One of the saddest tasks in the annual survey of the best places to do business I conduct with Pepperdine University's Michael Shires is examining the cities at the bottom of the list. Yet even in these nether regions there exists considerable diversity: Some places are likely to come back soon, while others have little immediate hope of moving up.
The study is based on job growth in 336 regions--called Metropolitan Statistical Areas by the Bureau of Labor Statistics, which provided the data--across the U.S. Our analysis looked not only at job growth in the last year but also at how employment figures have changed since 1996. This is because we are wary of overemphasizing recent data and strive to give a more complete picture of the potential a region has for job-seekers.
First let's deal with the perennial losers, the sad sacks of the American economy. Mostly cities in the nation's industrial heartland, these places have ranked toward the bottom of our list for much of the past five years. Eleven of the bottom 16 regions on our list are in two states, Ohio and Michigan. In fact, the Wolverine State alone accounts for bottom four cities: Jackson, Michigan, Detroit, Saginaw and Flint.
Unfortunately, there's not much in the way of short-term--or perhaps even medium- or long-term--hope for a strong rebound in those places. President Obama seems determined to give the automakers, for whom Michigan is home base, far rougher treatment than what he meted out to ailing companies in the financial sector.
In addition, new environmental regulations may not help auto production, since it necessitates some carbon-spewing and therefore perhaps unacceptable levels of greenhouse gas emission.
However, not all of Michigan's problems stem from Washington or the marketplace. Many of the locations at the bottom of the list remain inhospitable to business. To be sure, housing is cheap--in Detroit, property values are fast plummeting toward zero--but running a business can be surprisingly expensive in these hard-pressed places.
In fact, according to a recent survey by the Tax Foundation, Ohio has an average tax burden roughly similar to New York, California, Massachusetts and Connecticut. But while the others are comparatively high-income states, Ohio residents no longer enjoy that level of affluence.
Can these places come back? It is un-American to abandon hope, but there needs to be a radical shift in strategy to focus on creating new middle-class jobs. Some Midwestern cities, like Kalamazoo and Indianapolis, have made some successful efforts to diversify their economies, encouraging start-ups and trying to be business-friendly.
But those are exceptions. Cleveland, one of our worst big cities, could spark a renaissance by revamping its port and nearby industrial hinterland. Once the world economy improves, it could re-emerge--building on the existing knowledge and skills of its production- and design-savvy population--as a hub for manufacturing and exports.
But right now, Cleveland does not seem to be pursuing such opportunities. As Purdue's Ed Morrison has pointed out, local leaders there seem to "confuse real estate development with economic development."