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Minoli Ratnatunga
Associate Director, Regional Economics Research
California and Human Capital and Indexes & Rankings and Job Creation and Regional Economics
Minoli Ratnatunga is an associate director and research economist at the Milken Institute focused on regional economic development and regional competitiveness.
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Bay Area rising: High-skill jobs lift Best-Performing City

By: Minoli Ratnatunga
January 08, 2015
   
   

How do you go from No. 152 to No. 1 in 10 years? Perhaps we can ask San Francisco-San Mateo-Redwood City, CA—the metro that topped the Milken Institute’s 2014 Best-Performing Cities index, released today. Ed Lee is sure to have something to say about the question. The proud San Francisco mayor will be a special guest at the launch celebration.

The Milken Institute ranks the 200 largest U.S. metropolitan areas[i] every year in the Best-Performing Cities index and publishes a second index that ranks smaller metros. We base our assessments on growth in employment, wages, and the strength, concentration, and diversity of a metro’s tech industry. Paralleling the San Francisco metro’s rise on the large cities list, the Fargo, ND-MN, metropolitan area moved up from third place last year to the top of the list of Best-Performing Small Cities in 2014.

In 2004, San Francisco was ranked 152 on our Best-Performing Cities index. But that wasn’t the bottom for the city by the bay. The following year, it fell to No. 173. While some cities languish near the bottom of our index year after year, San Francisco demonstrates the ability of a metro to gather its inherent strengths and muster a dazzling rebound. It was joined in the top five by Austin-Round Rock-San Marcos, TX, at No. 2, Provo-Orem, UT, at No. 3, San Jose-Sunnyvale-Santa Clara, CA, at No. 4, and Raleigh-Cary, NC, at No. 5.

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Mirroring the experience of metros across the country, much of this growth has been spurred by employment in professional, technical, and scientific services. In the San Francisco-San Mateo-Redwood City metro, 45 percent of the jobs added between 2009 and 2013 were in this high-skill sector.

Across the 185 large cities that enjoyed job growth in 2012-13, more than 10 percent of the jobs added were in the professional, technical, and scientific services group, rising to 20 percent across the 77 large cities that saw growth in the five years ending in 2013. A similar pattern exists in the 179 small cities we rank—143 experienced growth in the last year, and this sector added up to 6.5 percent of the new jobs, rising to 10 percent across the 66 metros that saw growth in the five years ending in 2013.

Continuing the trends in our 2013 index, the technology and energy sectors were the engines of expansion in the top metros this year. With energy prices falling, however, we expect to see high-tech taking an even more important role in 2015. San Francisco may well retain its crown another year.

[i] Based on Census Metropolitan Divisions and Metropolitan Statistical Areas