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State Economic Development Bulletin
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SEDE News
Economic Performance
Economic Outlook
Trade
Industry Trends
Workforce
Finance and Incentives
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SEDE Hosts June Meeting for Top Executives. After nearly three years, the State Economic Development Executives (SEDE) Network is hosting an in-person meeting in conjunction with the SelectUSA Investment Summit at National Harbor near Washington, DC. The SEDE meetings will begin the afternoon of Saturday, June 25th and conclude at 3 pm on Sunday June 26th, in time for participants to fully engage in the Summit’s opening events. The agenda will include presentations by federal partners, discussions of hot issues facing states and many opportunities for networking among the state economic development commissioners, secretaries and executive directors or their top deputy. Invitations have been sent to the SEDE Network!
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Sophorn Cheang
Director
Business Oregon
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Spotlight: Sophorn Cheang, Director of Business Oregon Sophorn Cheang (so-POHRN j-ay-ng) took the reins as Director of Business Oregon in March 2021. Prior to that, Cheang served as the Director of the Office of Diversity, Equity, and Inclusion for Governor Kate Brown since 2018. In this role she oversaw the development of state business policies to eliminate bias and barriers and provided economic opportunities for all Oregon businesses through equity practices in state procurement and community economic development. Cheang also co-coordinated the Governor’s Racial Justice Council. Prior to her work with the Governor’s Office, Cheang served as Senior Community Development Manager and Director of the Asian Family Center for the Immigrant and Refugee Community Organization, where she developed and directed culturally specific programs and services for immigrants and refugees; mobilized diverse community leaders across the state to address social and racial injustices; and performed other strategic planning and advocacy work. Cheang has an MBA from Willamette University and a bachelor’s degree in finance from Portland State University.
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The U.S. Economy Shrank in the First Quarter (CNN Business) The US Bureau of Economic Analysis estimates GDP decreased at an annualized rate of 1.4% between January and March. This is the “advanced estimate” and a more complete estimate including additional data will be available at the end of May. The GDP contraction was driven by inventory draw-down, the increased trade deficit, and receding federal funds. In times of uncertainty, inventories increase (called inventory investment) as firms seek to forestall future delays. When supply chain issues resolve, firms allow their stock of inventory to shrink by slowing inventory purchases. The federal government also slowed purchases, specifically of defense-related intermediate goods and services. A decrease in government consumption decreases overall GDP.
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U.S. Economy Still ‘Very, Very Strong’ (Reuters) Despite an annualized GDP contraction of 1.4% in the first quarter, underlying economic conditions remain strong. Household balance sheets, household consumption, and business investment (other than inventory) are all quite robust. Further, the unemployment rate remains quite low at 3.6% and PCE or “core” inflation is expected to slow to 5.3% from 5.4% in February.
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Inflation Persistence: How Much Is There and Where Is It Coming From? (New York Fed) When inflation first reemerged in 2020, the Federal Reserve seemed confident it would quickly subside. Instead, inflation has remained and even expanded into the wider economy. The New York Federal Reserve distinguishes between two types of inflation: “Transitory” inflation, which is inflation caused by idiosyncratic changes or shocks and “trend” inflation, which is common across multiple sectors, and which reflects macro-level effects. The New York Fed found that “transitory” and “trend” inflation have both contributed to higher prices, but that “trend” inflation took over in the fall of 2021 and drives current price growth.
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As Stocks Fall, Economic Fears Rise, Along With Inflation (New York Times) April was the worst month for Wall Street since the March 2020 coronavirus shock. The S&P 500 fell 8.8% in April, indicating a wide belief that the “economy is about to take a hit.” Investors are concerned about high inflation, war in Europe, and looming rate hikes by the Federal Reserve.
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The Global Stagflation Shock of 2022: How Bad Could it Get? (Financial Times, subscription required) Initial predictions of post-COVID economic growth were optimistic. Now, hope for the new “roaring twenties” is dwindling as expansion fails to meet expectations. Further, the Russian attack on Ukraine has thrown fuel on the already blazing fire of commodity prices — particularly oil. For many, price rises, oil shocks, and middling economic growth trigger sour memories of the 1970s. However, inflation is not as high as it was following the 1973 OPEC embargo and growth is stronger overall.
Perhaps most importantly, central banks around the world are far more independent than they were 50 years ago, allowing them to fight inflation without political influence. While growth predictions may have been quixotic, nations have better tools to fight inflation than they did when stagflation first appeared.
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U.S. Trade Deficit in Goods Jumps to Record $125.3 Billion Due to Imports and Inflation (MarketWatch) The US trade deficit in goods (the difference between total import and total exports) rose by 17.8% in March, according to an initial estimate by the Census Bureau. The deficit indicates deferred-consumption pressure and healthy consumer demand for goods. It also indicates that the congestion at America’s ports may be easing slightly. Further, because inflation is decreasing the value of the dollar relative to foreign currency, many imported goods are now more expensive for Americans to buy—which contributes to the widening deficit.
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U.S. Trade Chief Signals China Tariff Relief an Option as Prices Soar (South China Morning Post) Biden’s Trade Representative Katherine Tai explained that, while “all tools are on the table,” tariff relief would need to be viewed in the wider context of available tools to combat inflation. Tai said that “…the US needs to make sure that the tools it deploys to meet the short-term challenge of inflation are effective and do not undermine the medium-term goal of changing the relationship with China.” Tai also dismissed a Peterson Institute study which estimated that eliminating a wide selection of tariffs “could reduce inflation by 1.3 percentage points.”
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EXIM To Provide Competitive Financing for U.S. Manufacturers (Mondaq) The Export-Import Bank of the United States (EXIM) assists American exporters using loans, loan guarantees, and insurance. For the first time, the EXIM will make its financing programs available to export-oriented manufacturers. Financing will be subject to EXIM’s due diligence standards and other financing requirements including environmental and social criteria, job numbers supported by financing, and a minimum “export nexus.” The “export nexus” is the percentage of a project’s production (i.e., goods produced at the facility) or capacity (i.e., percent of export traffic at a port) that is used for export.
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E-Commerce Sales Surged During the Pandemic (Census Bureau)
In 2020, e-commerce sales increased by $244.2 billion or 43%. The coronavirus pandemic shifted consumer behavior and firms responded by offering a broader range of online consumption options. While retail e-commerce grew, sales in some industries declined from 2019 to 2020 as pandemic-related lockdowns kept people at home, working, shopping, and even studying online.
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Competing for Manufacturing Talent (Deloitte) There is good news to report in the Deloitte and The Manufacturing Institute 2022 Manufacturing Perception Study. Compared to the 2017 study, significantly more respondents believe that manufacturing jobs are innovative, and more respondents are likely to encourage their child to pursue a career in the industry. Further, the pandemic has led to a new awareness of the critical nature of manufacturing in the United States and beyond. Now, manufacturers have an opportunity in the wake of the pandemic to educate people unfamiliar with the benefits of a manufacturing career, while continuing to retain their post pandemic workforce.
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How the “Amazon Way” is Transforming the Future of Work (Vox) Amazon’s immense success is forcing entire industries to adopt leaner labor practices across the country. To compete with Amazon, firms seek to streamline worker performance and increase productivity. While this “consumer obsession” is good for patrons, it can harm workers. As Amazon forces a new national work culture, labor advocates are concerned about arduous physical demands and invasive surveillance practices. Workers are seeking their own solution. In April, an Amazon warehouse in New York became the first in the US to successfully vote to unionize. This may force the company to reevaluate its labor practices. In his last shareholder letter as CEO in 2021, Jeff Bezos wrote that the company needed “to do a better job for our employees.”
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A Decline of Women in the Workforce (U.S. Chamber of Commerce) Both men and women suffered a 3% drop in labor force participation at the height of the pandemic. But more than two years later, men have returned to work at a higher rate than women. Today, women’s labor force participation is still a full percentage point lower than it was pre-pandemic, meaning an estimated one million women are missing from the labor force. Many women remain out of the workforce because their jobs were more vulnerable to layoffs during the pandemic and/or a lack of childcare forced them to resign. As the pandemic begins to recede, families are increasingly relying on one income.
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Nebraska Factory Gets Influx of Workers by Offering Flexible Hours, High Wages (CNN) A Kawasaki manufacturing plant in Lincoln, Nebraska is offering 9am to 2pm shifts paying $19 per hour with a retirement package. The tight labor market is forcing companies like Kawasaki to rethink their labor practices. Kawasaki was struggling to hire workers, so they spoke with the local community and decided to post shifts that mirrored the school day—giving parents the ability to work and care for their children after school. Experts indicate that the low unemployment rate and strong consumer demand have given workers more power to demand better working conditions. The question now is: Will it last?
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States Risk Leaving Broadband Money on the Table (Pew Charitable Trusts) A year after Congress passed the American Rescue Plan Act (ARPA), only 24 states have confirmed plans to use billions in federal money for broadband expansion. State legislatures are opting not to use ARPA because they are waiting on other, potentially larger pots of federal money that may be months away. Namely, states are waiting for the Infrastructure Investment and Jobs Act (IIJA) which allocates more money directly to broadband. However, IIJA also has a more restrictive definition of “unserved households” which could make broadband expansion plodding and inefficient. On the other hand, ARPA, through the Capital Project Fund (CPF) institutes a 100 Mbps-up/20 Mbps-down wireline requirement, meaning more households are eligible for help. Technically, states have until 2024 to appropriate CPF funds. But with more than a dozen state legislatures already out of session for 2022 and some not even convening this year, states that have not yet elected to use CPF for broadband should look to do so in 2023.
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Rivian Gets $1.5B in Incentives to Build Northeast Georgia Plant (Online Athens) Electric vehicle startup Rivian committed to a $5 billion manufacturing plant east of Atlanta in exchange for a $1.5 billion incentive package, a 25-year no-cost lease, and $198.1 million in site and road improvements on 1,978 acres. Georgia’s Commissioner of Economic Development, Pat Wilson, explained that the 7,500 jobs Rivian will create when the plant is fully built could generate an annual payroll of $420 million, or $10.5 billion over 25 years, more than justifying the $1.5 billion in incentives.
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Connecticut Lawmakers OK $75M in Tax Incentives for Sikorsky (U.S. News) Lawmakers in Connecticut approved a bill that will provide up to $75 million in tax incentives to Sikorsky, a helicopter company and subsidiary of Lockheed Martin. If the bill is signed into law, Sikorsky will keep its headquarters in Stratford, Connecticut for the next 20 years. The headquarters is estimated to generate $5 billion in tax revenue for the Connecticut economy.
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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.
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The State Economic Development Executives (SEDE) Network Steering Committee includes: Stefan Pryor (RI), Chair; Sandra Watson (AZ), Vice Chair; Mike Preston (AR); Kurt Foreman (DE); Don Pierson (LA); Kevin McKinnon (MN); Chris Chung (NC); Alicia Keyes (NM); Michael Brown (NV); Andrew Deye (OH); Sophorn Cheang (OR); Adriana Cruz (TX); Joan Goldstein (VT); Lisa Brown (WA); Mike Graney (WV).
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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.
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