Detail of cover art on Milken Insititute's 2014 Best Performing Cities Index.
Detail of cover art on Milken Insititute's 2014 Best Performing Cities Index.

San Antonio moved back into the Top 10 in the Milken Institute’s 2014 Best Performing Cities Index released Friday, one of five Texas metro areas to finish in the Top 10. San Antonio ranks 10th in the new Index after finishing 12th in 2013 and 22nd in 2012.  It was something of a stunner when San Antonio finished first in 2011 after finishing 14th in 2010.

Austin finished second this year, down from its first place ranking in 2013. Houston finished 7th, Fort Worth 8th, and Dallas 9th. Laredo was ranked 18, and Lubbock finished 20th.

Year after year, the Index ranks Texas as the strongest state economy in the nation based on the number of cities that rank highly.

The report’s authors said that technology and shale play were the two key drivers in domestic economic growth last year, especially technology. It cited San Francisco, Austin, San Jose, Provo, UT, and Raleigh, as the country’s five leading tech cities.

Milken Institute Chief Research Officer Ross DeVol
Ross DeVol

“Many of the Best-Performing Cities of 2014 possess what we call the ‘innovation advantage,’” said Ross DeVol, chief research officer of the Milken Institute and one of the report’s authors. “Cities like San Francisco and San Jose are able to offset high costs, an unfavorable tax structure, and a burdensome regulatory environment, thanks to the clustering of talent and technology in an entrepreneurial ecosystem.”

This was the first year San Francisco finished first on the Milken Index, driven by the continuing migration of skilled young tech works to the city, a reminder to San Antonio as its continues to compete to attract and retain talented young professionals. The Top 25 cities include 13 metros that self-identity as tech-driven cities and economies, DeVol said.

“Young, technology-skilled workers are flocking to San Francisco, driving up wages and driving down unemployment in these sectors below 2 percent,” said DeVol.

Rackspace encourages its employees to personalize their desk space with pictures, flags, decorations, etc. Photo courtesy of Rackspace.
Some feared rackspace might leave the city in 2014. Instead it grew in place. Photo courtesy of Rackspace.

He called Texas a “job machine” and said the state grew both its tech and energy sectors in 2014, and continues to benefit from its favorable business climate.

Colorado is the only other state with four or more metro areas that consistently finish in the Top 20, but after Denver, the cities are smaller in population and economy. Denver, Boulder and Greeley finished 12th, 13th and 14th, respectively, with Fort Collins at 17.

Both Austin and San Antonio benefitted again this year from continued economic growth along the I-35 North corridor. The Milken Index measures MSA growth, so Round Rock and San Marcos are included in the measurement of Austin, and New Braunfels is part of the San Antonio MSA.

Milken economist Minoli Ratnatunga
Minoli Ratnatunga

The precipitous drop in oil prices in not reflected in the report’s 2014 rankings, but the authors said it was bound the affect the 2015 rankings. Houston is cited by the report as the city that has benefitted the most from the advances in horizontal drilling and hydraulic fracturing that have transformed the U.S. energy landscape. That same impact has been felt in smaller shale play markets, such as Fargo, ND and Victoria, TX.

“The Best-Performing Cities report is based entirely on federal data, and most of the data released by federal sources at time of our report preparation ended at 2013, except for one Bureau of Labor measure that captures job growth from Aug. 2013 to Aug. 2014,” said co-author and Milken economist Minoli Ratnatunga. “The 2014 data for cities really isn’t available yet, so we expect Texas metros to be strong in our next report, too, because the drop in oil prices didn’t occur until the fourth quarter of 2014, but it will show up eventually.”

Top 10 High-Performing Large U.S. Cities

  1. San Francisco-San Mateo-Redwood City
  2. Austin-Round Rock-San Marcos
  3. Provo-Orem, UT
  4. San Jose-Sunnyvale-Santa Clara, CA
  5. Raleigh-Cary, NC
  6. Salt Lake City
  7. Houston-Sugarland-Baytown
  8. Fort Worth-Arlington
  9. Dallas-Plano-Irving
  10. San Antonio-New Braunfels

The Milken Institute, based in Santa Monica, CA, is a nonprofit, nonpartisan think tank “determined to increase global prosperity by advancing collaborative solutions that widen access to capital, create jobs and improve health.”

The National Security Agency building in San Antonio. Image via Google Earth.
Growth in San Antonio’s cybersecurity sector, including a growing workforce at the National Security Agency facility, is helping. Image via Google Earth. Credit: Courtesy / Google Earth

One of the many data-driven initiatives of the Institute is its annual Index of top performing large and small cities released in January. The Index ranks U.S. metropolitan areas by how well they create and sustain jobs and economic growth. Indicators include job, wage and salary, and technology growth. The Index began in 199 in partnership with Forbes magazine and since 2002 has been compiled independently by the Milken Institute.

One aspect of the annual Index is how much fluctuation is evident in each city’s ranking from year to year. While the top 25 cities tend to be the same ones each year, it’s not unusual for San Antonio or other metro cities to move up or down 10-15 places in the rankings in a single year.

“A number of factors contribute to Index volatility,” Ratnatunga said. “If a city has a high concentration of jobs in a specific sector, like energy, you are going to see economic fluctuation. It’s a relative ranking, so one city could be holding steady and still lose ground in the Index as other cities growing faster overtake it. Also, some cities did pretty well (during the Great Recession) and outperformed the nation, so other cities had to recover from the recession. While they might be rebounding strongly, they still have to catch up.”

Data for all metros is available on the interactive “Best-Performing Cities” website, where you may also download the report.

“2014 was a banner year for employment growth in the United States. During the year all 8.7 million jobs lost during the Great Recession were recovered — and then some,” DeVol said. “Yet our country’s significant financial and social challenges remain, and are best addressed by developing local strategies to foster high-quality jobs. Our Best-Performing Cities are showing the way.”

San Antonio Rankings, 2002-2014

2002: 36
2003: 18
2004: 78
2005: 57
2006: no study
2007: 43
2008: 15
2009: 11
2010: 14
2011: 1
2012: 22
2013: 12
2014: 10

Screen shot of the interactive map available at www.best-cities.org.
Screen shot of the interactive map available at www.best-cities.org.

Components of the Best-Performing Cities index

ComponentWeight
Job growth (I=2008)0.143
Job growth (I=2012)0.143
Wage and salary growth (I=2007)0.143
Wage and salary growth (I=2011)0.143
Short-term job growth (Aug 2013-Aug 2014)0.143
High-tech GDP growth (I=2008)0.071
High-tech GDP growth (I=2012)0.071
High-tech GDP location quotient0.071
Number of high-tech industries with GDP LQ > 10.071
Notes: “I” refers to the beginning year of index. Weights do not add up to 1 due to rounding.Source: Milken Institute.

Victoria, propelled by Eagle Ford Shale Play economic activity, shot up to 3rd on the small city index. It was 16th in 2013  and 23rd in 2012. Midland finished 6th and College Station-Bryan finished 8th. Odesa, another top performing small city, ranked 12th.

Top 10 High-Performing Small U.S. Cities 

  1. Fargo, ND-MN
  2. Colombus, IL
  3. Victoria, TX
  4. Bismark, ND
  5. Iowa City, IA
  6. Midland, TX
  7. Morgantown, WV
  8. College Station-Bryan, TX
  9. Grenville, NC
  10. Auburn, Opelika, AL

*Featured/top image: Detail of cover art on Milken Insititute’s 2014 Best Performing Cities Index. 

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Robert Rivard

Robert Rivard is editor of the San Antonio Report.