Dr. Michael Shires and Joel Kotkin on "The U.S. Cities Creating The Most White-Collar Jobs, 2016" | Forbes

The U.S. Cities Creating The Most White-Collar Jobs, 2016

by Joel Kotkin and Mike Shires | Forbes | July 21, 2016

The information sector may have glamour and manufacturing, nostalgia appeal, but the real action in high-wage job growth in the United States is in the vast realm of professional and business services. This is not only the largest high-wage part of the economy, employing just under 20 million people at an average salary of $30 an hour, it’s also one the few high-wage sectors in which employment has expanded steadily since 2010, at more than 3% a year, adding nearly 3 million white-collar jobs.

In many ways, the business and professional service sector may be the best indicator of future U.S. economic growth. It is not nearly as vulnerable to disruption as energy, manufacturing or information employment, and more deeply integrated into the economy, including professions like administrative services and management, legal services, scientific research, and computer systems and design.  In a pattern we have seen in other sectors, much of the growth is concentrated in two very different kinds of places: tech-rich metro areas and those that offer lower costs, and often more business-friendly atmospheres.

To generate our rankings of the best places for business services jobs, we looked at employment growth in the 366 metropolitan statistical areas for which BLS has complete data going back to 2005, weighting growth over the short-, medium- and long-term in that span, and factoring in momentum — whether growth is slowing or accelerating. (For a detailed description of our methodology, click here.)

Tech Strikes Again

There is a growing confluence between technology and business services, as more companies use the Internet to conduct commerce.

This can be seen in several of our top-ranked large cities. Business service employment in the San Francisco-Redwood City-South San Francisco MSA has grown a remarkable 45% since 2010, placing it second on our list, slightly faster than third-ranked Austin-Round Rock, which clocked 42% growth over the same span, and No. 4 San Jose-Sunnyvale-Santa Clara, where business services employment expanded 36%.

It’s questionable whether this pattern will continue, particularly in the high-cost Bay Area. There are signs of a slowdown in Silicon Valley and San Francisco, with more space being subleased and property prices seeming to have peaked, albeit at extraordinary high levels. In contrast the future for less expensive areas — increasingly attractive to millennials as well as companies — may be far brighter, as companies shift employment to places their employees can live decently.

Resurgence In Middle America

This pattern can be seen in the balance of our top-performing regions. It starts with our top-ranked metro area, Nashville, Tenn., which has seen business service employment grow 47.2% since 2010 to 152,700 jobs, with 7.7% growth last year alone. Some of this comes from the establishment of branch offices of Silicon Valley companies like Lyft and Everbright, as well as the expansion of the area’s strong health care and entertainment industries.

Nashville’s appeal to millennials is unsurpassed, with the strongest growth rate in net migration of college-educated people aged 25-34 of any metro area in the country, and the reasons are not hard to find. It’s a charming city located in a temperate part of the country, with both excellent, and affordable, urban and suburban options.

But if Nashville is the belle of the business service ball, fifth-ranked Dallas-Ft. Worth is now the beast. The Texas powerhouse’s business services workforce has expanded 28.9% since 2010 to 458,200. The Dallas-Ft. Worth area has plenty of appeal to big companies with a large cohort of middle-income managers, as a paper to be published this fall by Southern Methodist University’s Klaus Desmet and Cullum Clark well describes. These jobs pay well enough to live well in Dallas’ nicer suburbs, such as Plano and Frisco, but not remotely enough to buy a house, or even a condo, in Los Angeles, San Francisco or New York.

This accounts, in part, for the relocation of Toyota America’s headquarters from Torrance, Calif., to the north Dallas suburbs, and likely plays a role in the plans of Jacobs Engineering, a longtime fixture in Pasadena, to relocate its headquarters to downtown Dallas.

In many ways, argues urban analyst Aaron Renn, Dallas is becoming the new Chicago. It is anchored by a large airport, a diverse economy and a location in the middle of country. Even as downtown Chicago has attracted some notable new corporate headquarters in recent years, these generally employ relatively few people, while companies that need access to a large white-collar workforce, like Toyota and Jacobs, have been gravitating to the Big D.

How About The Big Boys?

As manufacturing has declined in our largest cities, professional and business services have become the prime generator of high-end jobs. Yet among the country’s largest business service centers there is a growing divergence between the winners and laggards.

The most impressive performance among metro areas with over 500,000 business and professional service jobs has been New York. With 714,000 business service jobs, the Big Apple is without question the leader in the field, but more importantly it continues to grow. Since 2010, New York has grown its professional and business service employment by an impressive 22%, helping it rank 14th on our list. This reflects the city’s continued preeminence in such fields as law, design, marketing, public relations and advertising.

But the other traditional business service leaders have not fared nearly as well. Gotham’s traditional rival, Chicago-Naperville-Arlington Heights, still has 673,000 business service jobs but has seen only a modest growth just under 15%, ranking 43rd. Whatever may have been gained in generally small scale “executive headquarters” has not been enough to make the vast Chicagoland region a big winner.

Things are even less positive in 60th place Los Angeles-Long Beach-Glendale, the third largest business service area. Since 2010, its 13.8% growth is well below the national average. Nor is the slack in the Southland being picked up by the area’s sprawling suburbs, with Santa Ana-Anaheim-Irvine ranking a modest 39th and San Bernardino-Riverside clocking in at 52nd. The Bay Area business services world may be still booming, but south of the Tehachapi, progress is slow.

Will Business Services Continue To Disperse?

Those who suggest dense concentrations have efficiencies that overcome higher costs can take some solace from our numbers, but not too much. Many of the fastest growing business service centers are hardly paragons of dense urbanism, including No. 7 Orlando-Kissimmee-Sanford, Fla., and No. 8 Richmond, Va., where employment jumped 10% last year. Even sprawling Atlanta, which has lost some of its ‘90s era luster, is now growing its business service sector at a faster pace than New York and light years ahead of much denser Chicago and Los Angeles. It ranks 13th.

The shift to less expensive places seems certain to continue, in part due to the growing role of Internet communications, which breaks down formerly insurmountable distance barriers. Looking at the full list of the 366 metro areas we examined, the fastest-growers include many smaller communities, led by overall No. 1 New Bedford, Mass., where business services employment has grown 58.5% since 2010 to 6,200 jobs, as well as No. 3 Monroe, Mich., No. 4 Lake Charles, La., and No. 6 Lawton, Okla.

Essentially business service growth seems destined to break down into three types: (1) large and expensive metro areas — San Francisco-Silicon Valley and New York — whose economic dynamism is strong enough to counter high costs; (2) less expensive, but still large metros such as Nashville, Dallas-Ft. Worth, Richmond and a host of Florida cities that can be expected to garner a lion’s share of the new growth; and (3) smaller communities where business service sector jobs, particularly at the lower end, may be increasingly attracted as employers pursue an affordable quality of life. While the short term has favored the largest cities, the long term is pointing toward more migration to midsized and smaller destinations.