Jonas Crews, Jackson Li, Ross DeVol, Dave Shideler, Anu Chatterjee
The COVID-19 pandemic disrupted life and contracted our local economy in unprecedented ways. That is why the underlying structural composition of metropolitan economies played a larger role than ever. This 2021 edition of our annual Most Dynamic Metropolitans (MDM) report sets out to identify which locales are making themselves more resilient and moving toward better economic outcomes for their citizens.
Use the map below to see how each metropolitan area performed:
Our index is based on capturing recent employment growth, wage growth, and GDP growth, as well as two entrepreneurship metrics (the density of young business activity within the overall economy and density of well-educated workers within the workforce employed by those young businesses) and the average income, which reflects previous productivity gains. We are also interested in determining which metros have improved over years past. On this front, we have seen some promising results with heartland metros such as Columbia, Missouri jumping to 51st from 75th. Other heartland university towns such as Madison, Wisconsin and Ann Arbor, Michigan regained positions in the top 100. And of course, given the differences between 2021 and years past, population density and vaccination rates influenced movements up or down the rankings as well.
For those at the top, we see a mix of top tech hubs, low-cost emerging tech hubs with outdoor and lifestyle recreational amenities that have been attracting remote workers, university and state capital presence, along with a lack of dependence on energy or international tourism and business travel as propelling factors.
Top Tech Hubs
It continues to be no surprise that familiar names of San Francisco and Seattle round the top of the MDM rankings due to their dominance as tech hubs, but others, such as Austin-Round Rock-Georgetown, Texas have been emerging as centers for tech and innovation.
Despite more restrictive COVID-19 protocols than much of the nation, San Jose-Sunnyvale-Santa Clara, California was first. It is on a peninsula but doesn’t have the population density of large cities such as New York, Los Angeles or Chicago. Many of its highly skilled tech talent were able to work remotely without major disruptions. San Francisco-Oakland-Berkeley was third. While experiencing an 8.3% decline in employment in 2020, jobs rebounded in 2021 and strong income growth over the medium term, along with the knowledge-intensity of its young firms, helped sustain its high ranking. Many workers chose to work remotely, but most remained in exurban locations, places beyond the city and suburbs, of the Bay Area.
Austin-Round Rock-Georgetown, Texas was another tech hub that ranked high (seventh). While it doesn’t have as high a share of its startups in the tech sector as the West Coast hubs, it has a vibrant entrepreneurial ecosystem with lower costs. Several California tech firms announced they were moving their headquarters to Austin (Tesla and Oracle being the most prominent). The University of Texas and being the state capital assisted as well.
Seattle-Tacoma-Bellevue was another tech hub among the most dynamic coming in at 11th. Home to tech giants Microsoft, Amazon and many other corporate headquarters, and the cutting-edge biomedical research producing University of Washington, Seattle barely slipped from our previous score.
Perhaps the most salient pattern present in the annual evaluation is the extent that several Rocky Mountain states exerted their dominance. Utah achieved a remarkable accomplishment— all five metro areas in the top 25 (St. George, 4th; Provo-Orem, 5th; Logan, 7th; Salt Lake City, 13th; Ogden-Clearfield, 16th). Several are emerging tech hubs with attractive outdoor recreational amenities that are appealing to knowledge-worker talent, including entrepreneurs. Many tourists who might have gone abroad if not for COVID-19 travel restrictions, visited Utah and some remained to work remotely. Altogether, Rocky Mountain states claimed 12 of the top 25 spots (Idaho and Colorado with three each and one in Nevada). These other metros (Boulder, Colorado, for example) share these characteristics and several have research universities. Although not in the Rockies, Bend, Oregon at eighth falls into the outdoor recreation category close to coastal tech hubs.
Major Research Universities
Another group are attractive, lower cost locations anchored by major research universities not in Mountain states. The Research Triangle has Durham-Chapel Hill (16th) and Raleigh-Cary (18th), North Carolina; and Wilmington, North Carolina joins the top 25. North Carolina State, the University of North Carolina and Duke are research leaders and incubators of tech firms. Software firms such as SAS and Red Hat are anchors as well as major biopharmaceutical firms. Fayetteville-Springdale-Rogers, Arkansas, (Northwest Arkansas) home to Walmart in Bentonville, combines the advantages of the University of Arkansas, outdoor amenities such as mountain biking, arts and recreation, along with corporate headquarters of logistics giant, J.B. Hunt, and the nation’s largest protein producer–Tyson Foods.
Florida had The Villages at second. It has seen rapid population growth due to retirees flocking there. Additionally, Naples-Marco Island, Florida (10th) and Crestview-Fort Walton Beach-Destin, Florida was 20th. Pent-up demand for travel, and substitution of domestic for international visitation, aided their performance.
Oil and Gas
A key reversal of fortunes occurred among oil and gas focused metros. Due to COVID-19 and the collapse in energy demand and prices, as well as more capital constraints on the fracking sector, oil and gas exploration declined in 2020 and most of 2021. Even with oil prices recovering in recent months, exploration activity is recovering slowly. Former No. 1, Midland, Texas, slipped to 38th. Greely, Colorado, and Odessa, Texas, among the most oil and gas dependent in the nation, slid over 200 spots. Four of the top seven metros experiencing the biggest fall from last year’s rankings were in oil and gas extraction-dependent metros. Even former top-heartland performers such as Houston and Dallas fell in the ranking due to reliance on oil and gas, though Dallas had airline dependence further harming it.
Foreign Tourism and Business Travel
Another structural component of the change in fortunes was how susceptible metropolitan areas were to foreign tourism and business travel. Foreign tourists have longer hotel stays and spend more per day than domestic tourists at museums, galleries and eating and drinking establishments. For example, New York dropped to 78th; Orlando, Florida dropped to 125th; Miami to 140th; Las Vegas to 164th; and Honolulu to 316th.
Although the heartland had just two metros in the top 25, four in the top 50 and 17 in the top 100; there were encouraging trends that will manifest themselves over the next couple of years. Heartland university towns witnessed an improvement in ranking in this edition. In addition to Austin and Northwest Arkansas, Columbia, Missouri, home to the University of Missouri, rose 24 positions to 51st. Madison, Wisconsin and Ann Arbor, Michigan moved back into the top 100. Columbus, Ohio, home to Ohio State University, was just outside the top 100 at 102nd. Intel just announced they are establishing two computer chip plants at a site in the metro area, and Ohio State and the technical schools were big reasons. As firms look at reshoring high value-added manufacturing or expanding capacity domestically rather than abroad, heartland locations will look increasingly attractive with lower costs and renewed focus on upskilling.
Manufacturing, associated logistics and transportation heartland locations are poised to move up in the rankings. In addition to Columbus, Ohio, Cleveland, saw a gain this year. As reshoring manufacturing gains ground, heartland logistic centers such as Memphis, Tennessee-Mississippi-Arkansas will benefit. A transportation hub, it operates the world’s busiest cargo airport courtesy of FedEx. Memphis rose 51 positions this year. Kansas City, Missouri-Kansas climbed 60 places over the last two years. Given the concentration of manufacturing, especially light vehicles, and being an important transportation center, increased availability of computer chips should boost its position.
Nashville, Tennessee should resume its high ranking as tourism begins to recover with its business-friendly environment and mix of cultural and natural amenities. It is an important health care services and medical research cluster. As concerts recover, the Music City seems well-positioned. Dallas will rebound as air travel begins to normalize and Houston weathers the energy crunch to move up.
Michigan saw several metros begin to advance in the rankings including Niles, Bay City, Jackson and Midland. They all witnessed large jumps. Heavy dependence on manufacturing, and lower costs of operations, make these communities ready for improvement.
As this is an annual report, it will be curious to learn what cities do to assist their economic recovery from the pandemic and possibly look at the dynamics and diversity of their structural composition through a new, innovative lens.Download the report