U.S. Economy Won’t Grow as Fast as Expected Over Next Six Months (Congressional Budget Office). The Congressional Budget Office downgraded its near-term assessment of the U.S. economy’s growth as it struggles in response to the shock of the coronavirus pandemic. In May, the CBO projected real gross domestic product to expand at 21.5% and 10.4% annual rates in the third and fourth quarters of the year. In the new report, it estimated an average GDP growth rate at 12.4% for both quarters. The unemployment rate, previously projected to peak at 15.8% in the third quarter, is now estimated to top out at 14%. CBO projects that if current laws governing federal taxes and spending generally remain in place, the economy will grow rapidly during the third quarter of this year. Following that initial rapid recovery, the economy continues to expand, but it does so at a rate more similar to the pace of expansion over the past decade.
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– FYI –
Social marketing has the primary goal of achieving “social good.” Traditional commercial marketing aims are primarily financial, though they can have positive social effects as well. In the context of public health, social marketing promotes general health, raises awareness, and induces changes in behavior. Many economic development organizations are being asked to promote public health messaging as part of reopening the economy. This article presents perspectives on what social marketing principles, strategies, and best practices appear to have been applied to reducing the spread of the coronavirus, even if they were not labeled as such. In addition, it discusses which ones were not apparent in this campaign to date and might have helped. For more on social marketing, click here.
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State Economic Performance
Unemployment Rates Higher in All 389 Metropolitan Areas (Bureau of Labor Statistics). Unemployment rates were higher in May than a year earlier in all 389 metropolitan areas. A total of 109 areas had jobless rates of less than 10.0 percent and 16 areas had rates of at least 20.0 percent. The national unemployment rate in May was 13.0 percent, not seasonally adjusted. Kahului-Wailuku-Lahaina, Hawaii, and Atlantic City-Hammonton, New Jersey, had the highest unemployment rates in May at 33.4 and 32.4 percent. Logan, Utah-Idaho, Lincoln, Nebraska, and Idaho Falls, Idaho, had the lowest rates, all below 5.5 percent. A total of 245 areas had May jobless rates below the U.S. rate, 142 areas had rates above it, and 2 areas had rates equal to that of the nation.
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* Upcoming SEDE Event *
Perspectives on the Economy and What is Next for Recovery:
Tom Barkin, President of the Federal Reserve Bank of Richmond
August 11, 2020
11:00 am – 12:00 pm EDT
The scale of the current pandemic-driven economic crisis is unprecedented. What does the future hold for businesses, workers, and jobseekers as states move forward with reopening the economy? Can we expect a speedy recovery? Join us for a conversation with Tom Barkin, President and Chief Executive Officer of the Federal Reserve Bank of Richmond, one of 12 regional Reserve Banks that are a part of the Federal Reserve System. During this digital town hall, President Barkin will share his perspectives on the economy and prospects for recovery, followed by an opportunity for participants to ask questions and share assessments about their own regional challenges. This is a great opportunity to both get and share insights on the state of the economy in this pandemic crisis and beyond.
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Topics and Trends
Economic Outlook for the Hospitality Industry (Brookings). Many states and local communities rely on food service, tourism, and hospitality for their economic livelihood. The COVID-19 pandemic has devastated restaurants, bars, hotels, entertainment, travel, and other hospitality sector businesses throughout the country. As of May 2020, the national unemployment rate for the leisure and hospitality industry was 35.9%, compared to 5% just one year prior. As states have begun reopening, employees of these industries have joined those in the health care industry on the front lines, interacting with customers while the pandemic continues to impact the nation’s health and economic well-being. How have restaurant owners and hotels adapted their businesses and what is the economic outlook for this service sector over the next one to two years? The Brookings Institution hosted a conversation with Chef José Andres and Marriott CEO Arne Sorenson about how the restaurant and hotel industries are adapting to the shifting economic landscape.
The Biggest International Trade Stories of 2020, So Far (Law 360). The public health crisis spurred by the outbreak of COVID-19 quickly sent shock waves through international trade circles. The shuttering of manufacturing hubs in China and elsewhere snarled global supply chains, and governments were forced to grapple with the challenges of acquiring the materials needed to combat the spread of the coronavirus. Overall trade has begun to bounce back after initial projections forecast a downturn on par with the Great Depression, but businesses across many industries are still wrestling with how best to adjust to the new commercial climate. The pandemic isn’t the only big trade story, a bitter feud with China, struggles at the WTO, court challenges to Section 232 trade restrictions on national security grounds, and the enactment of a new North American trade agreement were among the many factors keeping companies and their trade attorneys busy in the first half of the year.
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* SEDE Network Discussion *
The United Kingdom is a major trade and investment partner for the U.S. and negotiations are underway for a post-Brexit trade deal. The UK Minister of State for Trade Policy Greg Hands provided a U.S./UK Trade Briefing Session and Discussion for SEDE Network members on Tuesday, June 30, 2020. The discussion focused on how both sides are seeking a comprehensive deal with current talks being positive and constructive. However, there is no set deadline for this agreement as quality is more important than speed. Minister Hands and his team did express an interest in making trade and investment connections with states, and recently released a set of fact sheets on the UK’s role in each US state’s economy. The link above takes you to these highlights which include the number of people in each state employed by UK subsidiary companies, types of goods and services imported from each state into the UK, and the value of goods and services imported from each state into the UK.
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Applying the Opportunity Zone Program in the Wake of the COVID-19 Pandemic (Corporate Taxation). Taxpayers with short-term or long-term capital gain income generated in 2019 or in early 2020 can use the OZ program to invest the qualified gains in a qualified opportunity fund (QOF). As some investors reevaluate their commitments to qualified opportunity zones (QOZ) in light of the pandemic, they may enjoy some level of favorable tax treatment in 2020 if they decide to liquidate their capital from the funds. The Final Regulations clarify that individuals would not be subject to interest or other kinds of penalties if they chose to liquidate their investments early. The OZ program also allows a restart on the clock on the 180-day window for reinvesting in other funds without losing out on the OZ program’s favorable tax treatment. Once the capital gains have been reinvested into a QOF and then dropped into a qualified opportunity zone business (QOZB), taxpayers may have up to 62 months to reinvest the proceeds into various QOZ projects. This extended reinvestment period is particularly useful given the uncertainty in the current markets. To view the Final Regulations on Opportunity Zones issued by the U.S. Treasury Department and IRS, click here.
Opportunity Zone Best Practices Report (White House Opportunity and Revitalization Council). Since the establishment of Opportunity Zones, revitalization projects have delivered economic and social benefits to the fifty-two million Americans living in economically distressed communities, including the thirty-five million people across the nation’s Opportunity Zones. Public and private investment continues to flow into OZs. Such investment is more critical now than ever before, as we continue to combat the COVID-19 pandemic. This report highlights best practices of various stakeholders within the OZ ecosystem. The Council anticipates that this report will help guide State, local, and tribal governments to better understand strategies that increase economic growth, encourage business formation, enhance health outcomes, and revitalize communities. For instance, the report discusses how certain States and Territories have enacted legislation to magnify the effects of OZ investment for residents of underserved communities, and to make investment in their OZs even more attractive to Qualified Opportunity Funds. Ultimately, the overall success of the initiative depends upon strategic alignment of the resources best suited to meet the needs of each community. For more information on Opportunity Zones, CDFA has extensive resources available, click here.
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.
Not Inclusive? You’re Losing 39 Percent of Job Applicants (McKinsey & Company). A recent McKinsey Global Survey on inclusive workplaces finds that a sense of inclusion is strongly linked with employee engagement. Respondents who feel very included are much more likely to say they feel fully engaged—that is, excited by and committed to their organizations. Among survey respondents who feel very included, nearly three-quarters say they are entirely engaged. By comparison, just one-quarter of respondents who do not feel very included say they are completely engaged with their organizations. Furthermore, respondents who feel very included are 1.5 times more likely than others to believe their career advancement is outpacing their peers’. Additionally, the survey finds thirty-nine percent of all respondents say they have turned down or decided not to pursue a job because of a perceived lack of inclusion at an organization. LGBTQ+ and racial- or ethnic-minority respondents are more likely than others to report choosing not to pursue a job for this reason.
The Geography of New Technologies (Institute for New Economic Thinking). This study uses textual analysis of earnings conference calls, newspapers, announcements, job postings, and patents to document the rollout of 20 new technologies across firms and labor markets in the U.S. The key results of this analysis include: (1) Earnings call mentions and hiring announcements linked to the new technologies rise in parallel over time; (2) While initial hiring is focused on high-skilled jobs, over time the mean skill level in new positions associated with the technologies declines sharply, a “skill-broadening” effect; (3) New hiring in new technologies increases its geographic footprint over time, becoming less concentrated, dubbed “region broadening;” (4) The initial geographic hub retains an important advantage that persists over time. This pattern is particularly pronounced among high skill jobs; and (5) Hubs are most likely to arise around universities and areas with more educated populations. This work suggests a strong advantage for regions that were associated with the earliest activity in a technology. Despite the skill- and region-broadening effects, not only does a large share of new employment continue to locate there, but especially the most desirable high-skilled positions.
Reimagining Infrastructure in the United States (McKinsey & Company). U.S. infrastructure agencies have kept the country’s trains running, water flowing, and government buildings functioning during the coronavirus crisis. Now that operations are stabilizing, they can reconsider their capital-expenditure plans. What that entails will vary dramatically depending on whether the federal government provides substantial infrastructure funding as part of an economic-stimulus package. There is little doubt about the value of investing in good infrastructure. The Congressional Budget Office estimates that every dollar spent on infrastructure brings an economic benefit of up to $2.20. However, the American Society of Civil Engineers finds the U.S. has over a $2 trillion unfunded infrastructure gap. This report suggests how infrastructure agencies can reimagine their future—whether they get stimulus funding or not—and recommendations to improve capital allocation in six specific areas: airports, mass transit, roads, water and wastewater, broadband, and publicly owned buildings.
* Check out the SEDE Website *
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. The newest addition to the site includes a collection of websites and other communication resources used by states to address the Coronavirus Challenge.
Click the link above and check it out!
Incentives in Action
Wisconsin Launches Blue-Ribbon Commission on Rural Prosperity (Mid-West Farm Report). The Wisconsin Governor’s Office recently named leaders from around the state to a Blue-Ribbon Commission on Rural Prosperity. The 12-member commission, established by Executive Order, will be tasked with developing long-term strategies on how Wisconsin can best support the needs of rural Wisconsinites and rural communities. The Wisconsin Economic Development Corporation (WEDC) will provide logistical and administrative support to the commission. In his State of the State address this year, Governor Evers directed WEDC to create the Office of Rural Prosperity, and the organization recently named Kelliann Blazek as the first director of the office. The commission is expected to hold listening sessions around the state later this summer on the impact of COVID-19 on rural communities and businesses, as well as the challenges and opportunities the pandemic has created. The commission’s recommendations will help to form the biennial state budget, which will be introduced early next year.
Kentucky Partnership Helps State Manufacturers become Export Proficient (Northern Kentucky Tribune). The Advantage Kentucky Alliance, the state’s NIST Manufacturing Extension Partnership center, has announced a new partnership with the World Trade Center Kentucky to jointly deliver exporting and importing assistance through trade advisory and consulting services to manufacturers across the state. This partnership brings together experts in manufacturing consulting and training services with international and domestic trade professionals providing customized trade advocacy, practical education seminars, multi-sector trade missions, and networking events that will help Kentucky businesses become export proficient. Increased exporting strengthens Kentucky’s economy and creates more high-paying jobs in the commonwealth. The state’s international trade, which totaled $33 billion in 2019, allows Kentucky companies to grow and expand sales to a broader, more diverse customer base. It also reduces the financial risk to the economy by spreading costs across multiple markets and widening revenue streams beyond the domestic market.
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.
New Growth Opportunities
Where to Focus Economic Recovery Efforts? (Regional Growth Strategies). When the current health crisis subsides, civic leaders will be faced with replacing the scores of businesses that have been lost and creating jobs for the legions of people who are out of work. However, with state and local budgets severely depleted by the pandemic, they will need to focus economic recovery efforts where they can make the biggest difference, on those businesses that have the most potential to promote job growth and economic inclusion. Like the approach needed with the pandemic, their decisions will need to be based on science, rather than anecdotes, fads, or wishful thinking, which has too often been the case in economic development. For instance, in the short-term most job growth comes from new businesses, while in the long term, most job growth comes from businesses that have been around for a few years. Both are critical since an adequate supply of growing businesses tomorrow depends on getting enough new businesses into and through the pipeline today. Civic leaders will need to find the right balance between these long-term and short-term objectives.
A Skills-Based Approach to Occupational Mobility (Federal Reserve Banks of Philadelphia and Cleveland). Researchers at the Federal Reserve Banks of Philadelphia and Cleveland analyzed tens of millions of online job ads — and the skills listed therein — to identify viable career transitions between lower-wage occupations and better-paying jobs requiring similar skills. A skills-based approach to occupational mobility can offer economic pathways out of lower-wage work for those without a bachelor’s degree and help meet the talent needs of employers. In general, there is a high degree of similarity between the skills employers seek when filling lower-wage occupations and the skills demanded for opportunity occupations, defined as those that pay above the national annual median wage and that do not typically require a bachelor’s degree. The table below compares the skill portfolios of two occupations —retail salespersons (the origin) and sales representatives (the destination). Skills in common (shown in dark blue) include sales, customer service, communication, teamwork/collaboration, product sales, and organization. Investments to overcome the modest skill deficits (shown in orange) — such as marketing, Microsoft Excel and Microsoft Office, and problem solving — could help to facilitate a transition that, on average, would represent a 128 percent increase in annual median wages.
Reimaging Community Colleges (Opportunity America). Covid-19 will likely hasten the arrival of what we once called the “future of work.” Americans at all education levels will need to adjust. Many now out of work in the devastation sparked by the virus will find it necessary to learn new skills before they can re-enter the labor market. Millions of Americans will likely need quick, job-focused upskilling and reskilling. Among the education and training providers best positioned to meet this challenge are the nation’s 1,100 two-year community and technical colleges. Community colleges have an opportunity to embrace a new, more ambitious role—to accept and champion that they are the nation’s primary provider of job-focused education and training. These institutions should put workforce skills— career preparation and midcareer upskilling—more at the center of their mission and culture. The report provides a series of recommendations for community colleges and state education authorities, as well as critical changes needed to federal workforce policy and student financial aid, to better position community colleges as indispensable institutions for the talent pipeline needed for a national economic recovery.
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SEDE Network Updates
* Upcoming SEDE Event *
How to Leverage Higher-Ed to Attract New Employers:
Amazon HQ2 and the Virginia Tech Innovation Campus
August 18, 2020
2:00 pm – 3:00 pm EDT
In 2018, Northern Virginia became the envy of the nation when Amazon announced that it would build HQ2 at National Landing – a newly-named neighborhood that crosses the jurisdictional boundaries of the City of Alexandria and Arlington County. The region was successful for a myriad of reasons but the single most important factor, according to Amazon, was the talent pipeline that Virginia Tech (VT) would facilitate through their new Innovation Campus, located in the Alexandria portion of National Landing. Although VT is located hundreds of miles away in southwestern Virginia, their satellite location was a lynchpin for the success of the HQ2 project. The speakers will discuss how local and state officials can leverage higher education institutions and establish a talent pipeline to attract new employers.
Stephanie Landrum, President & CEO, Alexandria Economic Development Partnership
Stephen Moret, President & CEO, Virginia Economic Development Partnership
Brandy Salmon, Associate Vice President for Innovation and Partnerships, Virginia Tech
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The SEDE Network Steering Committee includes: Stefan Pryor (RI), Chair; Val Hale (UT), Vice Chair; Julie Anderson (AK); Dennis Davin (PA); Jennifer Fletcher (SC); Kurt Foreman (DE); Joan Goldstein (VT); Manuel Laboy Rivera (PR); Kevin McKinnon (MN); Don Pierson (LA); Mike Preston (AR); Sandra Watson (AZ).
For further questions on the content in this Bulletin or for information on the SEDE Network contact Marty Romitti, CREC Senior Vice President, at email@example.com