Calif. Dominates Best Places for Business

In the long parade of kooky trends lately sweeping California — banning perfume in restaurants and Indian mascots in public schools, smoking communal hookahs in cafes, turning your own bitter divorce into a thinly disguised autobiographical film that becomes a box-office hit — hold a place for sanity.

The state has proven, on the whole, remarkably resilient through the spike of energy prices and the constant thud of falling tech companies.

In the fourth annual Forbes/Milken Institute Best Places for Business and Careers, California has grabbed six of the 10 top spots, one more than last year.

With more than $1 trillion worth of goods and services produced each year, the Golden State generates 13 percent of total GDP in the United States, making California the world's fifth-largest economy.

Forbes.com: Full Coverage of the Best Places List

Net Quake Topples San Jose

Look closer and you'll see a shuffling of regional players within California.

Thanks largely to the Internet earthquake, San Jose toppled from first place on the list last year to No. 61 this year; San Francisco fell from No. 3 to 54.

San Diego, ranked No. 8 last year, rose to the top this time. The reason? "Industrial diversity within a metro area during a down economic cycle is critical," says Ross DeVol, director of regional studies at the Milken Institute.

You find a mix of strong companies within a broad technology base in the San Diego metro area — Sempra Energy, Qualcomm and IDEC Pharmaceuticals, not to mention one of the largest collections of biotech outfits in the United States, with some 500 of them.

To fatten their talent pools, these companies have their pick of more than 200,000 students from nearby colleges and universities.

NAFTA Boosts Other Regions

Diversified economies also helped propel Santa Rosa, Ventura, San Luis Obispo, Oakland and Orange County to the top of the rankings.

The Forbes/Milken list of Best Places relies on the latest government data for employment and wage growth over one- and five-year periods. Analysts at the Santa Monica, Calif.-based Milken Institute also search for critical shifts within the vast technology sector, weighing one- and five-year changes in gross tech output, technology output as a percentage of the total metro economy and the diversity within tech industries.

We added a "job momentum" category this year tracking employment during the first quarter of 2002 to gauge how metro areas were handling the effects of Sept. 11 and the slowing economy in 2001.

There's one reason you see a couple of non-Western regions in the top 10. Two cities on the Texas-Mexico border, McAllen and Brownsville, got a big boost in job and wage growth from the North American Free Trade Agreement.

For more, go to Forbes.com..

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