Raleigh has one of the ‘best-performing’ economies in the country, think tank says
Raleigh’s economy is the fifth best-performing in the United States, and it’s well positioned to recover from the effects of the COVID-19 pandemic, thanks to its high-tech ecosystem and relative affordability, according to a new analysis from the Milken Institute.
The ranking comes from Milken’s annual Best-Performing Cities Index, a comparison of the 200 largest metro areas that the California-based economic think tank has released annually since 1999.
Milken uses its index to track which parts of the country are creating the best economic opportunities. The analysis places a heavy emphasis on job creation and wage growth as well as concentration of high-tech industries.
For the first time, Milken included housing affordability and broadband access to measure how equitable the growth is in these metro areas during the pandemic, a factor that caused many Californian and Northeastern cities to plummet in the ranking compared to recent years.
San Francisco, for example, went from being ranked the No. 1 performing city in Milken’s 2020 list — compiled before the pandemic — to No. 24. Meanwhile, Raleigh was ranked No. 11 in 2020.
“The reason for including these indicators is that they give measurements of access to economic opportunity people have in respective cities,” said Misael Galdamez, a senior policy analyst at Milken, in a telephone interview with The News & Observer.
It has become very hard in some of the nation’s largest cities to buy a house or find affordable rent for those working in the service industry, Galdamez added.
That is less true in the nation’s Sun Belt and Rocky Mountain states, the report finds. The cities in those regions with research universities and a tech ecosystem performed the best in Milken’s rankings. Of Milken’s Tier 1 cities, none were located in California, the Northeast or Midwest.
For instance, nearly 73.7% of people in the Raleigh-Cary metro area had affordable housing costs (spending less than 30% of wages on rent or a mortgage) in 2019, while no city in California did better than 65%.
The Top 5 performing cities on the 2021 list are: Provo, Utah; Palm Bay, Florida; Austin, Texas; Salt Lake City, Utah; and Raleigh. (Palm Bay benefited from a huge influx of investment into private space exploration.)
Raleigh’s growth
Galdamez said Raleigh’s strong performance in this year’s list is a testament to the region’s investments in its universities and tech industry.
The momentum from those investments is finally getting to the point that it is drawing national attention, he said.
“Everyone now knows about Raleigh and about the Research Triangle,” he said. “The universities and the innovation ecosystem is self-reinforcing and it has been paying off since the ’90s.”
Additionally, the Triangle has a diverse economy and isn’t dependent on just the universities. It also has a strong health care sector, and its tech industry boasts huge software and biotech companies. If biotech has a down year, Galdamez said, then those other sectors can prevent the region from experiencing knock-on effects.
Wages have been growing rapidly in Raleigh as well. From 2014 to 2019, wages grew 45.6%, the sixth-fastest rate of any metro area.
“When you combine that with generally affordable housing costs, that is a recipe for success,” Galdamez said.
Kevin Klowden, executive director of the Milken Institute Center for Regional Economics and California Center, said places like Raleigh should continue to attract more jobs in the coming years.
“You have a number of tech companies in California or elsewhere saying, ‘We don’t need to lure everyone to the Bay Area anymore. We can set up satellite operations,’” Klowden said, noting that Austin, Texas, has been the biggest beneficiary of this philosophy in recent months.
“It is a return to Sun Belt locations,” he added. “There’s an attraction to going to places that still have space to grow and investment already going.”
How other N.C. cities fared
While no other North Carolina metro area cracked Milken’s Tier 1 rankings, many showed up in the list’s second tier.
Charlotte came in at No. 26, dropping 10 positions from the previous year.
Wilmington, which has a growing financial tech ecosystem, picked up the 37th spot.
The Durham-Chapel Hill metro area came in at No. 42 in Milken’s rankings. However, it was one of the five biggest risers in the list from last year. It increased its position by 60 spots compared to 2020, the fourth biggest increase of any large metro area.
Asheville was the only other North Carolina city in the top 100, with a ranking of 73.
2021 Milken Best-Performing Cities (Tier 1)
Provo, Utah
Palm Bay, Florida
Austin, Texas
Salt Lake City, Utah
Raleigh, North Carolina
Boise, Idaho
Phoenix, Arizona
Nashville, Tennessee
Ogden, Utah
Huntsville, Alabama
Denver, Colorado
Fort Collins, Colorado
Seattle, Washington
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate
