Summer 2010

Editorial

Unemployment Rates in the South are about to Drop

Mike Randle, Editor

The skeptics of the current economic recovery from the recession of 2008 and 2009 won't quit squawking until unemployment rates drop from the 8 to 12 percent seen in many areas of the country to 6 to 8 percent. While those lower rates will not be accomplished next year in many U.S. states, my bet is the South's average unemployment rate at the end of 2011 will be no higher than 6.5 percent, possibly lower. The regional rate is currently hovering at about 8.7 percent. That's a prediction of more than a 2 percent drop in only 15 months.

The really cool thing about following and tracking economic development closely is you can see the job market’s future more clearly than what can be seen by gathering information from any other source. 

For example, when a company announces a project, the jobs associated with that project typically don't factor into the employment picture for six months to a year. It’s even longer than that with very large projects of over 1,000 jobs, like Volkswagen's plant in Chattanooga that will open next year, Samsung's announced expansion in Austin and the ThyssenKrupp project that began operating in South Alabama in August. TK was announced in 2007 and they are just now ramping up their hiring.

So, when a talking head on the cable news rants about a "high unemployment rate that’s frozen" like what was present during the summer and asks "When are companies going to start hiring again?" well he or she is already six to 12 months behind the data flow that we in economic development use. If you are tracking all of the economic development projects currently and you have an 18-year book of history for each quarter as we do, it is very clear that companies are hiring now and fast.

How does the economic development crystal ball tell us that unemployment rates are about to drop and drop a lot next year? That's easy. This summer there were more projects announced by business and industry in the South than any quarter in three years. The winter and spring quarters of this year were also very good in new and expanded projects. That's three solid quarters in a row of improving deal activity in the South.

Surely that can't be the case you say. After all, many economists are not only predicting a double-dip recession, some think we are in a depression. We see and hear it on the cable news every day and night, right? Well, they are wrong.

Southern Business & Development prides itself in publishing almost, if not every single significant project announced in the South each and every quarter. And unlike other magazines, we don't just publish those projects on our Web sites, where space for copy is infinite. We put all of them in the print product you are holding in your hand.

In the summer of 2010, there were so many projects announced in the South that we had to expand our Relocations & Expansions section (page 20) to eight pages in this issue with a jump to page 60. Typically we run five R&E pages and that was a stretch between 2007 and 2009.

Because we own SouthernAutoCorridor.com, we have our own section in this magazine that exclusively focuses each quarter on projects from the automotive industry. For the second straight quarter the SouthernAutomotiveCorridor.com News section (page 26) is four pages long and profiles 44 large automotive projects that were announced in the South in the summer. That section had to jump to page 62 to fit those projects in. A year ago, we couldn't find enough automotive projects in the South to fill the two pages of space we typically allotted.

Again, almost all of the 40,000 direct jobs associated with this summer's surge in announced projects won't factor into the South's unemployment rate for six months to a year or longer. However, some of the indirect jobs created by those projects, like construction jobs, will show up within the next three or four months.

In other words, the projects found in our Relocations & Expansions and SouthernAutoCorridor.com News sections in this issue are commitments by companies to hire, but the bulk of those hires won't show up on the Bureau of Labor Statistics’ Web site until 2011. And combined with mass layoff events that peaked at almost 3,000 in February of 2009, but now are down to 1,600 in August 2010, the surge in job generating projects in the South throughout 2010 will mean one thing: an unemployment rate in 2011 that will eventually shut up the skeptics. How refreshing will that be?  

Editorial

Toyota is the Feel Good Story of the Year

Mike Randle, Editor

On February 27, 2007, Mississippi Gov. Haley Barbour joined Toyota officials to announce that the company had chosen a 1,700-acre site in Blue Springs, Miss. to build its eighth North American assembly plant. With 2,000 direct jobs and 2,000 more supplier jobs, it was a huge coup for the Tupelo area, northeast Mississippi and the state of Mississippi as a whole.

The successful recruitment of Toyota was led by Gov. Barbour, Mississippi Development Authority Executive Director Gray Swoope, David Rumbarger, President of the Community Development Foundation and other leaders from the state and from Union, Lee and Pontotoc counties.

On that day back in the winter of 2007, I was on the Loon Mountain ski slope in New Hampshire with my oldest son -- one of our five children -- who was attending boarding school nearby. He was teaching me how to snow ski. I must have received a dozen or more calls and many more emails about Toyota's choice of Tupelo that morning. One was a text from Dennis Cuneo, who headed up Toyota's site search. Dennis' message was sent shortly before the official announcement began.

I realized then why the South is so popular with locating industry and why Toyota had left New Hampshire off its site search list. Have you ever tried to answer a Blackberry with ski gloves on? It is impossible, particularly taking into account that you are on skis and the word "novice" really doesn't accurately describe your inability to manage the bunny hill.

After all, I was on the next hardest slope and while I hadn't fallen prior to all of the calls that started that morning, I was still the poster child of a four-time snow skier from Alabama who had ventured to the slopes of New Hampshire. Both ski polls were in opposite directions constantly as were the skis. In short, I was answering my phone and viewing arriving emails about Toyota, one after another on my "Crackberry," as if I was doing it in an astronaut suit with golf clubs in my hands, while wearing roller skates on a frozen lake. 

So, as the important calls came in, I would simply lie down in the snow (which is amazingly difficult and getting up is even worse), take my right glove off and answer the call. Each time I painfully realized it was minus eight degrees in half a second.

I wasn't shocked by the choice of Tupelo, but I was slightly surprised. I had personally picked Marion, Ark. for that Toyota plant prior to the announcement and that wrong choice represented the first time I had not picked the correct site for an automotive assembly plant in the Southern Automotive Corridor since BMW chose Greer, S.C. in 1992. I was on a streak of seven straight, I believe. I then picked Huntsville for the Volkswagen plant a couple of years ago and it went to Chattanooga. Then I got out of the automotive assembly plant site prediction business.

After reflecting on the Toyota site search back in 2007, I should have picked Tupelo all along. David Rumbarger and the three counties that formed an alliance to target specifically an automotive assembly plant went all-in by marketing that site in Blue Springs. That all-in strategy was threatened after Toyota built the plant but delayed the opening in the fall of 2008.

While the recession was raging, the rumors flew about the almost completed, but vacant facility. Some said that Toyota was abandoning the project and that the state of Mississippi was looking for another tenant. One rumor had Volkswagen moving into the facility even after it had chosen Chattanooga.

But all is well that ends well. Toyota announced this summer that it is completing the facility with an expected opening date in the fall quarter of next year. That news makes the Toyota plant in Tupelo the feel good story of the year. For more information on the South's automotive industry, go to www.SouthernAutoCorridor.com.

mike@sb-d.com

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