State Economic Development Bulletin – July 2022

 

State Economic Development Bulletin

Headlines:

Economic Performance  

Economic Outlook 

SEDE News 

Trade

Industry Trends

Workforce

Finance and Incentives

Economic Performance

U.S. Economy Contracts in Q1; Outlook Murky as Unsold Goods Accumulate (Reuters) GDP fell at a 1.6% annualized rate last quarter, the first time GDP growth has gone negative since the brief pandemic recession two years ago. The contraction was caused by lowered consumer spending, from 3.1% last month to a rate of 1.8%. However, it is highly unlikely that the U.S. is currently in recession as job growth, capital investment, and private-sector balance sheets all remain very strong.

How the U.S. Recovered from the COVID-19 Shock and Futures Challenges (IMF) Just over two years after the COVID-19 shock, the unemployment rate and other measures of labor force utilization have returned to end-2019 levels and output is close to its pre-pandemic trend. Rapid wage increases for lower income workers have helped family income levels as poverty fell to 9.1 percent in 2020 (from 11.8 percent in 2019), and there were even larger reductions in poverty for female-headed households, children, African Americans, and Hispanics. A total of 8.5 million net new jobs have been created since the end of 2020. However, inflation is taking its toll on consumers and higher prices are erasing nominal income gains. The U.S. will need to make long-run investments in productive capacity to eventually tame price rises.

U.S. Labor Market Still Tight as Job Openings Remain Elevated (Reuters) U.S. job openings dropped by 427,000 to 11.3 million in May, which was less than expected and points to a still tight labor market. This labor market could keep the Federal Reserve on an aggressive monetary policy path as it battles high inflation.

Economic Outlook

Will the U.S. Economy Avoid a Recession? (Economist Intelligence Unit) The Economist Intelligence Unit (EIU) predicts the U.S. will narrowly avoid a recession in 2023-2024. While inflation is high and the Federal Reserve has begun targeting higher rates, U.S. households maintain strong savings, the labor market remains tight, and nominal wages continue to increase. These indicators signal strong underlying economic activity, despite increased borrowing costs. The EIU notes three events which could force the U.S. into a recession: 1) another, more pronounced, jump in inflation, 2) an overly aggressive tightening by the Federal Reserve, and 3) a pronounced collapse in asset prices.

Recession Isn’t ‘Inevitable’ But Inflation Remains ‘Unacceptably High’: Janet Yellen (ABC News) President Biden’s Treasury Secretary, Janet Yellen explained that a recession is not inevitable. Despite historic inflation—exacerbated by Russia’s invasion of Ukraine—household balance sheets remain strong. The administration is working to reduce energy costs, specifically, by releasing oil from the strategic reserve and calling on major oil companies to lower prices. So far, these measures have done little to reduce energy price rises.

SEDE News

Michael Brown

Executive Director

Nevada Governor’s Office of Economic Development

SEDE Spotlight: Michael Brown is the Executive Director of the Nevada Governor’s Office of Economic Development, appointed by Governor Steve Sisolak on November 4, 2019. This is Mr. Brown’s second cabinet-level appointment in the Sisolak Administration as he previously served as the Director of the Department of Business & Industry. Previously, he led Barrick Gold of North America, the world’s largest gold mining company, as President and Vice President of U.S. Public Affairs. He also served in the Reagan Administration as Special Assistant to the Director of the United States Mint and the U.S. Mint’s Citizens Coinage Advisory Committee under U.S. Senator Harry Reid. Mr. Brown started his career in the Ohio House of Representatives, working for Representative William Batchelder. His dedication and passion have been recognized in many forms. In 2015, he received the Civitas Laurel award from the Foundation for an Independent Tomorrow and in 2016, the Latin Chamber of Commerce recognized him as a Señores of Distinction. In 2017, the Public Education Foundation recognized Mr. Brown as an Education Hero and in 2018 Lorain County Community College named him a Distinguished Alumnus. Currently, Mr. Brown serves as a board member for the Las Vegas Global Economic Alliance, Public Education Foundation, and Nevada Ballet Theatre.

Incentives Compliance Network Roundtable (SEDE Network) SEDE is excited to announce a webinar for economic development leaders and professionals engaged in incentive compliance and reporting. Participants will engage with each other about their work and have an open discussion about challenges and opportunities for the field. Ellen Harpel (Smart Incentives and CREC Senior Research Fellow) will facilitate the conversation. We expect this roundtable to be informal as we discuss topics that are top of mind for attendees, challenges you are facing, and future meeting topics. Registration is now open. 

Summary of the SEDE Network Meeting: On June 25th and 26th, the SEDE network gathered in Washington D.C. to discuss current challenges and opportunities in their respective states and to share strategies to promote economic development. The meeting began with a conversation of hot topics including ARPA, labor shortages, supply chain challenges, and mega-site development. The network also discussed state and federal collaboration with Jasjit Singh (Executive Director of SelectUSA), Jessica Milano (Chief Program Officer of the Office of Recovery Programs with the U.S. Treasury), Alejandra Castillo (Assistant Secretary, Economic Development Administration), and Brent Parton (Acting Assistant Secretary of the Employment and Training Administration). The network also discussed workforce challenges, flexibility in changing times, infrastructure investment, and legislature relations. A more detailed summary of the SEDE Network meeting is available to members who log in to the SEDE website.

Trade

Russia-Ukraine War: Perspectives U.S. Exporters Need to Know (International Trade Administration) After Russia began its invasion of Ukraine, the U.S. imposed heavy, broad-based sanctions on the country. Although some companies have chosen to stay in Russia while suspending operations, others have found that the already challenging business environment in Russia has become increasingly unstable and unpredictable virtually overnight. Complicating matters further, Russia has threatened Western companies with retaliatory measures, including proposals to seize the assets of Western companies that decide to leave Russia. U.S. companies rethinking investment positions in Russia may want to consider industries ripe for growth in Central Asia. Kazakhstan and Uzbekistan are currently courting U.S. companies in the extractive industries, including engineering, mining, oil and gas, construction, and infrastructure sectors.

U.S., China Talk Trade, Supply Chains as Biden Weighs Tariff Cuts (Al Jazeera) In talks with Chinese Vice Premier Liu He, Treasury Secretary Janet Yellen raised concerns about China’s “unfair, non-market” economic policies and Russia’s war against Ukraine. China expressed concerns about US tariffs and sanctions against Chinese firms, the ministry said, adding that both sides had agreed to continue dialogue. The talks come as U.S. President Joe Biden weighs the possibility of easing tariffs on Chinese imports as part of efforts to control soaring prices.

CBP Announces Launch of Green Trade Strategy (U.S. Customs and Border Protection) The Green Trade Strategy is a framework to incentivize green trade, strengthen CBP’s environmental enforcement posture, accelerate green innovation, and improve climate resilience and resource efficiency. The Strategy presents four strategic goals to guide CBP’s trade-related environmental activities:

  • Incentivize Green Trade – provide facilitation benefits and other incentives to promote environmentally-friendly trade practices and supply chains
  • Strengthen Environmental Enforcement Posture – enforce against environmental bad actors to drive meaningful changes in trade practices
  • Accelerate Green Innovation – promote and invest in the deployment of innovative, sustainable trade practices by government and private industry
  • Improve Climate Resilience and Resource Efficiency – decrease the greenhouse gas emissions associated with CBP operations and strengthen the resilience and sustainability of trade infrastructure and assets.

Industry Trends

Nuclear Power Gets New Push in U.S., Winning Converts (New York Times) President Biden, who wants to eliminate greenhouse gas emissions from the power industry by 2035, said a Supreme Court ruling last week limiting federal regulatory authority would not halt such efforts. But the supply chain issues that have hurt wind and solar power development have presented the latest hurdle to reaching that goal. As a stopgap, the Biden administration has established a $6 billion fund to help troubled nuclear plant operators keep their reactors running and make them more economically competitive against cheaper resources like solar and wind power. A separate bipartisan measure introduced last year is aimed at preserving and expanding nuclear energy in the United States including the provision of financial assistance like tax credits. Industry leaders recognize that the age of new large-scale nuclear plants in the United States has passed, chiefly because of runaway costs. But many in the industry say smaller reactors that can be expanded over time offer promise of avoiding long delays and high cost. These reactors can be built in factories and delivered to approved sites. And the reactors’ high-temperature steam could also yield significant amounts of hydrogen, a carbon-free alternative fuel to natural gas.

Explainer: What Drives Gasoline Prices? (Visual Capitalist) Four factors determine the price of gasoline at the pump, with the cost of crude oil being the largest determinate:

  1. Cost of crude oil: 54%
  2. Taxes: 16%
  3. Distribution and marketing: 16%
  4. Refining costs: 14%

Despite being the world’s largest oil producer, the United States is a net importer of crude oil. Thus, the cost of gas in the U.S. is largely determined by how much the Organization of the Petroleum Exporting Countries (OPEC) decides to produce. OPEC was originally conceived to combat U.S. dominance in international oil markets.

Workforce

Maryland Eliminates Four Year Degree Requirement for Thousands of Government Jobs (Pew Charitable Trusts) Maryland has been unable to fill state jobs since the peak of the COVID-19 pandemic. So, officials decided to eliminate the four-year degree requirement for thousands of state jobs—from parole agents to information technology specialists to nursing assistants. Applicants will be able to substitute relevant work experience, military training or community college or other educational courses. This method has worked in other locations like Boulder, Colorado, where the County hired 13% more non-degreed people in 2021 compared with 2019 and saw a 10.2% increase in the number of employees of color hired in the same period.

Finance & Incentives

Arizona Invests $1 Billion to Expand Water Finance Authority (Water World) Arizona Governor Doug Ducey has signed legislation that makes an unprecedented $1 billion investment in water conservation, efficiency, reuse, and importing through the Water Infrastructure Finance Authority (WIFA). This bill will allow the state to make significant investments in water conservation and technologies such as desalination, as well as identify and develop new innovative long-term water sources. WIFA will administer additional funds for water augmentation, supply development, conservation projects, and more. Through the funds, WIFA will have the ability to acquire, store and sell new imported water as well as engage in private-public partnerships to help enable these projects.

EDA Announces up to $35 Million in Funding for Economic Recovery Corps and Equity Investments (SSTI – State Science & Technology Institute) In June, the Economic Development Administration announced new funding that includes two programs to strengthen equitable economic development: the Economic Recovery Corps and the Equity Impact Investments Program. The Economic Recovery Corps program will award one five-year grant between $20 million and $25 million to a network operator to build, launch and operate an economic development fellowship program in cooperation with EDA. The program would recruit and place at least 50-75 fellows in economic development organizations in underserved communities throughout the nation. The deadline to apply is Aug. 5, 2022. The Equity Impact Investments Program aims to provide capacity, knowledge and technical assistance to organizations that serve underrepresented populations. The deadline to apply is Aug. 5, 2022, with the award expected to be made by Sept. 30, 2022.

U.S. Department of Labor Awards $121M In Apprenticeship Grants (U.S. Department of Labor) “The funding of $121.7 million in Apprenticeship Building America grants reaffirms and advances the Biden-Harris administration’s commitment to strengthening and expanding Registered Apprenticeships,” said Secretary of Labor Marty Walsh. “The Apprenticeship Building America grants will develop new pathways to good-quality jobs and provide America’s workers with opportunities to access and succeed in those pathways; and the intentional focus on equity partnerships and pre-apprenticeship activities will create opportunities for underrepresented and underserved communities.” The Apprenticeship Building America grant program advances the department’s efforts to expand and modernize Registered Apprenticeship by increasing the number of programs and apprentices, diversifying the industries that use Registered Apprenticeship and improving the access to and performance of Registered Apprenticeship Programs for underrepresented and underserved communities.

Mayor of St. Louis Uses Survey to Prioritize ARPA Funding (St. Louis Public Radio) The City of St. Louis conducted a survey to gauge local priorities on spending ARPA funds. The “ARPA Needs Survey” drew 4,215 responses, more than 77% of them from city residents. Respondents were asked to indicate their top three priorities and then drill down on how they would spend the money in each of seven broad categories. The mayor acknowledged the survey respondents were more likely to be white (67% self-identified as such) and female (58%) than the city as a whole. But the Mayor said she feels confident she’s not getting a skewed perspective. “We also did town halls and round tables,” she noted. The town halls alone drew more than 200 people.

The State Economic Development Executives (SEDE) Network engages in regular events throughout the year. State Economic Development.org lists these activities and offers an interactive forum for discussion among peers. The website is currently undergoing some minor reorganization including adding resources on how state and local economic development districts can align strategies and collaborate on activities.

The SEDE Steering Committee includes: Sandra Watson (AZ), Chair; Mike Preston (AR); Kurt Foreman (DE); Don Pierson (LA); Kevin McKinnon (MN); Christopher Chung (NC); Alicia Keyes (NM); Michael Brown (NV); Andrew Deye (OH); Sophorn Cheang (OR); Adriana Cruz (TX); Joan Goldstein (VT); Lisa Brown (WA) and Mike Graney (WV).

Leif Olson led the development of this Bulletin; 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.