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State Economic Development Bulletin
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EDA Launches American Rescue Plan Act Grant Programs (U.S. Economic Development Administration). Under the American Rescue Plan, EDA was allocated $3 billion in supplemental funding to assist states and communities in economic recovery from the coronavirus pandemic and building economies that will be resilient to future economic shocks. EDA will administer ARP Act recovery assistance through six grant programs: Build Back Better Regional Challenge; Good Jobs Challenge, Economic Adjustment Assistance Program; Indigenous Communities Challenge; Travel, Tourism, and Outdoor Recreation Program; and Statewide Planning, Research, and Networks Program. EDA is also making a Coal Communities Commitment, allocating $300 million to ensure support for these communities. EDA will cover 80%-100% of project costs, depending on the program and other factors, and most programs require that proposed projects align with a regional Comprehensive Economic Development Strategy (CEDS) or equivalent. The figure below shows the distribution of ARP Act funding among the grant programs, summary of each program, and expected award allocations.
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* U.S. Commerce Secretary Raimondo Briefs SEDE Network *
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State Economic Performance
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Employment Increases in Many Metro Areas (Bureau of Labor Statistics). Nonfarm payroll employment increased over-the-year in 164 metro areas, and 225 were essentially unchanged as of June 2021. The largest over-the-year percentage job gains occurred in Ocean City, New Jersey (+38.9 percent), Atlantic City, New Jersey (+36.8 percent), and Barnstable Town, Massachusetts (+17.8 percent). Over the year, nonfarm employment increased in all metro areas with 1 million or more population. Large percentage increases occurred in Las Vegas, Nevada (+12.8 percent), Buffalo, New York (+11.5 percent), and Providence, Rhode Island (+9.5 percent). These data are from the BLS Current Employment Statistics program.
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* Economic Outlook *
Inflation Spreading in U.S. Economy
Consumer price inflation remained elevated in July 2021. Prices rose 5.4% from a year earlier, although flat compared with June when the index hit a 13-year high. On a monthly basis, prices rose 0.5% in July, a major slowdown from 0.9% growth in June and the weakest pace since February. “The annual rate of inflation has seemingly peaked, but the details show a broadening out of price pressures,” according to James Knightley, chief international economist at ING. “This indicates inflation is likely to be more persistent and pervasive than predicted by the Federal Reserve.” While some of the major drivers of previous spikes, such as used car prices, eased last month, the cost of other goods, including medical care, housing, and food in grocery stores and at restaurants, climbed.
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U.S. Small Businesses Suffer Supply Chain Disruptions (U.S. Census Bureau). The Census Bureau’s Small Business Pulse Survey, designed to measure how COVID-19 is affecting U.S. small businesses, shows that 38.8 percent of small business respondents reported domestic supplier delays in the most recent July 2021 survey, up from the 30.9 percent in April. Foreign supplier delays increased from April’s 12.2 percent to 15.9 percent in July. Manufacturing (64.6%), Retail (59.8%), Construction (58.5%), and Accommodation and Food Services (51.4%) reported the highest levels of supplier disruptions. A particularly large portion of manufacturers (39.0%) indicated they would need to identify new supply chain options within the next six months. The share of small business respondents reporting production delays also rose, from 9.5 percent in April to 12.4 percent in July.
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Belarus Trade Sanctions Put Spotlight on Michigan Potash (Farm Progress). Recent sanctions imposed by the Biden administration against Belarus, including on Potash, make the scarcity of this potassium-rich mineral and critical crop nutrient even more dire. The U.S. currently imports 96 percent of its Potash supply from foreign countries like Belarus and Russia. Potash has no substitute and is a required nutrient for healthy food crops. Potash was added to the critical minerals list by the U.S. Department of Interior in 2018, declaring it a vital commodity for our country’s economy and security. A Michigan company is now set to be the largest domestic source of premium Potash for American farmers. Michigan Potash & Salt Company is looking to harvest a rock called the Borgen Bed, which lies a mile and a half below the surface near Evart, Michigan, for Potash. Construction is expected to take 36 months and once opened in 2024, the plant will offer 150 full-time jobs and produce upward of 650,000 tons of Potash and 1 million tons of food-grade salt annually.
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OZs Reap Benefits of National Home-Price Boom (ATTOM). Median single-family home prices increased in 75 percent of Opportunity Zones from the second quarter of 2020 to the second quarter of 2021, with housing prices rising by at least 15 percent in about half of OZs. The data was collected by ATTOM and released in its second quarter 2021 Opportunity Zones report. While price patterns in OZs continued to track trends in other areas of the U.S., home values lagged the national median of $305,000 in about three-quarters of zones. Thirty-nine percent of zones had median prices of less than $150,000 in the second quarter of this year, down from 47 percent a year earlier. The Midwest had the highest portion of Opportunity Zone tracts with a median home price of less than $150,000 (63 percent), followed by the South (45 percent), Northeast (41 percent) and West (6 percent). Overall, housing values inside some of the nation’s poorest communities kept surging despite the Coronavirus pandemic.
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The Opportunity Zones program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing into Opportunity Zones designated by the chief executives of every U.S. state and territory. Treasury has certified more than 8,700 census tracts as Qualified Opportunity Zones (QOZs) across all states, territories, and the District of Columbia. For a map of all designated QOZs, click here.
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Retirement Plan Access Varies by State (Economic Innovation Group). Nationwide, less than half (46%) of workers have access to an employer-provided retirement plan. Retirement plan coverage runs lowest in the Sun Belt and urban Northeast. The highest percentage of workers with access to an employer-provided plan is in Minnesota (59%) and lowest in Florida (36%). Even when plans may be offered by employers, many workers do not take advantage of them. Across every state, actual participation in offered plans runs far below access to them. For example, in Florida and Texas only 29 percent of respondents report participating in a plan, the lowest rates nationally. Nationwide, 38 percent of respondents say they are included in an employer plan, a figure that rises to roughly half of all workers in Hawaii, Iowa, and Minnesota—the leaders. However, low-wage workers are disproportionately likely to be left out everywhere. Since retirement savings constitute a large share of many Americans’ asset holdings, expanding access to and encouraging participation in retirement plans should be a public policy imperative.
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Move Fast with Automotive Innovation (Automotive News). Auto suppliers must be faster and more flexible to innovate new products as the industry shifts to electric vehicles and autonomous-drive technologies. It will also require sustained investment in new technology and manufacturing equipment, and a greater willingness to collaborate with automakers and other suppliers. Suppliers might also have to look for component solutions far outside their wheelhouses. American Axle, for example, is broadening its traditional portfolio of old-style heavy-duty axles and driveline components. The company created a new integrated electric-drive module that combines an electric motor, gearbox, and power inverter into one easy-to-package unit that weighs as much as 25 percent less than competitive systems. Company engineers gained some of the weight savings by making the electric motor smaller but capable of spinning faster — as high as 30,000 RPMs. This is coupled with an innovative lubrication system that cools the motor, requires no seals, and places the inverter close to the motor. The unit and software were all developed in-house.
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U.S. Senate Passes Bipartisan Infrastructure Bill (NPR). The U.S Senate passed the Infrastructure Investment and Jobs Act which focuses on investments in roads, railways, bridges, and broadband internet, but it does not include investments for “human infrastructure.” The package calls for $550 billion in new spending over five years. The package would be financed through a combination of funds, including repurposing unspent emergency relief funds from the COVID-19 pandemic, and strengthening tax enforcement for cryptocurrencies. While negotiators said that the cost of the plan would be offset entirely, the Congressional Budget Office predicted it would add about $256 billion to projected deficits over 10 years.
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Incentives for Entrepreneurial Firms (Kauffman Foundation). The most common types of state and local incentives for entrepreneurial firms are financial, fiscal, and services. Incentives for entrepreneurial firms are, for the most part, divided into two target categories: small business entrepreneurs and innovation- or technology-oriented entrepreneurs. New or young firms are rarely the defined target for incentives. State and local financial incentives are primarily intended to fill small business funding gaps and address the regional disparity in private equity investment. They may take the form of debt, equity investment, or grants. The most prominent type of fiscal incentive is a tax credit for angel investors, which is intended to address the funding gap by encouraging more private investment. Services include business advice and training, technical assistance, professional services, access to innovation spaces and networks, and referrals. Governments are also devising new approaches to support growth oriented and second-stage small businesses, inclusive entrepreneurship, social enterprises, and microenterprises.
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New York’s Largest State Incentives Awards (Albany Business Review). New York’s top state incentive deals are usually dominated by big projects receiving hundreds of millions of dollars. For example, the 2019 list was topped by state funding for the Cree factory in Utica, an incentive worth up to $500 million. By comparison, the most recent top 25 list covering 2020, comes in at $434 million in total potential incentives. Topping the list is $25 million to help fund the new Legoland theme park and hotel in Orange County. Why the drop? Due to the budget uncertainty in 2020, some incentive programs were canceled altogether, including the $750 million Regional Economic Development Council competition and the $100 million Downtown Revitalization Initiative (though both are back this year). Other programs saw fewer applicants and awardees. The Film Tax Credit had 104 production credit approvals last year, down from 157 in 2019. However, the big deals are back on the table in 2021. Regeneron’s plans to expand its Tarrytown headquarters has already received a $100 million incentive from the state if hiring goals are met over the next few years.
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Many States Maintain SSBCI Programs (C2ER). The 2010 Small Business Jobs Act created the State Small Business Credit Initiative (SSBCI). Functioning as a recovery response to the Great Recession, it delivered $1.5 billion in capital to small businesses. Federally, SSBCI phased out in 2017. Nevertheless, after more than a decade, many of the same original SSBCI programs still exist, suggesting that states value them. Several states, in fact, have maintained all SSBCI programs including Idaho, Illinois, Kentucky, Maine, Delaware, Maryland, Massachusetts, Mississippi, New York, Ohio, Oklahoma, Oregon, South Carolina, and Vermont. In the wake of the COVID-19 pandemic, the 2021 American Rescue Plan Act seeks to deliver immediate and direct relief to families, businesses, and workers impacted by the COVID-19 crisis, part of which reauthorized SSBCI. The 2021 bill allocated $10 billion to SSBCI, which is a sizeable $8.5 billion more than the amount authorized before.
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The State Business Incentives Database is a national database maintained by the Council for Community and Economic Research (C2ER) with almost 2,000 programs listed and described from all U.S. states and territories. The Database gives economic developers, business development finance professionals, and economic researchers a one-stop resource for searching and comparing state incentive programs. To view the information available in the database, click here.
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West Virginia Releases Science & Technology Plan (WV Science & Research Council). West Virginia’s science and technology (S&T) plan provides strategic goals to develop the state’s STEM talent pipeline, expand research, catalyze more innovation and entrepreneurship, and support the growth of high-tech companies. High-priority areas are identified in the most recent plan that represent significant and growing university-based research and educational activities that align with West Virginia’s target industries and workforce development goals. These areas include Life Sciences (neuroscience; health sciences; environmental & natural resources; agriculture); Computer and Data Science (computer sciences; data science applications); Advanced Manufacturing (chemical and materials; transportation; civil infrastructure); and Advanced Energy (exploration & production; efficiencies & decarbonization). The development of the plan included stakeholder input from higher education, industry, and government leaders.
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Talent Development/Attraction
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The Future of American Higher Education (Georgetown University). The U.S education and training system is becoming more closely intertwined with the economy, not less. More than two-thirds of jobs require at least some postsecondary education or training, and good jobs will continue to be concentrated among workers with postsecondary education. Likewise, the effect of changing technology on jobs is good news for those with postsecondary education and bad news for those with no more than a high school diploma. While these trends confirm the value of higher education, today’s postsecondary education and training system has become arguably the biggest gearwheel in the American race and class inequality machine. The postsecondary education and training system of the future must therefore be less fragmented, more responsive to consumers, and better serve our local economies. Continuing to bridge the gaps between education, training, and work is essential to the recovery from the COVID recession and the future of our economy.
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Explanations for the Labor Shortage (Business Insider). The labor shortage is unprecedented in its scale. There has never been such reluctance by the unemployed to go into open roles. Wages are up, the number of people quitting their jobs is consistently near record highs, and there are more open roles than job seekers. Morgan Stanley economists find three main factors for the labor crunch. First, the decrease in participation for caregiving (childcare) reasons accounts for the decline in participation among mothers. Schools reopening could offer more concrete, in-person options for parents — although moms may not return to work for months. Second, workers cannot easily transition to high-demand industries, leading to a mismatch of labor supply and demand. These skills mismatches continue to fuel labor shortages. Third, people moved during the pandemic, but many jobs did not. New York and San Francisco, for instance, have huge numbers of open positions for service jobs. At the same time, exurban areas have lots of openings for professional roles. After the 2008 financial crisis, regional misallocation of labor was one of the reasons that employment was slow to recover.
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SEDE Network Updates
* Check out the SEDE Website*
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StateEconomicDevelopment.org
The SEDE Network engages in regular activities and events throughout the year. You can stay up to date on all these activities via the SEDE Network website.
Click the link above and check it out!
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The SEDE Network Steering Committee includes: Stefan Pryor (RI), Chair; Sandra Watson (AZ), Vice Chair; Julie Anderson (AK); Mike Preston (AR); Kurt Foreman (DE); Don Pierson (LA); Kelly Schulz (MD); Kevin McKinnon (MN); Chris Chung (NC); Alicia Keyes (NM); Michael Brown (NV); Andrew Deye (OH); Dennis Davin (PA); Adriana Cruz (TX); Joan Goldstein (VT); Mike Graney (WV).
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For further questions on the content in this Bulletin or for information on the SEDE Network contact Marty Romitti, CREC Senior Vice President, at mromitti@crec.net.
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