Hot Cities 2006


New Jersey is the shining light in the generally under-performing Northeast. The Garden State sank from second place last year to fourth, but it's still the highest-ranked Northeastern state. Strengths include easy access to scores of consumers in the New York/Philadelphia/Washington, DC, area and good infrastructure, including major airports and seaports, says Virginia Bauer, CEO of the state's Commerce, Economic Growth and Tourism Commission. The high level of economic activity means there's plenty of opportunity for startups to jump into the game.

The state's new governor, former Goldman Sachs CEO Jon Corzine, has asked for a review of the state's financial and tax incentive programs, with an eye to making sure growing businesses get their share, Bauer says.

Across the Hudson River in 35th-ranked market New York City, Federal Reserve Bank senior economist Rae Rosen says the city's small-business sector is often underestimated. Though our study tracked only businesses with five employees or more, Rosen says the city's large immigrant population teems with self-employed businesspeople.

"Within the 2nd District [of the Federal Reserve] of New York; New Jersey; and Fairfield, Connecticut, we see a far more robust picture," says Rosen. "These small businesses are under the radar."

But in upstate New York, Rosen says, as in much of New England, the outlook is bleaker as manufacturing plants continue to migrate southward and overseas.

Boston Federal Reserve Bank senior economist Katharine Bradbury, who studies the New England economy, says the region continues to struggle to recover from the economic downturn of the early 2000s, which hit hard here. New England's employment rate is still down 2 percent from its pre-recession peak, while the nation's employment rate has risen 2 percent above its bubble-bursting low.

The region suffers from a lack of affordable and available land, Bradbury notes, and the employment growth rate is about half that of the nation. One result of the fairly stagnant economy is low population growth--Massachusetts actually had a net population loss in both 2004 and 2005.

On the upside, the area boasts an unemployment rate lower than the national average: It was 4.5 percent in May 2006, vs. 4.6 percent nationwide.

University of Rhode Island economics professor Leonard Lardaro says lower-population states in the Northeast are grappling with ways to become more alluring to business owners. "Rhode Island is trying to find its way as far as its tax and cost structure," he says. "We're trying to be more competitive with Massachusetts and Connecticut." Among Northeastern cities, the Washington, DC-Baltimore area, which ranked sixth for the second year, is the region's top market. Chamber senior vice president of marketing and communications Chris Knudson says a boom in the redevelopment of blighted neighborhoods within the area has created ample opportunity for entrepreneurs.

Downtown Revival
At 2-year-old Moda Restaurant & Lounge in downtown Providence, Rhode Island, chef/owner Jules Ramos is benefiting from his city's on-going urban-renewal efforts. Born in Angola, Ramos, 38, says his Portuguese-inspired waterfront eatery does nearly $2 million in annual sales.

The city is coming back from a low point four years ago, when its longtime mayor was jailed after a scandal. Once a blighted urban core, downtown is now sprouting upscale condo towers. The city, which lost population from the 1970s on, began to gain residents again around 2000.

Because the economy is still recovering, Ramos says the city offers ample assistance to growing businesses. It has also introduced numerous special events--including WaterFire, a series of riverside-bonfire nights--that draw visitors downtown.

Choosing the Hot Spots
National Policy Research Council uses its Entrepreneurial Activity Index to measure the best places to start and grow a company. The index is made up of two parts, each dedicated to measuring a key aspect of entrepreneurship: business formation and business growth. To measure business formation, researchers identify the percentage of businesses that were started four to 14 years ago and that employ five or more workers today. (Researchers ignore newer firms because it takes several years for new businesses to appear in national databases.)

To determine growth, researchers measure the percentage of those young businesses that have experienced rapid growth over the past four years. An area must have a large number of young businesses and be able to support their growth to achieve a high overall score.

The National Policy Research Council is a Washington, D.C.-based organization offering non-partisan research, analysis, and information to state and local policymakers. The Council was founded on the principle that state and local governments, and those who run them, face unique challenges and constraints that require equally unique solutions. NPRC's mission is to develop, enhance, and sustain state and local policymakers' capacity to carry out their public service functions more efficiently and effectively. To learn more about NPRC, visit .


Seattle writer Carol Tice reports on business and finance for The Seattle Times, Seattle Magazine and other leading publications.

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The author is an Entrepreneur contributor. The opinions expressed are those of the writer.

Carol Tice, a freelance writer, is chief executive of TiceWrites Inc. in Bainbridge Island, Wash. She blogs about freelance writing at Make a Living Writing. Email her at

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This article was originally published in the September 2006 print edition of Entrepreneur with the headline: The Right Spot.

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