No. 3 Washington D.C.

The federal government stimulates job growth in our number-three pick.

Population: 5,263,322

Income Growth: 8.7%

Cost of Living Index: 138

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Median Household Income: $81,163

Percentage of Workforce in Creative Class: 44%

For better or worse, the federal government is big and getting bigger. And for the Washington, D.C., area economy, that means for the better. "The government just keeps spending and adding jobs," says city spokesman Sean Madigan.

Only about one in eight workers in the Washington area -- spanning D.C. proper and big chunks of adjoining Virginia and Maryland -- are employed directly by the feds. Still, the government fuels nearby companies in almost every industry, especially law firms, lobbyists, and aerospace and defense companies. For example, Lockheed Martin, the largest defense contractor, stays close to the Pentagon, providing about 23,000 jobs in Northern Virginia and metro Maryland.

High-tech industry is booming across the Potomac River. Science Applications International's sprawling campus along Northern Virginia's Dulles corridor, for example, employs about 17,500 people (and just landed about $300 million in government contracts). In Maryland, biotech firms, such as vaccine producer Emergent BioSolutions, gather around the National Institutes of Health, which is headquartered in Bethesda.

A slew of universities add both fresh faces and dollars to the local economy. More than 150,000 undergrads attend Georgetown, George Washington and Howard universities, among others.

D.C. welcomes about 16 million tourists annually. This year, tourist season kicked off early, when a certain historic Inauguration Day brought millions to the National Mall. Since then, Madigan says, the city has seen a steady stream of budget-conscious travelers taking advantage of the free Smithsonian museums and world-class monuments and memorials. "Plus, everyone wants to see where President Obama lives," he says.

Visitors come for the museums but often stay for the kaleidoscope of culture. That includes every shade of ethnic cuisine, the art scene in Dupont Circle and the music clubs of the U Street corridor. On weekends, locals and savvy visitors frequent the historic Eastern Market on Capitol Hill for fresh produce and handmade crafts.

One drawback to Washington's popularity: No matter the time, day of the week, starting point or destination, you will hit traffic. Try the Metrorail and buses instead of driving. Just remember: On Metro escalators, you stand on the right and walk on the left.

NEXT: No. 4 Charlottesville

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Stacy Rapacon
Online Editor,

Rapacon joined Kiplinger in October 2007 as a reporter with Kiplinger's Personal Finance magazine and became an online editor for in June 2010. She previously served as editor of the "Starting Out" column, focusing on personal finance advice for people in their twenties and thirties.

Before joining Kiplinger, Rapacon worked as a senior research associate at b2b publishing house Judy Diamond Associates. She holds a B.A. degree in English from the George Washington University.