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Austin, Texas, has logged strong growth in manufacturing, technology-related employment and business services.
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updated 5/7/2012 7:39:28 AM ET 2012-05-07T11:39:28

Throughout the brutal recession, one metropolitan area floated serenely above the carnage: Washington, D.C. Buoyed by government spending, the local economy expanded 17 percent from 2007 to 2012. But for the first time in four years, the capital region has fallen out of the top 15 big cities in our annual survey of the best places for jobs, dropping to 16th place from fifth last year.

It’s a symptom of a significant and welcome shift in the weak U.S. economic recovery: Employment growth has moved away from the public sector to private businesses.

In 2011, for the first time since before the recession, growth in private-sector employment outstripped the public sector. More than half (231) of the 398 metro areas we surveyed for our annual study of employment trends registered declines in government jobs, with public-sector employment dropping 0.9 percent overall. Meanwhile, private-sector employment expanded 1.4 percent.

Forbes.com slideshow: See which big cities are best for jobs

Instead of government, the big drivers of growth now appear to be three basic sectors: energy, technology and, most welcome all, manufacturing.

Energy-rich Texas cities dominate our list — the state has added some 200,000 generally high-paying oil and gas jobs over the past decade — but Texas also leads in industrial job growth, technology and services. In first place in our ranking of the 65 largest metropolitan areas is Austin, which has logged strong growth in manufacturing, technology-related employment and business services. Houston places second, Fort Worth fourth, and Dallas-Plano-Irving sixth.

Another energy capital, Oklahoma City, ranks 10th, while resurgent New Orleans-Metairie places 13th among the largest metro areas.

To determine the best cities for jobs, we ranked all 398 current metropolitan statistical areas based on employment data from the Bureau of Labor Statistics covering November 2000 through January 2012. Rankings are based on recent growth trends, mid-term growth, long-term growth and the region’s momentum. (Click here for a detailed description of our methodology.) We also broke down rankings by size — small, medium and large — since regional economies differ markedly due to their scale.

The strong growth of the energy sector, and Texas, is even more evident in our overall ranking, which includes many small and medium-sized metropolitan areas. The top 10 fastest growers overall include such energy-centric places as No. 1 Odessa, Texas; second-place Midland, Texas; Lafayette, La. (fourth place); Corpus Christi, Texas (sixth), San Angelo, Texas (seventh); and Casper, Wyo. (10th).

The shift from public to private can be seen in the falling rankings of many of the most government-dependent economies. Outside of Washington, D.C. (where federal employment actually has continued to grow), Bethesda-Rockville-Frederick, Md., took an even more dramatic tumble in our big city table, dropping 34 places to No. 46.

There were sizable relative declines in the rankings of many state capitals such as Springfield, Ill. and Madison, Wis. College towns, which had previously done well in the face of the recession, have also moved sharply lower in our rankings, due to a combination of state budget cuts and better performance elsewhere. College Station, Texas, plummeted from fourth last year on our overall list to 167th; Fairbanks, Alaska, slid from 15th place to 165th, Corvallis, Ore., tumbled from 40th place to 203rd place; and Cedar Rapids, Iowa, dropped from 81st to 246th.

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Budget constraints have also hurt military towns, which previously had been largely immune to the recession. Last year’s overall No. 1, Killeen-Ft. Hood, Texas, slid to 43rd place; Jacksonville, N.C., home to Camp Lejeune, fell to 102nd from 19th last year; and Lawton, Okla., home to Fort Sill, slipped to 274th from No. 20 last year.

In addition to energy, the technology sector has been on a tear. After a decade of tepid growth and some years of job losses, Silicon Valley has blown itself another huge tech bubble, this time driven by the social media craze and a surge in private-equity investment. In the San Jose-Sunnyvale-Santa Clara metro area, the number of information sector jobs is up 36 percent over the past five years; this year the epicenter of Silicon Valley jumped 22 places to No. 5 among the 65 biggest metro areas. The social media boom has also been very good for the San Francisco-San Mateo-Redwood City area, which rocketed 16 places to a solid 17th this year.

But much of the tech growth in the country has continued to flow to more affordable regions less dependent on venture investment. At the head of the pack is Austin, where Apple recently announced a large expansion, and Salt Lake City, No. 2 on our big cities list, which is a major destination for expansion for Silicon Valley firms such as Adobe, Twitter and Electronic Arts. Other big players benefiting from the tech boom include seventh-place Raleigh-Cary, N.C., which has been a consistent top 15 performer for the past seven years; Seattle, which rose 18 places to 14th, and Denver at No. 15.

Perhaps most encouraging of all has been the expansion of the manufacturing sector. In 2011 manufacturing expanded at three time the rate of overall GDP, according to Mark Perry of the University of Michigan-Flint, and the sector added 425,000 jobs, also outpacing the national average.

As a result, the fortunes of some of America’s hardest-hit manufacturing regions are improving. Columbus, Ind., rose from 235th overall last year to No. 3 on our list this year. Michigan is beginning to see some signs of new life: perennial cellar dweller Holland-Grand Haven rose a remarkable 202 places to 19th on the overall list. A slew of other Michigan cities rose more than 100 places, including Grand Rapids (64th place), Bay City (136th), Warren-Troy-Farmington Hills (199th), Muskegon-Norton Shores (219th), and Jackson (233th). It is a glimmer of hope in a region that has lurked near the bottom of our Best Places rankings for as long as we have published it.

Another group of big cities that may be seeing light at the end of the tunnel are some of the metro areas hit hardest by the bursting of the housing bubble. Miami, which ranks 21st among the 65 largest metros, Tampa-St.Petersburg-Clearwater, Fla. (33rd), Phoenix (45th), Riverside-San Bernardino, Calif. (50th), and even Las Vegas (56th) began to show some signs of new life this past year.

So amidst all the good news, which big cities are still doing badly, or even relatively worse? Sadly, many of the places still declining are located in California, including Los Angeles (59th place among the biggest metro areas), Sacramento (60th), and, and just across the Bay from Silicon Valley, Oakland (63rd).

Only the old, and to date still not recovering, industrial towns of Providence, R.I. (64th), and Birmingham-Hoover, Ala. (dead last at No. 65), did worse. And the glad tidings in manufacturing have not touched all the Rust Belt cities: Camden, N.J. (57th), Newark, N.J. (58th), Cleveland, Ohio (61st), and Detroit (62nd) still feature prominently near the bottom.

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© 2012 Forbes.com

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