Best U.S. Cities To Earn A Living, August 18, 2008
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Though Houston has plenty of fat cats, this is not a story about America’s Most Overweight Cities.

Rather, Houston is recognized here for its dynamic business environment, low unemployment and high wages relative to income. These factors make Houston the best city to earn a living by our calculations.

A record amount of money has been made off oil and commodities this year, and Houston is the American business hub of those industries. Throw in the weak dollar, which allows Houston-based materials companies to glean more cash off exports and increases the price of gasoline, and it’s easy to understand why the city excels.

And it’s not likely to change anytime soon. When you add up the projected gross state product growth, business openings vs. closings, and venture capital investments in Texas, based on data from Moody’s (nyse: MCO – news – people ) and Pacific Research Institute, the Lone Star state ranks fourth in the country for its future economic prospects.

Now if it could only do something about the humidity and traffic.

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Right behind Houston are Minneapolis, home to more of the nation’s top companies per capita than any other city; Boston, fueled heavily by the biotech industry; and Washington, D.C., where unless the government goes out of business, consulting firms will continue to make a killing.

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Behind The Numbers
To compile our list, we looked at the country’s 40 largest Census-defined metros and gauged the quality of the business environment by how many of the Forbes’ 400 best big companies and 200 best small companies were headquartered there. These are companies with strong growth prospects and positive revenue streams. The best big companies are perfect for the company man, and the rate of success for small businesses is an indicator of the business environment’s hospitality to entrepreneurs.

We also looked at each metro’s median incomes, collected from the U.S. Census Bureau, compared them to cost of living (provided by the Council for Community and Economic Research), and factored in job-growth forecasts from Moody’s

Some might object that the industries in remission in some of these cities offer jobs few would call alluring. For instance, jobs in Phoenix or Las Vegas are declining because of a stall in the number of new homes being built, and in Detroit they’re shrinking as the auto industry contracts.

However, when a local industry crashes, it drags the local economy down with it. High-paying consulting or marketing jobs in Detroit are affected by the Big Three’s financial woes, as are shops or restaurants in Phoenix whose customers lack discretionary income due to falling home prices.

In other words, the more successful local companies and employed denizens, the brighter the future of a city. Even if you work in San Francisco and aren’t in tech, or in New York and don’t have a job on Wall Street, the health of those industries means a great deal to you.

San Francisco ranked seventh, thanks to a healthy tech industry. The City by the Bay has an extremely high cost of living, but the San Francisco metro includes San Jose. Between them is a who’s who of the top tech companies in the country. Whether you’re a start-up, or want to work at Google (nasdaq: GOOG – news – people ), high salaries and available venture capital are concentrated here.

New York’s economy is one of the most broadly based in the country. Need proof? Wall Street has been at the focus of our current economic woes related to subprime. Banks have lost billions and mass layoffs have followed, but the metro still maintains an unemployment rate of 5.1%, comfortably below the national average of 5.7%.

That’s not the case in many cities across the Rust Belt. Just run through our list of America’s Fastest Dying Cities and count how many of those cities are in states rated as the worst places to do business thanks to high tax, regulation, labor and energy costs.

It’s a far better bet to catch one of these ten cities on the upswing.

In Depth: Best U.S. Cities To Earn A Living

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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