State Economic Development Bulletin – October 2022

 

<!–

State Economic Development Bulletin

<!–
<!–

Headlines:

<!–
<!–

Economic Performance 

Economic Outlook

SEDE News 

Trade 

Industry Trends

Workforce

Finance and Incentives

<!–
<!–
<!–
<!–

Economic Performance

<!–
<!–

U.S. Consumer Inflation Expectations Fall in September; Sentiment Rises (Reuters) Consumer near-term inflation expectations fell this month to 4.6% from 4.8% in August, according to a University of Michigan survey. Consumers’ five-year inflation expectations also fell from 2.9% in August to 2.8% this month. Consumer confidence increased over the same period. Much of these shifts in perception are driven by falling gas prices, but future rate hikes and recession may dampen consumer sentiment going forward.

<!–
<!–

Pass-Through of Wages and Import Prices Has Increased in the Post-COVID Period (Liberty Street Economics) Researchers at the New York Federal Reserve analyzed two major contributors to inflation: higher wages and increased input prices. They found that both factors have a greater impact on prices now than they have in the past. Mangled supply chains and higher prices in other countries have contributed more to U.S. inflation in the past two years than they have in the past ten years. Researchers saw the same pattern with U.S. wages. In the past, increased worker wages have not contributed strongly to inflation. However, in the past two years—likely due to a tight labor market and increased bargaining power—higher wages have contributed more significantly to the general price level.

<!–
<!–
<!–
<!–

Economic Outlook

<!–
<!–

Pandemic Aid Averted Global Depression But Left a Bad Hangover (Reuters) While economists largely agree that stimulus was necessary to prevent a global recession, evidence suggests governments may have overspent. Global inflation, particularly acute in the US, is indicative of both supply shocks and of an overabundance of cash. To tame inflation, the Federal Reserve continues hiking interest rates and shedding assets—risking a global recession and currency crises in developing countries. Further, the historically inverse relationship between unemployment and inflation implies that U.S. unemployment may reach higher-than-expected levels before prices come down. 

<!–
<!–

Fed Goes Big Again With Third-Straight Three-Quarter-Point Rate Hike (CNN) On Wednesday September 22nd, the Federal Reserve hiked interest rates by 75 basis points for the third consecutive time. This hike raises the benchmark rate to a range of 3-3.25%. Higher interest rates also mean worsening economic conditions across an array of measures. The median predicted unemployment rate in 2023 is up to 4.4%, and the June GDP growth rate was revised down from 1.7% to 0.2%. While consumer spending and the job market remain strong, more economic measures are pointing toward a hard-landing recession.

<!–
<!–
<!–
<!–

SEDE News

<!–
<!–

SEDE Website Update (SEDE) The State Economic Development Executives website has been redesigned to offer a more up-to-date user experience. We’ve introduced several changes:

  • New, modern look
  • Consolidated and reorganized content tabs
  • More accessible blogs and bulletins pages
  • More content including: research on EDA Statewide Planning Grants and new webinars and blogs

This refresh is part of an ongoing process to update online SEDE resources to better serve leaders. If you have any questions or if you have suggestions for future updates, contact Leif Olson.

<!–
<!–
<!–
<!–

Trade

<!–
<!–

U.S. Trade Chief Tai, EU’s Dombrovskis to Keep Talking On EV Tax Credits (Reuters) South Korean and EU officials raised concerns over the U.S.’s electric vehicle subsidies, claiming they may constitute a violation of the World Trade Organization’s national treatment principle. National treatment obliges member state governments to treat domestic and foreign goods the same, without discrimination. The U.S.’s Katherine Tai met with her EU counterpart on Wednesday, September 14th to discuss EV subsidies. “Both ministers agreed to continue discussions on the electric vehicle tax credits in the Inflation Reduction Act,” USTR said, referring to the $430 billion climate, health and tax bill signed into law by President Joe Biden last month. 

<!–
<!–

U.S., Paraguay Discuss Ways To Deepen Trade Ties (Reuters) The United States and Paraguay reaffirmed their mutual commitment to deepen bilateral trade relations under a 2021 trade and investment agreement. Paraguay plans to begin exporting beef and other nontraditional products to the U.S. and to enhance anti-corruption and transparency measures. Both countries agreed to review customs fees and procedures to reduce costs and increase efficiency for traders and operators. From the Observatory of Economic Complexity: “In June 2022 United States exported $145M and imported $25.7M from Paraguay, resulting in a positive trade balance of $120M. Between June 2021 and June 2022 the exports of United States have decreased by $-55.7M (-27.7%) from $201M to $145M, while imports increased by $11.9M (85.7%) from $13.9M to $25.7M.”

<!–
<!–

U.S. Decides Against National Security Tariffs On Rare Earth Magnets From China, Japan, EU (Politico) President Biden has decided against tariffs on rare earth magnets from China, Japan, and the EU. Neodymium magnets are used in several high-tech products including electric vehicles and wind turbines. The move will prevent both a new front on the trade war with China and even tighter constraints on domestic manufacturers of high-tech goods. Biden’s decision is based on a Commerce report which advised against tariffs and encouraged investment in key parts of the magnet supply chain including support for domestic markets and strengthened ties with magnet producers in allied countries.

<!–
<!–
<!–
<!–

Industry Trends

<!–
<!–

Shift to Working from Home Diminished Large Cities’ Productivity Premium (Dallas Federal Reserve) The COVID-19 pandemic forced large numbers of workers to adapt to working from home, emptying out previously dynamic central business districts and industry clusters. Since large cities and industry clusters are places where interactive activities occurred before the pandemic, work from home likely reduced these locales’ productivity premium the most. Indeed, there was a drop in large cities’ wage premium. This research finds that the most important factor explaining the drop wage premium among the professions with high-work-from-home adoption is diminished rewards for “relationship-building” and “marketing and public relations” skills. In other words, an important reason for the big decline in finance and computer jobs’ large-city premium is that the wage reward for relationship-building and marketing skills fell much more in large cities relative to small cities.

<!–
<!–

Plastics Sector Jumps from Eighth to Sixth Largest US Industry (Plastics Today) The U.S. plastics industry moved from the eighth to the sixth largest industry in the country, according to the 2022 PLASTICS Size and Impact report. However, growth projections between 2022 and 2023 are muted as plastics are quite sensitive to other sectors in the U.S. economy—especially manufacturing. Further, because final plastic goods are mostly for personal consumption, softening consumption due to inflation and a possible recession will slow plastics growth.

<!–
<!–

Manufacturers’ Third Quarter Outlook Shows Continued Supply Chain Issues, Growing Workforce Needs and Rising Costs (National Association of Manufacturers) On Monday, September 19th, the National Association of Manufacturers released its Manufacturers Outlook Survey for the third quarter of 2022 and the results are mixed. While three out of four manufacturers are optimistic about their own business, many expect a recession in the next year and are still facing supply chain and workforce challenges.

Key findings:

  • 78.3% of manufacturing leaders listed supply chain disruptions as a primary business challenge with only 10.8% believing improvement will occur by the end of the year.
  • Attracting and retaining a quality workforce (76.1%), increased raw material costs (76.1%) and transportation and logistics costs (65.9%) were not far behind supply chain challenges as the biggest problems faced by manufacturers.
  • More than three-quarters of manufacturers felt that rising material costs were a top business challenge (tied with workforce challenges and slightly below supply chain worries), and 40.4% said that inflationary pressures were worse today than six months ago. In addition, 53.7% noting that higher prices were making it harder to compete and remain profitable.
  • The top sources of inflation were increased raw material prices (95.2%), freight and transportation costs (85.4%), wages and salaries (81.7%), energy costs (54.4%) and health care and other benefits costs (49.0%), with 21% also citing the war in Ukraine and global instability.
  • When asked about what aspects of the CHIPS and Science Act were most important for supporting manufacturing activity, 69.6% of respondents cited strengthening U.S. leadership in energy innovation and competitiveness.
<!–
<!–
<!–
<!–

Workforce

<!–
<!–

Getting to Work[force]: State Business Incentive Database Summer 2022 Update (C2ER) The Council for Community and Economic Research (C2ER), in partnership with the Center for Regional Economic Competitiveness (CREC) presents the Summer 2022 update of the State Business Incentive Database. In this blog, Jessica Holmes of CREC details the number and type of state workforce development programs. She explains that most workforce development programs are found east of the Mississippi, but that the number of programs does not correlate with state population. The majority of programs are either tax credits or grants and most programs are devoted to job creation and job training. For more information, click the link above.

<!–
<!–

Inflation Pushes Minimum Wages Higher in Some States (PEW) Thirteen states and Washington D.C. index their minimum wage to inflation, meaning they will be significantly increasing their state minimum wages. “In total, 27 states and Washington, D.C., will raise their minimum wages next year, either because of inflation or previously scheduled increases, according to the Economic Policy Institute, a left-leaning Washington, D.C., think tank.” Twenty-three states have no minimum wage increases scheduled. Minimum wage increases do not apply to all workers.

<!–
<!–
<!–
<!–

Finance & Incentives

<!–
<!–

States’ Environmental Investments Continue to Grow: State Economic Development Expenditures Database Update (C2ER) The State Economic Development Expenditures Database blog series begins today and marks the release of the updated database. Over the next several weeks, the Council for Community and Economic Research (C2ER) will be releasing blogs that highlight important findings from the latest update. In this blog, Jacob Stenstrom of the Center for Regional Economic Competitiveness documents increasing state environmental investments following a general trend since the signing of the Paris Climate Accords in 2016. Overall, states are beginning to take the lead in funding environmental programs—taking over from the initial support from federal programs and other funding. The five states that spent the most on environmental economic development were Kansas, Hawaii, Pennsylvania, New Jersey, and Ohio. You can learn more by following the link above.

<!–
<!–

Centre County PA Expands Clean Energy Financing Program (The Express) The Centre County Planning and Community Development Office announced recently the Centre County Board of Commissioners approved the expansion of the Centre County Commercial Property Assessed Clean Energy (CPACE) program. The CPACE is a financial tool for property owners to obtain low-cost, long-term financing for energy efficiency, renewable energy, air quality and water conservation projects. Commercial and industrial building owners, nonprofits and agricultural projects are eligible for the program. CPACE financing is administered for Centre County and 20 other Pennsylvania counties by Sustainable Energy Fund.

<!–
<!–

Tennessee Awards Nearly $450 Million To Providers To Expand Broadband Internet Access (WBIR) Governor Bill Lee on Monday announced the state approved nearly $450 million in grants as part of a large initiative to expand broadband internet access across Tennessee. The state approved $447 million in grants to various utility providers to expand broadband access to more than 150,000 unserved homes and businesses in 58 counties. Utility providers in the state that are receiving funds in this round provided roughly $331 million in matching funds to complete broadband expansion projects, meaning a total of $778 million is being invested in broadband infrastructure projects. The state said the projects must be completed within three years. According to the Federal Communications Commission’s 2020 Broadband Deployment Report, one in six rural Tennesseans lacked access to broadband internet.

<!–
<!–

$150 Million Financing Closed by Qcells For Largest Standalone BESS In Texas’ ERCOT Market (Energy Storage News) Vertically integrated solar PV and clean energy company Qcells has closed a $150 million financing deal for its first large-scale standalone battery energy storage system (BESS). Qcells secured a revolving credit loan facility with lead arrangers BNP Paribas and Crédit Agricole CIB for its 190MW, two-hour duration (380MWh) Cunningham Energy Storage Project in Texas. It is anticipated that Cunningham Energy Storage Project, on which construction has already begun, will be the largest standalone battery storage system operating in Texas’ ERCOT grid service area and market when it comes online. In related news from the Texas market, sister site PV Tech reported this week that independent power producer (IPP) Cypress Creek Renewables has closed a $216 million financing deal for a solar-plus-storage project. Cypress Creek is developing the Zier Solar and Storage project, pairing 208MW of solar PV with a 40MW/80MWh BESS.

<!–
<!–
<!–
<!–
<!–
<!–

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.

<!–