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San Antonio joined fellow Texas cities on the best big cities for jobs list. The Lone Star State took up half the slots.
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updated 4/28/2010 8:06:11 AM ET 2010-04-28T12:06:11

This year's "best places for jobs" list is easily the most depressing since we began compiling our annual rankings almost a decade ago. In the past — even in bad years — there were always stalwart areas creating lots of new jobs. In 2007's survey 283 out of 393 metros areas showed job growth, and those at the top were often growing employment by at least 5 percent to 6 percent. Last year the number dropped to 63. This year's survey, measuring growth from January 2009 to January 2010, found only 13 metros with any growth.

Mike Shires at the Pepperdine School of Public Policy, who develops the survey, calls it "an awful year." Making it even worse, the source of new jobs in almost all areas were either government employment or highly taxpayer-funded sectors like education and health. This year's best-performing regions were those that suffered the smallest losses in the private economy while bulking up on government steroids.

So far the recovery has favored the government-dominated apparat and those places where public workers congregate. After all, besides Wall Street, public-financed workers have been the big beneficiaries of the stimulus, with state and local governments receiving more than one-third of all funds. Public employment grew by nearly 2 percent over the past three years, while private employment has dropped by 7 percent.

Private-sector workers have also seen their wages decline, while those working for the various levels of government have held their own. Federal workers now enjoy an average salary roughly 10 percent as high as their private sector counterparts', while their health, pension and other benefits are as much as four times as high.

Not surprisingly government workers, according to a recent survey, are more likely to see the economy improving than those engaged in the private sector. It's not so pretty a picture on Main Street; personal bankruptcy filings rose 23 percent in the year ending in March.

Despite these differences, some patterns from previous years still persist. The most prominent is the almost total domination of the top overall rankings by smaller communities. With the exception of Austin, Tex., all the top ten growers — and all the net gainers — were small communities. Americans have been moving to smaller towns and cities for much of the past decade, as well as jobs, and this recession may end up accelerating the trend.

At the top of the list stands No. 1 Jacksonville, N.C., whose economy grew 1.4 percent, paced by 3.3 percent growth in government jobs. Fast growth, however, is not a stranger to this Southern community, whose employment base has grown 22.8 percent since 1998. The area includes the massive Marine Base at Camp Lejeune, a beehive of activity since the U.S. started waging two wars in Afghanistan and Iraq. Fort Hood-Temple-Fort Hood in Texas came in fourth place overall with Fayetteville, N.C., home to the Army's Fort Bragg, placing sixth and Lawton, Okla., home of Fort Sill, close behind at No. 7. Similar explanations can apply to war economy hot spots Fort Stewart (No. 20 overall) and Warner Robbins (No. 26), both in Georgia.

But perhaps nothing captures the current zeitgeist more than the presence, at No. 23, of Hanford-Corcoran, Calif. A large Air Force base and a state prison have bolstered Hanford-Corcoran's economy, which shows that even in the Golden State — an economic basket case whose unemployment keeps rising — a large concentration of government jobs still guarantees some degree of growth.

Not all our top-ranked small stars got their stimulus from Uncle Sam. Energy-related growth explains strong performances from Bismarck and ag-rich Fargo, N.D., at Nos. 2 and 8, respectively. You can also credit some energy-related growth to the high standing of Morgantown, W.Va., (No. 17) and Anchorage, Alaska, (No. 18), which have benefited from consistently high prices of oil and other sources of energy.

Our list of best places among big cities is dominated this year, as last, by Texas, with the Lone Star State producing fully half of our top 10. This year, like last, the No. 1 big city (those with a more than 450,000 non-farm jobs) was Austin, Texas, which enjoys the benefits of being both the state capital and the home to the University of Texas, as well as a large, and growing, tech sector.

But the Texas story also includes places that do not enjoy Austin's often overwrought "hip and cool" image. Broad-based economies, partly in energy, have paced the growth of No. 2 San Antonio, No. 3 Houston, No. 5 Dallas and No. 7 Fort Worth. Other consistent big-city Southern performers include No. 8 big metro Raleigh-Cary, N.C., as well as two ascendant Great Plains metropolises, No. 9 Omaha and No. 11 Oklahoma City. None of these places were too hard-hit by the mortgage meltdown, and they all have retained reputations as business-friendly areas.

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The other big winner among the large areas is an obvious one: No. 6 ranked greater Washington, D.C. While most American communities suffer, our putative Moscow on the Potomac has emerged as the big winner under Barack Obama and the congressional centralizers. Remarkably, federal employment in the area has grown at a smart pace throughout the recession. One partial result: Washington office space is now — for the first time ever — more expensive than that in Manhattan. Northern Virginia, home to many beltway bandit companies, ranks No. 4 on our list.

With the productive economy outside energy only now getting its footing, the biggest relative winners have been what could be called the "eds and meds" economies. This includes de-industrialized places such as Pittsburgh (ranked a surprising No. 13), Rochester, N.Y., (ranked No. 17) and Buffalo, N.Y. (No. 20). If you have few more factory jobs to lose, little in-migration and a huge collection of institutions relatively immune to the economic turndown, you have a better chance to look good in bad times. The stimulus tilted more toward education and health than to construction and infrastructure, something that has worked in favor of these cities.

We can see this in New York City, whose huge and growing concentration of colleges and hospitals helped propel it to No. 10 among the big regions, its best ranking ever, despite losing almost 130,000 jobs. This is all the more remarkable since the Big Apple was the epicenter of the financial collapse, although that also made it the prime beneficiary of the federal bailout and Wall Street's boom. Soaring salaries for hedge fund managers and new hires at financial firms could be pacing new growth in the city's elaborate service industry, from toenail painters, restaurateurs and psychologists to dog walkers and yoga instructors.

The health of the eds and meds economy, however, has even been enough to lift some traditional bottom-dwelling sad sacks, such as No. 14 Philadelphia, to unfamiliar, if rather relative, heights. With private-sector growth weak everywhere, cities with lots of big hospitals, universities and nonprofit foundations look better for the time being than they have in a generation.

We expect our list to change next year, but how it will do so will depend as much on politics as economics. The current policy approaches — with healthy increases in government employment and strong support for education — have worked relatively well for taxpayer-financed economies including those with a strong "eds and meds" sectors. State universities, now confronted with the real pain of the recession felt by state taxpayers, are already crying for heavy increases in federal support.

But if Congress takes a turn to the center, or even right, after November, the advantageous position of the favored government-supported sectors may erode. Particularly vulnerable will be state workers, whose current federally sanctioned reprieve could be terminated if voters force legislators to start addressing concerns over the huge federal governmental deficit both locally and nationally. Given D.C.'s unique ability to print money, Washington and its environs will likely continue to expand, as they did under the spendthrift Bush regime, but many state and local governments may be forced onto a stringent diet.

On the other hand, a welcome return to growth in overall economy would further boost those relatively low-cost areas — notably in Texas, the Great Plains and the Intermountain West — that have in recent years enjoyed the strongest trajectory in the non-government-related sectors, including natural resource-based industries . These places have probusiness regulatory and tax regimes, lots of available land and affordable housing, which will attract new businesses and workers to their areas.

This change could also benefit some places, such as Silicon Valley, parts of Southern California and the Pacific Northwest, which, despite high costs, still retain globally competitive, tech-related sectors. A resurgent job market in these areas would erase the current apparent advantage enjoyed by "eds and meds" based economies in favor of those places that will serve as the real incubators for a revived private sector economy. With the resumption growth, one hopes our economy next year will begin resembling the more capitalist, competitive one we have enjoyed in the past.

Joel Kotkin is a distinguished presidential fellow in urban futures at Chapman University. He is also an adjunct fellow at the Legatum Institute in London and serves as executive editor of newgeography.com. He writes the weekly New Geographer column for Forbes. His latest book,The Next Hundred Million: America in 2050, was published in February 2010 by Penguin Press.

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