San Francisco Ranked as Best US City for Jobs, Led by Technology Industry
San Francisco knocked Provo, Utah, out of the top spot for best-performing large U.S. city for creating and sustaining jobs, largely because of its skilled high-technology workforce.
San Francisco ranked No. 1 on the study from the economic think tank Milken Institute, “Best-Performing Cities 2020 – Where America’s Jobs are Created and Sustained,” after three years in the No. 4 spot. Ranking at the top or near the top on high-technology and wage growth gave a big boost to the area known for an abundance of venture capital and touting its innovation and entrepreneurial culture.
The U.S. areas with high-tech economies have performed well on the Milken Institute’s rankings. The health of a city’s tech sector is among the components the Milken Institute uses in creating the performance index. Different job and wage growth factors are weighted more heavily than high tech in establishing performance.
But the institute’s focus on the tech sector takes center stage.
“Overall, metros with strong tech industries remain the superstars of regional economies,” the report said. “One key factor in the success of these tech powerhouses is their ability to engage in new technologies.”
Provo, though dropping to No. 2, has been among the top areas for several years because of its growing tech scene. It’s part of what has been dubbed the “Silicon Slopes” with Salt Lake City, about 45 miles to the north.
Salt Lake City, however, dropped 15 spots and out of the Top 10 on the study. The institute’s report didn’t indicate why, beyond noting that its tight labor market will put downward pressure on growth.
The Bend, Oregon, area retained the top spot for small cities, primarily because of healthcare, retirees and tourism. But it also ranked well with high-tech.
The institute’s designation of “large” is broad, said Michael Lin, a co-author of the Milken Institute report, said by email, adding it used a midpoint in population among 401 metropolitan areas in the study.
In the large category, the Hagerstown, Maryland-Martinsburg, West Virginia, metropolitan statistical area had the smallest population at 268,049, Lin said. Norwich-New London, Connecticut, is the largest of the small cities at 266,784 people.
While the ranking listed positives for each area, it also included liabilities that could be trouble spots. The common themes include U.S.-China trade tensions, housing affordability, tight labor conditions and relying too heavily on one industry.
Real Estate Value
Real estate investors look at these types of rankings when trying to decide where to buy property, fund developments or exit the market.
K.C. Conway, chief economist for CCIM Institute, which awards real estate professionals accreditation in investment sales, said there are so many rankings out there that “it’s almost ranking fatigue.”
Different rankings put cities in different lights. So, it’s a matter of looking at their objectivity with the measurements they use and layering several on top of each other to get a fuller picture, Conway said.
He cited LinkedIn’s “Workforce Report” as one example of a ranking that he considers along with other studies in his analysis. The business networking and jobs site culls data from the more than 165 million profiles on its site, focusing on 20 of the largest U.S. areas.
Its latest report ranked Austin, Texas, at the top for migration with 142.95 per 10,000 members. The Texas capital held steady in the No. 3 spot on the Milken Institute’s ranking, buoyed by a growing tech sector.
San Francisco wasn’t in the Top 10 on LinkedIn’s report. Interestingly, LinkedIn’s November 2019 report on Austin showed that San Francisco topped the list of members moving to the Texas city over the previous year.
Conway said he draws three circles on a map when talking to people about growth areas. One circle covers Nashville, Tennessee, and Huntsville, Alabama. Another covers Salt Lake City and Provo. And the third covers the Raleigh and Durham, North Carolina, area.
“It’s becoming more about affordability” and a ready workforce of skilled workers in science, technology, engineering and math, he said.
In the Milken Institute study, Raleigh dropped five spots to No. 11. No explanation was given other than noting that U.S.-China trade tensions could have a negative effect on the area's tech sector.
Changing Rankings
Nashville rose 11 spots to No. 14, in part because of a growing tech sector. That ranking could improve with new job growth from companies such as Seattle-based Amazon, which plans to open a Nashville office and create 5,000 high-paying office jobs.
Huntsville is heavy on military and space technology development, anchored by the U.S. Army Aviation and Missile Command and NASA’s Marshall Space Flight Center. Rocket City moved up 10 spots to No. 49 on the Milken ranking.
Its ranking may improve over time as well. Japanese automakers Toyota and Mazada are partners on an assembly plant in the area that will employ up to 4,000 people once it opens next year. And Blue Origin, a private spaceflight company started by Amazon founder and billionaire Jeff Bezos, just opened a rocket engine plant in Huntsville.
The Palm Bay-Melbourne-Titusville, Florida area rocketed up 47 spots to enter the Top 10 on the Milken Institute ranking in 2020. Technology related to the aerospace and defense industry spending there played a significant role in the leap. The area is next to the Kennedy Space Flight Center and Cape Canaveral Air Force Station.
Blue Origin also has another operation there along with competitor SpaceX, founded by billionaire Elon Musk.
Although tech-heavy metropolitan areas did well, the biggest gainers in the rankings had nothing to do with technology. Wheeling, West Virginia; Tuscaloosa, Alabama; Grand Junction, Colorado; and Odessa, Texas, rose many spots on the list because of the energy industry and natural gas and coal.
Wheeling rose the most with a jump of 111 spots to No. 70. The Wheeling area ranked No. 5 for wage growth of small cities between 2016-2017, while Odessa ranked No. 4 for that metric.
However, Tuscaloosa and Wheeling are in the U.S. Appalachian region and Odessa is in the Permian Basin of west Texas. The U.S. Energy Information Administration has forecast monthly natural gas production to decline this year mostly stemming from those two regions. In the Appalachia region, low natural gas prices are discouraging natural gas drilling, and in the Permian Basin, low oil prices are expected to reduce associated gas output from oil wells, according to a February report.
Meanwhile, the coal industry is suffering domestically as coal-fired plants providing electricity and producing greenhouse gases continue to close. But exports of metallurgical coal used in making steel and thermal coal used to make electricity hit their highest level in five years in 2018 while production has slowed.
India was the biggest importer of U.S. coal in 2018, according to the U.S. Energy Information Administration, but coal exports began slowing last year while U.S. natural gas exports started rising.
Coronavirus Effect
Milken Institute's ranking used data through 2018, long before the coronavirus outbreak hit China and spread to the United States and other parts of the world. To deal with it, China temporarily closed factories across the country, including those that make products for the U.S. high-tech industry that dominate the San Francisco area.
Globally, there have been 88,930 confirmed cases of the coronavirus as of Monday morning, according to the World Health Organization. More than 90% of the confirmed cases, or 80,0174 have been in China, where 2,915 virus-related deaths have been confirmed. The virus has spread to 65 countries, including the United States, which has confirmed its first deaths related to the virus.
In San Francisco, mayor London Breed took a preemptive step in combating the virus by declaring a local state of emergency Feb. 25. That was before a case was reported in Solano County, just northeast of the city.
There are concerns China’s economy slows dramatically as a result of the virus that could ripple through U.S. companies that sell products and services in China.
“We may have to wait for the data to come out one or two years from now to see the real impact of this particular epidemic on U.S. economies,” said Lin with the Milken Institute. “China’s service sector is hit hard by the coronavirus. Although China is still the world’s major manufacturer and supplier for a variety of products and parts, the service sector currently accounts for a little over 50% of China’s" [gross domestic product], he said.
How the coronavirus outbreak affects the U.S. energy industry and economies remain "highly uncertain," according to the U.S. Energy Information Administration, which reduced its estimates for Chinese and global oil consumption for 2020 as a result of the virus.
"Jet fuel demand is likely to fall because of travel restrictions and demand for other oil products is likely to fall because of lower economic growth," the U.S. Energy Information Administration said in the February report.
