Why Small Towns Create Hotter Labor Markets

Move to New York and take the San Francisco bench, the hottest job markets are not in the big cities. Mid-sized cities with populations under 2.3 million in states with low or no income taxes attract workers. The hottest cities on the list include Austin, Texas; Nashville, TN; Raleigh, North Carolina; Salt Lake City, Utah; and Jacksonville, Florida.

The Wall Street Journal has partnered with Moody’s Analytics to assess 300 metropolitan areas for unemployment rate, participation rate, job growth, labor force growth and wage growth in 2021.

The five hottest cities shared some commonalities. They were each home to major universities, state capitals, or high-tech employers. Two have no personal income tax and the others hover around 5%. Here are the details of why these cities topped the charts.

1.Austin, Texas.

Austin has a thriving technology hub and is home to Oracle Corporation. Tesla moved its headquarters to Austin during the pandemic – leaving Palo Alto, California. According to the WSJ study, Austin had the highest proportion of people working or looking for work. It also recorded the strongest growth in wage employment and wage growth.

Austin is the state capital and home to the University of Texas’ flagship campus. It is well known for its vibrant music scene and is popular for hiking, biking, swimming and boating. Austin is a year-round city with a temperate climate. Three years in a row (2017, 2018 and 2019), Austin earned the top spot on US News and World Report’s list of the best places to live in the United States (before slipping to number 13 in 2022).

2. Nashville, TN.

Nashville is a hotbed of music and entertainment. But Nashville’s major industries also include healthcare, transportation, banking, and finance. Nashville scored 7.1 out of 10 for local labor market, housing affordability, and quality of life in US News and World Report. Unemployment is only 2.4% (March 2022) and Tennessee has no personal income tax.

Music City is also a capital and home to a major university, Vanderbilt. It is home to the Grand Ole Opry House, the Country Music Hall of Fame and the historic Ryman Auditorium. The downtown district is bustling with many country music superstars making their debut in one of the local honky-tonks. If you like to play outdoors, there are over 10 stunning waterfalls within easy driving distance of Nashville.

3. Raleigh, North Carolina.

Voted sixth by US News and World Report, Raleigh’s top industries include manufacturing, commerce, transportation and utilities, information, and finance. Raleigh is a hub for tech giants Google and Apple. It is home to the second largest banking center in the United States. Its income tax rate is only 5.25% and its cost of living is 5% lower than the national average.

Also the capital and seat of North Carolina State University, Raleigh is part of the Research Triangle (along with Chapel Hill and Durham). Raleigh is one of America’s fastest growing cities and for good reason. It has that small town feel in the middle of a big city. The year round weather is inviting and you will never run out of things to do.

4. Salt Lake City, Utah.

Technology and computing are booming in Salt Lake City. Adobe establishes its headquarters in SLC with a second $90 million facility in Lehi, Utah. Adobe is expected to be the source of more than $85 million in state corporate, payroll and sales taxes over the next 20 years payable to the state. Overstock.com, Instructure and Domo are other companies that call SLT home. eBay has expanded into SLC with a $250 million building upgrade to house its 1,800 Utah employees. Utah has an income tax of 4.95% and a cost of living 8% lower than the national average.

If being outdoors is your thing, SLC should be at the top of your list. Eleven ski resorts are within driving distance of SLC, including Alta and Deer Valley, two of only three resorts that don’t allow surfers (Mad River Glen in Vermont is third). World-class ice climbing and hiking exist in the two mountain ranges that surround SLT: the Wasatch Mountains and the Oquirrh Mountains. And after you’re done exploring, you can now enjoy a beer with up to 5% alcohol! In November 2019, the 86-year-old law banning beer above 3.2% was finally replaced. The new law was supported by Utah’s vibrant craft brewing scene with plenty of choice in Salt Lake.

5. Jacksonville, Florida.

Jumping up the rankings in 2021, Jacksonville is the fifth hottest job market, in part due to the pandemic. Jacksonville is a logistics hub with its own seaport, two major interstate highways, rail and air connections. Dun & Bradstreet, Inc. has announced that it will be moving its headquarters out of New Jersey to Jacksonville.

Jacksonville is Florida’s most populous city with over 850 square miles of beaches – and it’s always sunny. It’s the birthplace of Southern rock and hosts the annual Jacksonville Jazz Festival every Memorial Day weekend. The cost of living is 11% lower than the national average and income tax is only 5.5%.

Due to the pandemic, people have moved to find more affordability and a better work-life balance. Big cities have suffered where medium cities have prospered. Businesses have followed suit amid the pandemic by finding more affordable spaces outside of major metropolitan areas. This trend is likely to continue as technology propels us forward as a digital economy.

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