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Texas metros, led by No. 1 Austin, fill top ranks of 2009 Milken Institute Best Performing Cities Index; oil and gas sector, and avoidance of subprime mortgages, fuel their gains
For Immediate Release
Nov 11, 2009

LOS ANGELES —Texas metros, led by number one Austin, claim four of the top five spots in the 2009 Milken Institute /Greenstreet Real Estate Partners Best-Performing Cities Index — and nine of the top 16.

Leaders in this year′s index, which ranks U.S. metros based on their ability to create and sustain jobs, are all metros that succeeded in avoiding the worst of economic declines driven by falling housing markets and job losses in manufacturing and global trade.

Regional economic factors also strongly influenced the rankings this year, with the oil and gas sector, technology and alternative energy providing stability among metros in Texas, North Carolina, Washington and Louisiana, which also benefited from low dependence on housing/construction. Austin in particular has been helped by its strong tech industry. It is the first metro to ever be ranked number one twice on the index, the last time being in 2000.

Another factor helping Texas metros move up in the rankings is that state′s favorable business climate and its ability to attract jobs and corporations away from higher-cost states.

"'Best performing′ sometimes means retaining what you have," said Ross DeVol, director of Regional Economics and lead author of the report. "In a period of recession, the index highlights metros that have adapted to weather the storm. As we move forward in a recovery that still lacks jobs, metros will be further tested in their ability to sustain themselves."

The biggest decliners (including multiple cities in Florida and California) continue to experience the fallout from the housing meltdown, which has caused spillover into the construction sector. Michigan metros are mired among the nation′s weakest performers, with heavy losses in durable goods manufacturing and the ailing U.S. automotive industry.

The 2009 top 10 performers (with 2008 rankings) of the 200 largest metros:

1. Austin-Round Rock, TX (4)
2. Killeen-Temple-Fort Hood, TX (13)
3. Salt Lake City, UT (3)
4. McAllen-Edinburg-Mission, TX (7)
5. Houston-Sugar Land-Baytown, TX (16)
6. Durham, NC (21)
7. Olympia, WA (9)
8. Huntsville, AL (5)
9. Lafayette, LA (14)
10. Raleigh-Cary, NC (2)

Biggest Movers: One of the most telling stories in this year′s index is the group of biggest gainers, many of them located in the Northeast. At the helm of this upwardly mobile group, Hartford-West Hartford-East Hartford, Connecticut, moved up 101 spots to 48th. These cities didn′t experience extreme housing bubbles and therefore avoided a major correction. They also tended to have a smaller dependence on durable goods manufacturing and instead have a larger stake in the services sector. Most of these metros are not major exporters. But in the current economic environment, their improved rankings scores don′t necessarily reflect marked growth; these metros generally moved up by simply avoiding the rapid decline seen in metros that were more dependent on sectors undergoing contraction.

On the other end, the list of biggest decliners illustrates the extent that the housing bust has hit Florida. More than half of the 20 metros posting the steepest drops in the rankings are in the Sunshine State. Pensacola-Ferry Pass-Brent, Florida, led the declining group this year, falling 124 spots to 157th.

America's 10 Largest Cities: Large metropolitan areas often literally don′t have space for growth. High density means that construction comes with a lot of extra costs. Larger metros also tend to have higher business costs overall, so it′s not often that a large metro ranks high on the index. However, Houston-Sugar Land-Baytown, Texas, once again is a top performer at number 5. Houston ranked 7th in both job growth and wage and salary growth for the one-year period we examined. Its performance is based on both a low cost of doing business and its role as a major center for health services and the oil and gas industry.

Small-Cities Rankings: Another Texas metro — Midland — received a number-one ranking, on the Institute′s separate list of small metros (those with a population of 235,000 or less). While the nation as whole lost jobs, Midland increased employment by 6.2 percent in 2008. The region benefited from rising oil prices in 2007 and 2008 and a healthy retail sector.

The Best Performing Cities Index includes both long-term (five years) and short-term (one year) measurements of employment and salary growth. There are also four measurements of technology output growth, which are included because of technology's crucial role in creating good jobs and driving regional economies.

Data for all 324 metros is available on our 2009 Best-Performing Cities interactive web site. View the full report.