and other growth incentives.
Needless to say, “Creating a competitive position varies based on the type of firm that is expanding,” Chmura says. “Some manufacturing plants might need proximity to rail or a large water supply, while software providers need good Internet access.”
Metro size also did not determine whether or not a location showed economic strength or longer-range economic growth. Small metros like Elkhart-Goshen, Ind., and Napa, Calif., took the first two spots in these categories, with Elkhart-Goshen ranked No. 1 for Economic Strength and No. 2 for Five-Year Economic Growth, while Napa was No.1 for Five-Year Economic Growth and No. 2 for Economic Strength.
Midterm (Five-Year) Growth
Carson City, Nev., also has experienced a remarkable trajectory. Once known for the Comstock Lode, today Carson City ranks third among the Top 20 Small Metros and ninth overall. In 2015, it ranked 308th overall; in 2016, 191st overall; and in 2017, 163rd overall. Part of the reason for its ascent is Year-Over-Year Growth.
Robert Hooper, president and CEO of the Northern Nevada Development Authority, attributes the region’s growth to Nevada’s governor and state legislature putting in place “the right formula for recovery and job creation” during the Great Recession. “This allowed Carson City to leverage its streamlined building process, attractive tax structure and low-cost fees, economical industrial real estate, and competitive utility rates for commercial operations to stabilize and grow its economy,” he says. “The city’s geographic location, easy access to the Silver State’s multi-modal infrastructure, and close proximity to major U.S. markets and deep-sea ports also play a role in the growth of the area’s advanced manufacturing, logistics, and construction industries.”
In essence, this is what is driving growth in many U.S. metros in today’s economy.
Area Development’s research desk compiled the statistics for this report. Locations were ranked according to the methodology explained herein. This article was written by Karen Thuermer, Staff Editor.