Three California cities showed the largest increases and decreases in an annual report of the best-performing cities in the nation by the Milken Institute, a nonprofit organization that crunches data and makes policy decisions funded by financier Michael Milken.
The report evaluates 403 U.S. metro areas — 200 large and 203 small cities — on factors such as employment growth and housing affordability.
San Francisco’s ranking as a best-performing large city dropped 99 places from 27 to 126, the steepest decline of any metro area in the annual report. Two metro areas in California’s San Joaquin Valley — Merced and Hanford — showed some of the highest increases in the study.
Here’s what the Milken Institute’s 2025 Best-Performing Cities ranking study found about California cities.
Why did San Francisco’s rank drop in Milken’s best-performing cities study?
Due to layoffs and continued high housing costs, San Francisco dropped 99 spots in the Milken Institute’s 2025 Best-Performing Cities study rankings.
San Francisco’s heavy reliance on the volatile tech industry has left it particularly vulnerable. Tech layoffs have dealt a heavy blow to the city’s economy.
“The lack of high growth from the country’s larger cities may be related to the housing affordability challenges faced by many populous metro areas, as illustrated by the recent drop in rankings of notable high-cost metros such as San Francisco,” the report says. “The downturn of the technology sector also affected some of the large cities with the biggest drops this year, such as San Francisco.”
Why did Merced and Hanford’s ranks rise in Milken’s best-performing cities study?
Merced’s ranking in the large cities category jumped 75 places from 193 to 118 due to the growth of the metro area’s education, government, and health sectors. The city is home to the University of California, Merced, which recently launched a new medical school and broke ground on a new $300 million medical building. Merced also gained points for affordable housing, especially compared to other metro areas in California.
In the small city category, Hanford in Kings County jumped 86 spots from 143 to 57. The metro area saw strong health and education services growth and has the most affordable housing in California.
Both cities’ rankings were the fifth highest increase in the nation in the study’s city-size categories.
How did other metro areas in California fare in Milken’s best-performing cities study?
San Jose, also hard hit by tech layoffs, saw its ranking drop from 44th in 2024 to 108th this year, one of the study’s steepest declines.
The study also found ranking changes in these California metro areas:
Lose Angeles dropped from 122 to 155San Diego dropped from 37 to 71Fresno increased to 108 from 138Stockton dropped from 60 to 73Sacramento dropped from 58 to 59Redding increased to 20 from 73Salinas dropped from 137 to 174Visalia increased to 103 from 121Riverside-San Bernardino-Ontario increased to 53 from 68.
What cities in the US topped Milken’s best-performing cities study?
In the large city category, these cities ranked in the top five of the study:
Raleigh, North Carolina, strength in the tech sectorOgden, Utah, strength in the aerospace sectorSalt Lake City, Utah, widespread balanced economic healthHuntsville, Alabama, strength in the aerospace sectorColorado Springs, Colorado, widespread balanced economic health
In the small city category, these cities ranked in the top five of the study:
Gainesville, Georgia, widespread balanced economic healthSt. George, Utah, strength in the tech sectorIdaho Falls, Idaho, strength in healthcare and educationBend, Oregon, strength in tech sectorMidland, Texas, strength in the mining and fracking sectors
To read the complete 2025 Best-Performing Cities ranking by the Milken Institute, click here.
Who is Michael Milken?
Michael Milken, 78, pioneered using high-yield bonds to finance corporate takeovers as an executive at Drexel Burnham Lambert in the 1980s. The billionaire former junk bond king was indicted on 98 racketeering and securities fraud counts in 1988. Then-U.S. attorney for the Southern District of New York Rudy Giuliani led the prosecution. Milken pled guilty in 1990 to six felonies and was sentenced to two years in prison. He also was banned from securities trading for life.
Since his release from federal prison, he has become a philanthropist known for funding the nonprofit Milken Institute and his campaign for prostate cancer awareness. In 2020, President Donald Trump pardoned him.
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