Benchmark: Phoenix ranks 6th best for doing business

Heather Peterson
Research Associate, Economic & Business Research Center
Eller College of Management

May, 2005

Phoenix ranks as the 6th best large city for doing business, according to Joel Kotkin, Senior Fellow at the Davenport Institute for Public Policy at Pepperdine University in his Inc. Magazine article “The Best Places For Doing Business in America 2005” (May 2005). Ranked 12th in last year's study, 6th placed Phoenix is preceded by two western cities, Riverside-San Bernardino, CA, the top ranking MSA and Las Vegas, NV, in second place, with Jacksonville, FL, and two Virginia MSAs, completing the top 6.

The ranking is based on current and historical job growth, which, according to Kotkin, “is the best measure of a region's economic vitality.” Assuming that “small businesses produce up to 80% of the new jobs in this country,” then “a region showing strong job growth is bound to be a hotbed of entrepreneurial activity… strong job growth suggests that a region's economy is expanding.”

Kotkin used current-year employment growth numbers for 274 MSAs as well as considering average annual job growth over the past three years and compared job growth “in the first and second halves of a period comprising the past 10 years. Job-growth factors account for about two-thirds of each city's final score; the balance among industries accounts for the remainder.”

Phoenix ranked 16th in best overall cities for doing business, following Western cities Reno, NV (1st ), Boise City, ID (2nd ), Casper, WY (3rd ), Riverside-San Bernardino, CA (6th ), Missoula, MT (8th ), and Las Vegas, NV (14th ).

The authors observe that the “economies of most big cities are idling. The real entrepreneurial hotbeds are now on the periphery -- where low costs make it possible to thrive in a tough global economy.” Although cities like New York, Boston, and San Francisco still attract many of the best and the brightest when they are in their 20s and early 30s, the authors suggest that there has been a decade long trend of people, as they get older and start families, moving away from large urban centers to suburbs or to smaller cities like Riverside-San Bernardino, Las Vegas, and Phoenix. They note that “between 2000 and 2003, for example, New York experienced a net out-migration of some 469,000 native-born citizens [while] Las Vegas and greater Phoenix, by contrast, each added 130,000 people over the same period.” This has lead to strong job growth and expanding economies in these and similar cities.

To read the entire article, or for more details please visit Inc. Magazine's website at http://www.inc.com/magazine/20050501/bestcities.html

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