San Antonio Leads Texas-Heavy List Of Best U.S. Economies

PHOTO: The skyline of San Antonio, Texas, is shown.

It turns out "Don't Mess With Texas," is more than just a slogan. At least judging by the state's ability to rebound from the Great Recession, and its dominance over the rankings in a new report highlighting the best-performing U.S. cities.

San Antonio heads up the Milken Institute's 2011 Best-Performing Cities index, but is just one of four Texas cities in the top five and nine of the 25 best in the country. The Lone Star State grades out well in job creation, according to the report, which found that Texas employers were responsible for one of every five U.S. jobs created from June 2010 to June 2011.

Ross DeVol, the Milken Institute's chief research officer, leads the team that compiles the index and said that a number of factors lie behind Texas' success, some unique to the region and others that cities elsewhere in the U.S. can try to emulate.

Gallery: America's Best-Performing Cities

For one thing, many Texas metro areas are benefiting from the military's Base Realignment and Consolidation (BRAC) process, which has brought more families near the state's armed forces facilities, from San Antonio's Lackland Air Force Base to Killeen's Fort Hood. Those families need housing, health care and other services, DeVol points out.

Texas is also seeing a surge in IT equipment and software employment. DeVol highlights Apple's expansion in Austin, where the company is said to be getting chips for its iPad, as well as significant presences from the likes of AT&T, IBM and Advanced Micro Devices.

"Given the depth of the Great Recession," DeVol says, "businesses have become more focused on cost." Texas, which has no state income tax, is very understanding of "the need for companies to be competitive," he adds, citing streamlined processes that allow employers to get new facilities up and running faster and aggressive recruiting of out-of-state businesses to cities where they can hire qualified workers for less than in New York, California, Massachusetts or many other states.

The cost issue is also a big factor in Utah, the only state other than Texas to put more than one metro area among the 25 best performers. Provo touts the educated workforce stemming from Brigham Young University, while Salt Lake City was a big gainer in a year when its mining presence was greeted with big demand for gold and silver. Both, along with Ogden and Logan (Utah-Idaho), which topped the Milken Institute's list of best-performing small cities, offer low-cost destinations for employers focused on keeping expenses in line.

In Pictures: Cities with the Best Economies

Utah also benefits by having plenty of room for development, an issue that limits the potential for growth in some larger metro areas like the one around New York. While DeVol points out that the NYC area was hurt by the loss of financial services jobs in 2011 – a trend that has continued with cuts announced at Bank of America, Morgan Stanley and others this fall – he also notes that many bigger metro areas did not fall off as much as others during the Great Recession.

While that means those economies proved more resilient to the downturn, it also means they are not springing back off a depressed base. To wit, none of the 10 largest metros cracked the top 10 Best-Performing Cities for the first time since 2008.

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