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Top 10 Cities for Business from MarketWatch, Part 2: The Bottom 10

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By Russ Britt, MarketWatch

RISMEDIA, Sept. 26, 2007-(MarketWatch)-Continuing with Market Watch’s Best Cities for Business, today we bring you the rest-the bottom cities. If you want proof that weather has little to do with where a business locates, just take a gander at MarketWatch’s Bottom 10 centers for business.

Two frigid towns in upstate New York — Buffalo and Rochester — made the Bottom 10 list. So did desert havens Tucson, Ariz., and Las Vegas. And the metro area with perhaps the nation’s most temperate climate, Los Angeles, also was in this dubious category.

The Bottom 10 list may be puzzling to some. For instance, Las Vegas has grown proportionately faster than any of the other 50 cities in the MarketWatch survey, but it wasn’t enough to keep the gambling hub out of the bottom of the rankings.

Some of that is due to the metrics used in the MarketWatch survey, which examined the concentration of Fortune 1000, S&P 500, Russell 2000 and Forbes 400 private companies. Our survey also looked at the concentration of small businesses as well as employment data and population growth.

There is one caveat: If we could include certain statistics — say, tourism — cities like Las Vegas and Los Angeles likely would move up in the rankings. But data from the Department of Commerce are incomplete and comparable statistics for individual metropolitan areas were unavailable from other sources.

Regardless, many of the lower-ranking cities, including Las Vegas, lack economic diversity. That helped to boost a number of cities to the Top 10 and propelled Minneapolis-St. Paul to the top.

Here are the bottom 10 centers for business among the 50 cities included in MarketWatch’s survey:

50. New Orleans, 76 points: Not to kick a city when it’s down, but the Big Easy probably would have made this list even if Hurricane Katrina hadn’t struck two years ago. It just may not have been on the very bottom. The city now has only four Russell 2000 firms, two Fortune 1000 companies, one S&P 500 component and no business on the Forbes list. Entergy Corp. is now the city’s sole S&P 500 company after Freeport-McMoRan merged with Phelps Dodge and moved its headquarters to Phoenix.

Hurricane Katrina caused the business picture to worsen considerably. The city lost roughly half its residents, putting it at the very bottom of the population growth index, and it finished 40th in job growth. Its highest ranking was 31 — and that was in the unemployment measure.

New Orleans’ small businesses are essential to the city’s tourism industry as well as its economic survival, and it finished 35th by that measure. However, the most recent statistics available are from 2004, a year before Katrina hit.

49. Rochester, N.Y., 114 points: This upstate New York town might have finished last, were it not for Hurricane Katrina and the lack of reliable tourism statistics. The city was dead last in job growth and in the bottom 10 in population growth and Russell 2000 measures.

It did, however, finish eighth in the S&P 500 category, thanks to a handful of big-name firms like Bausch & Lomb, Eastman Kodak and Constellation Brands.

48. Tucson, Ariz., 120 points: Arizona’s second-largest city may have suffered because of its size; it’s the smallest metro area in our survey and much of the state’s commerce is based in Phoenix. Tucson has no Fortune, Forbes or S&P companies and only a handful of Russell 2000 companies. Furthermore, it has a low concentration of small businesses.
But the city is among the top 20 in population growth and manages to keep its residents working, jumping up to the seventh spot in unemployment rankings. It does so through a burgeoning environmental cleanup industry and a large missile-systems assembly operation owned by Raytheon Co.

In addition, not many corporate headquarters are located in Arizona, perhaps due in part to its harsh summers. The state’s biggest city, Phoenix, ranked only 35th in the MarketWatch survey.

47. Buffalo, N.Y., 125 points: This upstate New York City, known for its tough winters, is much in the same boat as 49th-ranked Rochester — and it isn’t just because of the weather, says Richard Deitz, senior economist for the Federal Reserve Bank’s Buffalo office.

According to Deitz, neither Buffalo nor Rochester ever fully recovered from a decline in heavy industry several decades ago.

“Our economy has not fared very well, certainly over the last couple of decades,” Deitz said. “Climate can be a factor, but it’s not the only factor.”

Buffalo was next to last in population growth, as it lost nearly 3% of its residents. It now has only one major company, M&T Bank Corp., which sits on both the Fortune 1000 and S&P 500 lists.

46. Sacramento, Calif., 128 points: California’s capital suffers from the same growing pains as Tucson, and it competes with more formidable urban centers in the same state: San Diego, Los Angeles and San Francisco, the latter of which is only an hour away.

Sacramento has one major public firm, McClatchy, which made the Fortune list, but none of the region’s companies made the S&P list. It has two Forbes companies: Raley’s grocery stores and Pacific Coast Building Products, and the city is home to four Russell 2000 firms.

The city also ranks low on small-business concentration and unemployment metrics, but finished seventh in job growth. It may just be a matter of time before the city captures more attention from big business.

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