Why are some places in America prospering, and some struggling? What separates the cities that are positioned well for the future from those that are still mired in the setbacks inflicted by the financial crisis and the Great Recession? Our annual Best-Performing Cities index provides a data-driven, comprehensive measure of economic strength across metropolitan areas. We include job, wage, and technology metrics over a five-year period to capture the structural elements.

A relative handful of communities have seen employment rebound to prerecession levels; they are poised to gain a bigger share of the accelerating expansion we expect to see. Identifying the regions that weathered the downturn best and are recovering fastest reveals a range of ideas and strategies for seizing opportunity and keeping risk at bay. One clear takeaway is that communities and industries that embrace technological know-how can claim an enviable advantage. In 2012, rewards accrued to those that designed and produced communications and computing devices. It also helped to have the stuff in the ground to meet America's energy needs and host industries that lent stability to the local economy, if not spectacular growth.

Key Findings

• San Jose-Sunnyvale-Santa Clara, Calif., vaulted 50 spots from last year to lead our Best Performing Large Cities Index, a position it last held in the 2002 rankings.
• Texas metros didn't dominate the rankings quite as much as last year but still took three of the Top 10 positions and seven of the Top 25.
• Tech centers performed well, holding 12 of the Top 25 positions. In addition to San Jose, Austin-Round Rock, Texas; Raleigh-Cary, N.C.; Washington-Arlington-Alexandria, DC-VA-MD-WV; Salt Lake City, Utah, and Cambridge-Newton-Framingham, Mass., were in the Top 10.
• Logan, Utah-Idaho remained the best Small City for 2012 with the help of a thriving technology sector.
• Holland-Grand Haven, Mich., enjoyed the biggest surge, rising 108 spots.

What's Behind the Success Stories?

The return of technology clusters to the list of Best-Performing Cities is the top story for 2012.

The resurgence of business investment in equipment, especially information technology and software, has been the unheralded story of this recovery as businesses began making IT purchases that had been deferred. Throw in some social media, iPads, the apps that run them and clean technology, and it becomes clear why these tech centers advanced in 2012.

A recovery in traditional manufacturing was also important, particularly autos and heavy capital goods like mining equipment and excavators.

How Can This Information Be Used?

We pinpoint where employment is stable and expanding, wages and salaries are increasing, and economies and businesses are thriving. Armed with this knowledge, businesses, investors, industry associations, development agencies and government officials, academics, and public-policy groups can assess, monitor, and gain insight into each metro's performance relative to the rest. We also provide benchmarking data that can inform approaches to improving a region's performance.

Moreover, the index provides a tool for understanding consumer markets and business opportunities as communities recover from the financial crisis and Great Recession. Identifying the regions that weathered the downturn best and are recovering fastest reveals a range of ideas and strategies for seizing opportunity and keeping risk at bay.

About the Milken Institute

A nonprofit, nonpartisan economic think tank, the Milken Institute works to improve lives around the world by advancing innovative economic and policy solutions that create jobs, widen access to capital, and enhance health. We produce rigorous, independent economic research—and maximize its impact by convening global leaders from the worlds of business, finance, government, and philanthropy. By fostering collaboration between the public and private sectors, we transform great ideas into action.

Armen Bedroussian is a senior economist with the Institute's Economic Research group. His research focuses on regional industry dynamics, economic impact analysis, and forecasting of regional and macroeconomic trends. His contributions to many of the Institute's research projects and publications have provided useful benchmarking tools to business and policy leaders. Bedroussian has co-authored numerous studies, and was directly involved in the groundbreaking research contained in "An Unhealthy America: The Economic Burden of Chronic Disease" and "Mind to Market: A Global Analysis of University Biotechnology Transfer and Commercialization." His recent work specific to the California economy includes "Energizing California: Mapping Chevron's Economic Impacts on the Golden State" and "Manufacturing 2.0: A More Prosperous California." Bedroussian co-authors the annual "Best-Performing Cities" index. His work has also appeared in The Milken Institute Review. Before joining the Institute, he was an economics teaching assistant in micro- and macroeconomics at the University of California, Riverside, where he received a bachelor's degree in applied mathematics and a master's degree in economics.

Ross C. DeVol is chief research officer at the Milken Institute. He oversees research on international, national, and comparative regional growth performance; technology and its impact on regional and national economies; access to capital and its role in economic growth and job creation; and health-related topics. Since joining the Institute, DeVol has put his group in the national limelight with groundbreaking research on technology and its impact on regional and national economies. He is an expert on the new intangible economy and how regions can prepare themselves to compete in it. He examines the effects of technology, research and development activities, international trade, human capital and labor force skills training, entrepreneurship, early stage financing, capital access, and quality-of-place issues on the geographic distribution of economic activity. DeVol is ranked among the "Super Stars" of Think Tank Scholars by International Economy magazine. DeVol appears on national television and radio programs, including CNN's "Moneyline," "Wall Street Journal Report with Maria Bartiromo," Fox Business News, and CNBC. He is frequently quoted in print media, including the Wall Street Journal, the Financial Times, Investor's Business Daily, Forbes, The Economist, Time, and Bloomberg Businessweek. DeVol earned his master's degree in economics at Ohio University and received advanced training in economics at Carnegie Mellon University.

Yu Liu is a research analyst at the Milken Institute. She specializes in local economic development, industrial mix and urbanization. She is also interested in transportation and affordable housing policy, particularly in Asia. Before joining the Institute, she worked as a short-term consultant at the World Bank, conducting research on the demographic, economic and infrastructure development of towns and affordable housing policies of cities in China. Her work is included in the World Bank publication "China Small and Medium Towns Overview." She holds a master's degree in planning from the University of Southern California, with a concentration in economic development, and bachelor's degrees in urban planning and economics from Peking University.