Unlike recently released business climate studies that focused on the cost of doing business, Milken ranked cities based on economic performance measures such wage and job growth. Hawai'i, along with top performing cities including Daytona Beach; Fort Myers, Fla. (No. 1); Las Vegas (No. 2); and West Palm Beach, Fla. (No. 4), benefited from rebounding tourism in 2003, said Armen Bedroussian, a senior research analyst for Milken, a nonprofit economic think tank.

"Most of the cities that rely extensively on tourism saw rebounds in tourism and Honolulu was one of them," Bedroussian said.

Honolulu ranked 169th in 2003, 177th in 2002, 189th in 2001, 181st in 2000 and 189th in 1999 on the Milken study. Based on population, Honolulu was the 56th largest metropolitan area in 2000, according to the Census Bureau.

During 2003, job growth in Honolulu exceeded the national average by nearly 2 percent, while wages and salary growth exceeded the national average by more than 3 percent, according to Milken. Over the five-year period, the results were less impressive, with Honolulu job growth outpacing the nation by just 1.5 percent and wage and salary growth trailing the nation by about 8 percent.

The study also showed the concentration of high-tech jobs increasing in Honolulu in 2003 from 2002, but it still trailed the nation as a whole. Honolulu slipped to 161st in tech sector concentration from a prior year rank of 156th because the pace of tech sector growth lagged behind the nation by about 3.5 percent, according to Milken. The drop comes despite state technology tax incentives that are among the most generous in the nation.

Honolulu did have a higher-than-average concentration of high-tech jobs in three of 25 sectors studied: other information services, other telecom, and medical and diagnostic laboratories.

The state's economic strength, which has gathered steam in the past two years, comes despite common criticisms about the high cost of doing business in Hawai'i. In a separate internal study Milken ranked Hawai'i's business climate 50th among all states because of high taxes, land costs and electricity rates, among other things, Bedroussian said.

"As far as tourism is concerned, Hawai'i is still one of the top destinations in the world," he said. "That's offsetting the higher cost of doing business for now. But it's something policy makers may want to look at addressing."

Hawai'i's high business costs trace their roots to the state's geographic isolation and generous social safety net, said Byron Gangnes, a University of Hawai'i associate professor of economics.

"Those are the decisions the people of Hawai'i have made about the kind of society they want," he said. "That doesn't mean we can't perform well when the areas that are important are performing well."

Gangnes said the Milken study's results weren't unanticipated given Hawai'i's strong economy, which is helped not just by tourism, but by strength in construction, real estate and business services.

"Hawai'i has outpaced the nation for the last several years and has this year so that doesn't surprise me," he said. "This really has turned into a fairly broad-based recovery."