Best Performing Cities 2012

The Milken Institute’s Best Performing Cities Index 2012 was released this morning, and, as usual, the benchmarking report is an interesting read.  This report offers a quality analysis.  Unlike many such reports, such as the ALEC Rich States, Poor States studies, the Milken Institute reports don’t include a clear ideological bias.  But, the report does have some quirks that are important to understand.   For example, the Milken researchers’ rankings rely heavily on measures that track a community’s recent job economic performance.  They emphasize a region’s recent job, wage, and GDP growth.  I have no problem with that approach, but, in practice, it means that these rankings often track regions that have done well in the recent past.  They may be less effective at tracking future performance.  Recent history is instructive.  Until the Great Recession, communities in Florida dominated these rankings.  In the 2012 edition, Florida communities rank very low on most measures.   Movement from top performer to poor performer can happen quite quickly.

Now, onto the findings–this year’s top performer among large metros is San Jose-Sunnyvale-Santa Clara, CA, suggesting that, as the report quips, “Silicon Valley is back.”  Among smaller cities, Logan, Utah-Idaho takes the top position.

The rankings yield some interesting trends:

  • It’s good to be strong in technology sectors.  Many of the top performing cities, such as Austin, Raleigh, and the DC metro area, are home to extensive information technology clusters.
  • Energy-related clusters are also strong performers.  These factors account for high rankings for Houston, Lafayette (LA), and Bakersfield (CA).
  • The manufacturing renaissance appears to be for real.  Manufacturing centers were among the leading communities that saw the greatest performance improvements from previous years.   Examples include Holland (MI), Spartanburg (SC), Rockford (IL), and Gary (IN).

As always, my concluding advice is to avoid placing too emphasis on the findings of one report or the results of one set of rankings.   These numbers can fluctuate greatly from year to year.  While each year’s ranking may get the headline, the long term trends are what matters.



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