Best-Performing Cities Index 2014 - Press Conference

Milken Institute Metro Index 2014 Findings

• San Francisco ranked #1 nationally, driven by an outcomes-based metric focusing on job growth, wages, and technology rather than static costs or quality-of-life indicators.
• The index methodology avoids subjective measures like crime rates or housing costs, prioritizing the dynamics of job creation and human capital attraction.
• Two primary factors defined the top 25 metros: the technology sector and the shale oil boom.
• Five Texas metros placed in the top 10, leveraging energy strength and a favorable business climate.
• California and Colorado each secured four metros in the top 25.
• Fargo, North Dakota, ranked as the top small metro (top 179) due to oil exploration activity and spillover effects.
• West Palm Beach, Florida, was the most improved city from the previous year, rising 93 spots due to the end of the local housing bust.
• The index calculates growth over a five-year period to smooth business cycle volatility, supplemented by year-over-year job growth from August of the preceding year.
• Key metrics include employment growth, wages, technology growth, and diversity concentration within the knowledge-based economy.
• U.S. job growth has fully recovered all 8.7 million positions lost during the previous recession as of the second quarter of the prior year.
• Energy investment claimed the largest share of GDP since the early 1980s, with U.S. oil production increasing by 4 million barrels per day over five years.
• Shale oil dynamics may shift if prices remain below $70 per barrel, though a recovery would sustain the revolution.

San Francisco Economic Performance

• San Francisco ranked #5 in job growth across all U.S. metros over the past five years.
• The city achieved #1 in wage and salary growth nationally over the past five years and specifically in 2013.
• Unemployment in tech-related occupations within the city is below 2%.
• Technology employment concentration in San Francisco is double the national average.
• The employment multiplier for the tech sector is approximately 5 (one tech job creates four others).
• The "Professional, Technical, and Scientific Services" sector added 25,500 jobs over five years, accounting for 45% of total metro job growth.
• Average wages in the tech sector reached $160,000 per employee, significantly higher than the $90,000 average for professional services and $70,000 for the U.S. average in similar categories.
• Major employers driving growth include startups (e.g., Uber, Dropbox, Yelp) and established firms (e.g., Oracle, Salesforce, Bloomberg).
• Biotechnology, medical research, and social media are key fuel sources for the local economic expansion.

Other Top-Performing Markets

• Austin, Texas, ranked #2, noted as the most consistent top-five performer with high rankings in job growth (1st in 2008, 3rd in 2012, 9th in 2013) and wage growth.
• Provo-Orem, Utah, ranked #3, leading the nation in job growth over the past year with a 5.3% increase.
• Provo-Orem's Gross Metro Product (GMP) grew by 7.5%, compared to the U.S. average of 2.4%.
• San Jose, California (Silicon Valley), remains the world's largest technology hub with 270,000 tech jobs.
• Silicon Valley's workforce holds a master's degree or higher at a rate of 21%, double the U.S. average.
• Research Park (Durham, NC), in the Southeast, saw job creation rates accelerate, ranking 4th nationally in the last 12 months.

Mayor Ed Lee Statement and Policy Priorities

• Mayor Ed Lee emphasized that the city's goal was not explicitly to be ranked #1, but to ensure a robust recession recovery and diversified economic base.
• The city's growth is attributed to a multi-sector approach blending technology with healthcare, biotech, tourism, construction, and manufacturing.
• San Francisco has raised the minimum wage and is implementing tax reform to address systems that previously taxed job creation.
• The administration is prioritizing investments in education, youth, and families, including the swearing-in of a new school board.
• Housing is identified as a critical challenge, with an aggressive goal to build or rebuild 30,000 housing units.
• Of the 30,000 targeted units, at least one-third must be permanently affordable to low-income persons, and 51% of those must be affordable to working families.
• The city is utilizing public land, such as former school district property near Mission Street, to develop 125 new housing units.
• Incentives are being offered to private developers to increase the supply of affordable units in exchange for market-rate housing approvals.
• The Mayor announced a plan to eliminate chronic homelessness, including for veterans, within the next few months.
• Workforce development programs, such as health care academies for public housing residents, are creating pathways for low-income individuals to secure jobs.
• The city is fostering local manufacturing, including fashion, food production (beer, candy), and technology science campuses (e.g., SF State at Hunters Point).
• Mayor Lee expressed support for the 2024 Olympic bid, noting that cities holding this top index ranking have historically won re-election.

Panel Discussion and Future Outlook

• David Klesch (Chairman, Bay Area Council) and Kish Rajan (Head of Governor's Office of Business and Economic Development) were recognized for their regional economic leadership.
• Ross Duvall of the Milken Institute reiterated that the index uses rigorous, non-manipulated metrics to evaluate true economic performance.
• The panel highlighted the $160,000 tech wage premium and the 5:1 employment multiplier as unique drivers of broad-based economic health.
• The event concluded with a commitment to address housing challenges through innovation and public-private partnerships.
• The Milken Institute plans to release the next index in 2015, continuing the assessment of urban economic dynamics.