State Economic Development Bulletin – February 2022

 

State Economic Development Bulletin

Headlines:

Economic Performance

Economic Outlook

SEDE News

Trade

Industry Trends

Workforce

Finance and Incentives

Economic Performance

Unemployment Continues To Ease (U.S. Bureau of Labor Statistics) Unemployment rates were lower in December in 42 states and the District of Columbia and stable in 8 states, the U.S. Bureau of Labor Statistics reported. Forty- eight states and the District had jobless rate decreases from a year earlier and two states were little changed. The national unemployment rate, 3.9 percent, declined by 0.3 percentage point over the month and was 2.8 points lower than in December 2020.

Nonfarm payroll employment increased in 17 states and was essentially unchanged in 33 states and the District of Columbia in December 2021. Over the year, 48 states and the District added nonfarm payroll jobs and 2 states were essentially unchanged.

Meanwhile, job opening rates increased in 7 states, decreased in 4 states, and were little changed in 39 states and the District of Columbia as of December. Hires rates decreased in 6 states, increased in 1 state, and were little changed in 43 states and the District of Columbia. Total separations rates decreased in 15 states, increased in 2 states, and were little changed in 33 states and the District of Columbia. 

Start-ups Slow but Still Drive Growth (U.S. Bureau of the Census) The evolution of job growth and employment in the U.S. economy over the past four decades has been characterized by two important but seemingly contradictory facts: Young start-up businesses have been a key driver of economic growth, yet more and more of the American workforce has become concentrated at older, more mature firms. After falling in the 1980s, the share of employment at more mature firms rose steadily, representing approximately 90% of all employees by 2019. However, young firms have much greater rates of net job creation and are the engine of economic growth. These seemingly contradictory facts require noting that there are fewer startups over time and in turn fewer young firms over time. The net growth rate differential between young and old has not changed much but there are fewer and fewer young firms over time.

Economic Outlook

Impacts of the Ukraine Crisis (Bloomberg) Russia’s invasion of Ukraine, seen as a risk scenario by economists just days ago, became the new reality as Russian troops entered the country. There’s been no mass rush — yet — to downgrade growth forecasts or ramp up consumer-price predictions. But policy makers and economic observers alike are scrambling to assess the potential knock-on effects of the worst security crisis in Europe since World War II. The most obvious channel of impact is via energy and other commodity prices, given Russia’s prominent role as an exporter. While there hasn’t been a disruption to flows, fears of an escalation sent prices of many products – from oil and gas to wheat, fertilizer and industrial metals soaring in recent weeks.

Wind Farms in Ocean Waters Can Be an Economic Driver (Stateline) The United States currently produces almost no electricity from wind farms in ocean waters. That’s about to change—fast. State leaders have spent years laying the groundwork: requiring their utilities to purchase set amounts of offshore power by certain dates, investing in ports and transmission infrastructure and setting up workforce training programs. As a quickly growing list of projects enters the permitting and construction phases, many states are betting on offshore wind to be a crucial source of renewable power—and an economic driver that will create thousands of manufacturing and maritime jobs. However, many seaports still lack the capacity to handle giant towers and turbines and others will need significant upgrades to their grids to bring electricity onshore. As states transition away from gas-powered cars and furnaces, they expect their need for electricity to increase with many noting that it will be impossible to meet their clean energy goals without significant offshore wind production.

SEDE News

Michael Preston, Arkansas Secretary of Commerce & AEDC Executive Director

Spotlight: Michael Preston, Arkansas Secretary of Commerce & AEDC Executive Director Governor Asa Hutchinson appointed Michael “Mike” Preston executive director of the Arkansas Economic Development Commission (AEDC) in March 2015 and Secretary of Commerce July 2019. Preston is highly regarded as a leading advocate in economic development. Over the years, Preston has made successful business recruitment trips to Japan, China, France, Germany, Israel, Cuba, Mexico, Italy, United Kingdom, New York City and Silicon Valley. The trips continue to play an important role in the state’s economic development efforts and have led to more than 451 projects with companies signing agreements with AEDC to locate or expand in Arkansas.

Before joining AEDC, he served six and a half years as the Vice President of Government Relations for Enterprise Florida, the state’s primary economic development organization. In 2018, Preston was selected to join The Wall Street Journal’s prestigious CEO Council. It is an invitation-only group that connects some of the world’s most ambitious and influential leaders to discuss the issues shaping the future. A 2005 graduate of the University of Florida, Mike and his wife Anne – along with their young son Pierce – are proud to call Arkansas home. They both volunteer in the community in a variety of ways, including the Children’s Advocacy Centers of Arkansas and the Cystic Fibrosis Foundation.

Online Forums Now Available for SEDE Members The SEDE Network recently launched online forums available to state economic development leaders to better collaborate, ask questions about specific policies, programs, or to generally bounce ideas off other state colleagues in a shared space. Go here, sign in using your SEDE website credentials, and start interacting with your peers! Feel free to contact Bob Isaacson with any questions.

Trade

No Relief Seen in Trade Deficits (U.S. Census Bureau and the U.S. Bureau of Economic Analysis) The goods and services deficit was $80.7 billion in December, up $1.4 billion from $79.3 billion in November, revised. December exports were $228.1 billion, $3.4 billion more than November exports. December imports were $308.9 billion, $4.8 billion more than November imports. The December increase in the goods and services deficit reflected an increase in the goods deficit of $3.2 billion to $101.4 billion and an increase in the services surplus of $1.8 billion to $20.7 billion. For 2021, the goods and services deficit increased $182.4 billion, or 27.0 percent, from 2020. Exports increased $394.1 billion or 18.5 percent. Imports increased $576.5 billion or 20.5 percent.

Industry Trends

Manufacturers Reshoring to Address Supply Chain Challenges (Manufacturing Innovation Blog, MEP) Disruptions in the global supply chain have led to a new dynamic for many small and medium-sized manufacturers (SMMs) – the need to be more strategic about “second sourcing” and reshoring. The biggest increase is in what’s referred to as second sourcing, which adds redundancies such as a second source of a supply to minimize risk while increasing options. But supply chain experts also are seeing an interest in relying long term on domestic supply sources. In one recent example, a manufacturer was paying $5,000 per roll for material and shipping from China, but delays in shipping forced it to use air freight instead of ocean freight, which raised the cost of just the shipping to $7,500. A traditional tactical approach of reducing shipping costs is not enough to address the potential risk for that manufacturer. The manufacturer is now using supplier scouting to reshore that base material and source it domestically.

The Pandemic Has Influenced Site Selection (Site Selection Magazine) From reshoring and supply-chain tightening to remote working and worker shortages, site selectors are telling us that the trends exacerbated by the global pandemic will become even more pronounced in 2022. In a Site Selection November 2021 survey, consultants reflected how entrenched the new realities of reshoring efforts, relocation of workplaces to satellite facilities, and remote working had become. The big takeaways from our annual Site Selectors Survey this time were as follows:

  • Distribution and logistics projects will again dominate the headlines in 2022.
  • Sunbelt states maintained their status as the most favored business climates in America.
  • Most corporate clients are expected to expand their facilities sometime this year.
  • Reshoring projects are here to stay for the foreseeable future.
  • Suburban and rural communities will benefit as more employers look outside of large central cities to establish new workplace hubs.
  • Remote working has become a permanent part of the new workplace landscape.
  • Governmental mismanagement continues to be the main barrier to getting deals done.

Workforce

DOL Announces $113M in Funding for Apprenticeship Programs (U.S. Department of Labor) The U.S. Department of Labor announced the availability of $113 million for the Apprenticeship Building America (ABA) grant program to support the expansion, modernization and diversification of Registered Apprenticeship programs (RAPs). Of the $113,000,000 in grants funds available for ABA, the Department intends to fund up to $50,000,000, in aggregate across all grant categories, for projects primarily focused on equity partnerships and pre-apprenticeship activities. The Department expects to fund 20 to 30 grants, with varying funding ranges based on four grant categories:

  • Category 1: State Apprenticeship System Building and Modernization: up to $4 million; Category 2: Expansion of RAP Opportunities for Youth: up to $5 million;
  • Category 3: Ensuring Equitable RAP Pathways Through Pre-apprenticeship Leading to RAP Enrollment and Equity Partnerships: up to $3 million;
  • Category 4: Registered Apprenticeship Hubs: up to $6 million for projects with a local/regional or statewide geographic scope; and up to $8 million for projects with a national geographic scope.

Finance & Incentives

Wichita, KS Approves Redevelopment of Oil Refinery Site (The Wichita Eagle via MSN) Wichita has approved a new tax district that will provide between $6 million and $7.8 million to help two prominent Wichita businessmen redevelop a heavily polluted former oil refinery site. The money from the city will help finance a 1 million-square-foot complex of warehouse, manufacturing, office and retail space at a 115-acre site of the abandoned refinery. The city’s contribution to the project will be funded with a tax increment finance district that will borrow $6 million and then pay it back by diverting future increases in property taxes generated by the new development. The city will also provide as much as $1.8 million in additional pay-as-you-go TIF funding, if it’s available after the debt is paid. 

Opportunity Zones Continue To Draw Investment (Novogradac) Qualified opportunity funds (QOFs) tracked by Novogradac reported equity investment of $6.88 billion over the final six months and now total $24.40 billion in equity. The jump of nearly $7 billion in reported equity since June 30, 2021, is the largest increase in any reporting period since Novogradac began tracking QOF investment in May 2019. The semiannual report also includes data on the types of reported investment, the planned geographic focus of investment and the top 20 states and top 40 cities for targeted QOF investment. The list does not include proprietary or private funds owned and managed by their principal investors. 

StateEconomicDevelopment.org The SEDE Network engage in regular activities throughout the year. The State Economic Development Executives (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); Kevin McKinnon (MN); Chris Chung (NC); Alicia Keyes (NM); Michael Brown (NV); Andrew Deye (OH); Adriana Cruz (TX); Joan Goldstein (VT); Mike Graney (WV). 

For further questions on the content in this Bulletin or for information on the SEDE Network contact Bob Isaacson, CREC Senior Vice President, at bisaacson@crec.net.