Cities with the Most & Least Diversified Economies

“Don’t put all your eggs in one basket,” say the wisest investing experts. But that wisdom applies to the economy, too. During the Great Recession, local economies that diversified, tapping into new ideas and innovations, proved to be more resilient than the cities that stuck to their old tricks. That advice rings especially true in 2021, where certain state economies have been hit harder than others by the COVID-19 pandemic in part because they were concentrated too highly in vulnerable industries.

Some researchers have found that greater professional and industrial variety increases a city’s productivity, a pattern in growing and large urban areas in the U.S. and around the globe.

In other words, diversification helps an economy the way it protects an investor’s portfolio: Over time, job gains in some sectors will offset the losses in others. And that was exactly the outcome at the end of the financial crisis, when the number of professions in health care and social assistance multiplied while construction and manufacturing occupation rates declined.

In order to determine the most diversified local economies — and therefore the least susceptible to the changes in the market — WalletHub compared the 501 largest cities across three key metrics: industry diversity, occupational diversity and worker-class diversity.

Main Findings

Ratio - Over Time

Highest & Lowest Concentrations by Category

Ranking by City Size

Ask the Experts

Many scholars advocate for economic diversification, rather than specialization, to strengthen local economies. To shed more light on the benefits of the former, we asked a panel of experts to weigh in with their thoughts on the following key questions:

1. What are the benefits to residents of living in an economically diverse city?
2. Did cities with diversified economies better weather the recent economic downturn? Why?
3. Are cities with diversified economies more likely to experience job and wage growth than cities with more specialized economies? Under what conditions?
4. What policies and strategies can local authorities employ in order to encourage the diversification of the local economy?

Ask the Experts

Gary A. Hoover
Chair and Professor of Economics, University of Oklahoma
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Michael Ash
Chair and Professor of Economics and Public Policy, University of Massachusetts Amherst
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Andrew J. Cassey
Associate Professor of Economics, Washington State University School of Economic Sciences
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Andrew J. Hussey
Associate Professor of Economics, University of Memphis
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Sunwoong Kim
Professor of Economics, University of Wisconsin–Milwaukee
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David Brasington
James C. and Caroline Kautz Chair in Political Economy, University of Cincinnati
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More Experts

Methodology

In order to identify the most diversified local economies, WalletHub compared 501 of the most populated U.S. cities — limiting each state to no more than 10 cities each — across three key metrics, which are listed below with their corresponding weights and subcomponents. Each metric was graded on a 100-point scale, with a score of 100 representing the most economic diversity.

We conducted our analysis using the Herfindahl-Hirschman Index method, which is a commonly accepted measure of market concentration that also works effectively as a general-purpose measure of diversity.

Our sample considers only the city proper in each case and excludes cities in the surrounding metro area. Each city was categorized according to the following population-size guidelines:

• Large cities: More than 300,000 residents
• Midsize cities: 100,000 to 300,000 residents
• Small cities: Fewer than 100,000 residents

We then determined each city’s weighted average across all metrics to calculate its overall score and used the resulting scores to rank-order our sample.

Industry Diversity - Total Points: 60

Note: Considers the civilian employed population aged 16 and older

• Agriculture, Forestry, Fishing and Hunting, and Mining
• Construction
• Manufacturing
• Wholesale Trade
• Retail Trade
• Transportation and Warehousing, and Utilities
• Information
• Finance and Insurance, and Real Estate and Rental and Leasing
• Professional, Scientific, and Management, and Administrative and Waste-Management Services
• Educational Services, and Health Care and Social Assistance
• Arts, Entertainment, and Recreation, and Accommodation and Food Services
• Other Services (excluding Public Administration)
• Public Administration

Occupational Diversity - Total Points: 20

Note: Considers the civilian employed population aged 16 and older.

• Management, Business, Science, and Arts Occupations
• Service Occupations
• Sales and Office Occupations
• Natural-Resources, Construction, and Maintenance Occupations
• Production, Transportation, and Material-Moving Occupations

Worker-Class Diversity - Total Points: 20

Note: Considers the civilian employed population aged 16 and older.

• Private Wage and Salary Workers
• Government Workers
• Self-employed Workers (operating their own, unincorporated businesses)
  Note: Includes “people who worked for profit or fees in their own unincorporated business, professional practice, or trade or who operated a farm,” as defined by the U.S. Census Bureau.
• Unpaid Family Workers

Sources: Data used to create this ranking were collected from the U.S. Census Bureau.