The Road Ahead A Look at the South and Rural America

1
The Road AheadA Look at the South and Rural
America
2003 Southern Institute for Rural
Development September 8, 2003

• Presented by
• J. Mac Holladay, CEO
• Market Street Services, Inc.
• www.marketstreetservices.com

2
What Do We Know?

• Changing Economy
• Jobs and the New Economy
• September 11, 2001
• Rural America Today
• The Southern United States

3
Changing StructureOf The Economy

• Undergoing continuing fundamental changes in US
  economy.
• Until mid-2001, the U.S. experienced the
  strongest growth and development in history
  record lows in unemployment and record growth in
  per capita income.
• Fortune 500 companies made up 26 of
  nonagricultural workforce 30 years ago and those
  firms have lost over 12 million jobs.
• In the 1990s, medium and small companies account
  for all of the net job growth across the country.

4
1979 Fortune 500 Top 25

• General Motors
• Exxon
• Ford
• Mobil
• Texaco
• Standard Oil California
• IBM
• General Electric
• Gulf Oil
• Chrysler
• International Telephone and Telegraph
• Standard Oil Industrial

• Atlantic Richfield
• Shell
• US Steel
• E.I. duPont
• Western Electric
• Continental Oil
• Tenneco
• Procter and Gamble
• Union Carbide
• Goodyear
• Sun Oil
• Caterpillar
• Eastman Kodak

5
2002 Fortune 500 Top 25

• Wal-Mart
• Exxon/Mobil
• General Motors
• Ford
• Enron
• General Electric
• Citigroup
• Chevron/Texaco
• IBM
• Philip Morris
• Verizon
• American International Group
• American Electric

• Duke Energy
• ATT
• Boeing
• El Paso
• Home Depot
• Bank of America
• Fannie Mae
• JP Morgan Chase
• Kroger
• Cardinal Health
• Merck
• State Farm Insurance

6
Fortune 500 Top 25 By Sector

• 1979
• Manufacturing 12
• Energy 11
• Communications 2

• 2002
• Energy 6
• Financial 5
• Manufacturing 5
• Retail 3
• Communications 2
• Health 2
• Insurance 2

7
Definition of New Economy

• It is a knowledge and idea-based economy where
  the keys to wealth and job creation are the
  extent to which ideas, innovation, and technology
  are embedded in all sectors of the economy.
• Source The State New Economy Index Progressive
  Policy Institute

8
Employment in the New Economy

• In the 1990s, nearly 75 of all net new jobs were
  created by gazelle firms (firms that have
  increased annual sales revenue by 20 for 4
  straight years).
• Americans now change jobs every 3.5 years those
  in their 20s change every 1.1 years.
• Job Churning the dynamic of jobs created and
  lost in an area - is driven by new technology,
  increased competition, and increasing
  globalization.

Source U.S. Bureau of Labor Statistics
9
What Kinds of Jobs are Coming?

• Demand for skilled workers will only intensify,
  42 of US jobs in 2010 will require technical
  (vocational) or academic degrees, up from 29 in
  2000.
• 8 of the top 10 business groupings that have the
  fastest wage and salary growth are in Services.
• 8 of 10 fastest growing jobs are in computers.
  Not programmers but software engineers, support
  specialists, network administrators.
• All told in 2010 167.8 million jobs vs. 158
  million workers. A worsening labor deficit. In
  2000, 146 million jobs, 141 million workers.

Source U.S. Bureau of Labor Statistics
10
Required Job Skills are Increasing
Source U.S. Bureau of Labor Statistics
11
Fastest Growing Occupations 2000-2010
12
Five Key Trends in Economic Development

• Globalization
• Technology Telecommunications
• Regionalism
• Sustainable Development
• Workforce Development

13
Current Investments in China
14
Imports - China

• Imports are soaring
• Telecom
• Power making and transmission equipment
• Aerospace
• Computers
• Appliances
• Furniture
• Estimated 900,000 U.S. jobs will be lost to China
  by 2010, with the worst loss in manufacturing.
• Contributed 31 of furniture imports in 2001,
  will double in a few years.
• Member of WTO all tariffs are off in 2004.

Source Kiplinger Letter, September 27, 2002
15
Annual Per Capita Income, 2002
Source World Bank
16
White-Collar Globalization

• Western companies are increasingly outsourcing
  knowledge jobs to overseas locations.
• Types of jobs moving overseas include back-office
  support, processing, accounting, customer
  service, financial analysis, software and chip
  design, and even architectural drafting.
• Countries with well-educated, English-speaking
  workers are popular destinations for these jobs
  --- India, China, the Philippines, Mexico, Costa
  Rica, Russia, Hungary, and South Africa.
• Workers in these countries have skills similar to
  their American counterparts, but they work at a
  fraction of the cost.

17
White-Collar Globalization
18
September 11, 2001
19
Rural America Today
20
U.S. Rural Economy, April 2003
Source Center for the Study of Rural America
21
Source Center for the Study of Rural
America U.S. Bureau of Labor Statistics 2002
Data
22
Population Shifts

• In the 1990s, about 25 of nonmetro counties lost
  population.
• Counties that lost population were characterized
  by
• Location away from metro areas
• Low population density
• Low level of natural amenities (i.e. climate,
  topography, lakes and ponds)
• From 2000-2001, the number of nonmetro
  outmigrants totaled 2.6 million.
• Net nonmetro outmigrants totaled more than 1
  million people.
• Source McGranahan and Beale. Understanding Rural
  Population Loss. Rural America, 17(4), Winter
  2002.

23
Source Rural Policy Research Institute (RUPRI)
24
The Rural Brain Drain

• Rural communities across the United States are
  having difficulty keeping and attracting young
  and/or educated workers.
• Even burgeoning rural areas, with tourist or
  recreation-based economies, are having difficulty
  attracting these types of workers - young ones
  especially.
• Rural areas that have seen influxes of educated
  workers are primarily in the exurban areas of
  large metropolitan areas (i.e. the new
  suburbs).

25
Rural Income Inequality

• From 1979 to 1999, the gap between nonmetro and
  central city areas in real median household
  income increased from 11 to 3,124.
• Over that same period, the difference between
  suburban and nonmetro median household incomes
  rose from 13,771 to 15,984.
• In 2000, rural earnings per worker averaged
  23,242, about 13,000 less than metro earnings.
• Additionally, the services sector, a lower paying
  sector, is becoming a larger part of the rural
  economy.
• Sources Novack, Nancy. The Income Divide in
  Rural America. The Main Street
• Economist Center for the Study of Rural
  America October 2002.
• Mclaughin, Diane. Income Inequality in
  America. Rural America, 17(2), Summer 2002

26
Source Rural Policy Research Institute (RUPRI)
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Rural Regionalism

• Regional approaches to economic development are
  increasingly seen as ways to combat some of the
  inherent comparative disadvantages in rural
  communities.
• Types of regions that have been successful
  include
• Macro regions large multi-state regions often
  created by Federal legislation, examples include
  the Appalachian Regional Commission and the Delta
  Authority.
• Self-defined regions can emerge from new
  business opportunities or other factors.
• Economic regions multi-county regions formed to
  help blur political boundaries in a common
  economy.
• Natural resource regions formed to protect
  natural resources such as watersheds or natural
  habitats.
• Source Drabenstott, Mark and Sheaff, Katharine.
  The New Power of Regions A Policy Focus for
  Rural America A Conference Summary. Center for
  Study of Rural America Federal Reserve Bank of
  Kansas City.

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The Southern United States
29
Decline of Manufacturing Manufacturing Jobs
Lost in the South, 2001-2002

• Alabama -25,900
• Arkansas -24,700
• Florida -45,000
• Georgia -48,400
• Kentucky -20,000
• Louisiana -8,300

• Mississippi -18,600
• North Carolina -79,600
• South Carolina -39,300
• Tennessee -40,500
• Virginia -32,200
• West Virginia -8,200

TOTAL - 390,700 JOBS
Source U.S. Bureau of Labor Statistics
30
Net Job Change in the South, 2001-2002

• Alabama -35,000
• Arkansas -6,600
• Florida 72,200
• Georgia -123,100
• Kentucky 12,600
• Louisiana 9,500

• Mississippi -12,500
• North Carolina -56,300
• South Carolina -24,700
• Tennessee -24,600
• Virginia -58,800
• West Virginia -10,900

TOTAL - 258,200 JOBS
Source U.S. Bureau of Labor Statistics
31
Index of State EconomicMomentum June 2003(Out
of 50 states)

• Florida
• Mississippi
• Arkansas
• Kentucky
• South Carolina
• Tennessee

• Virginia
• Georgia
• North Carolina
• Louisiana
• Alabama
• West Virginia

Source State Policy Reports
32
2002 State New Economy Index

• 2002 1999
• Maryland 5 11
• Virginia 8 12
• Florida 18 20
• Georgia 22 25
• North Carolina 26 30
• Tennessee 39 31
• South Carolina 41 38
• Kentucky 42 39
• Louisiana 45 47
• Alabama 47 44
• Mississippi 49 50
• West Virginia 50 48

Source Progressive Policy Institute
33
Source U.S. Bureau of Economic Analysis
34
Percent of Residents Who Lived in a Different
House Five Years Ago, Southern Region, 1999
Source U.S. Census Bureau
35
Percentage Employment Change, South, U.S., 1994
to July 2003
Source U.S. Bureau of Labor Statistics
36
Unemployment Rate, South, U.S., 1993 to 2003
(July)
Source U.S. Bureau of Labor Statistics
37
Source U.S. Bureau of Economic Analysis
FIRE Finance, Insurance, and Real Estate TCU
Transportation, Communications, and Utilities.
38
Per Capita Income, South, U.S., 1990, 2000
Source U.S. Census Bureau
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Innovative Rural Practices
40
Rural America has an exciting frontier of new
opportunities New business relationships and
partnerships that achieve critical mass are
essential to capturing new economic
gains. Thinking regionally offers great power in
building these synergies. In the end, leadership
may be the essential ingredient in forging new
regions in rural America. Mark Drabenstott
Katharine H. Sheaff Center for the Study of Rural
America
41
Community Development Foundation Tupelo,
Mississippi

• Created a broad domestic and international
  business base in the region.
• Collaborated with government to establish nine
  industrial parks in the area.
• Created the Tupelo Furniture Market, now the
  second largest furniture market in the U.S.
• Launched the National Model for Technical
  Education to improve and coordinate career
  training and development within the Tupelo area.
• Created one-stop Career Centers to assist
  businesses and industries with workforce
  assessment, training and counseling-related
  activities.

42
Iowa Cooperative

• A fledgling region trying to develop
  pharmaceutical crops.
• Strategy driven by an emerging business
  opportunity.
• Requires critical mass of farmers, communities,
  businesses and support institutions.
• Cooperative is working to develop a cluster of
  300 to 500 producers growing pharmaceutical
  crops.
• Challenges to the effort include
• Convincing farmers to switch from commodity
  production to crops requiring special production
  and handling procedures.
• New research is needed on crops best-suited to
  the region.
• Source Center for the Study of Rural America.

43
Virginia Enterprise Initiative

• Established in 1994 by state legislature.
• Provides grants to community non-profit
  organizations that assist entrepreneurs otherwise
  unable to obtain financing or capital.
• These non-profits must match state funding from
  banks, the SBA, colleges, or various private
  firms.
• Types of assistance offered include
• Business skills training
• Personalized technical assistance
• Microloans from 3,000 to 10,000
• Follow-up assistance
• Total funding is over 9 million and has created
  656 businesses and more than 1,600 jobs.
• Source Carl Vinson Institute of Government,
  University of Georgia. Dismantling Persistent
  Poverty.

44
OneGeorgia

• Created with one-third of Georgias tobacco
  settlement to fund local economic development
  efforts in the nonmetro parts of the state.
• Implemented through two funds
• Equity Fund provides loans and grants for
  infrastructure development
• EDGE Fund Economic Development, Growth, and
  Expansion Fund helps communities that are
  competing for businesses from outside the state.
  Money must be used for public infrastructure,
  land acquisition, and site development.
• Has given more than 50 million and created more
  than 10,000 jobs.
• Source Carl Vinson Institute of Government,
  University of Georgia. Dismantling Persistent
  Poverty

45
NC Rural Economic Development Center

• A non-profit organization created in 1987 through
  initiatives by the North Carolina Commission for
  Jobs and Economic Growth.
• The first organization of its kind in the U.S.
  devoted exclusively to state rural advancement.
• Governed by a 50-member Board comprised of
  leaders from a variety of areas.
• Operates a variety of loan and grant programs for
  infrastructure development, workforce
  development, leadership development, business
  development, and rural Internet access.
• Identifies four main roles for itself Policy
  Development, Capacity Building, Technical
  Assistance, and Program Operation.
• FY2001 operating budget 16 million, with 5.5
  million of that provided by the state.

46
San Juan Forum The Four Corners

• The San Juan Forum, created in 1991, is a
  non-profit corporation promoting economic
  development in the cross-state Four Corners
  region of Colorado, Utah, Arizona, and New
  Mexico.
• The Forum ignores state lines and serves as the
  umbrella organization for the various federal,
  state, local and tribal economic development
  interests in the natural economic region.
• The Forum allows this rural area to form a common
  and unique identity while aggregating demand for
  infrastructure and educational services.
• The Forum has used its leadership to solicit
  valuable research assistance from surrounding
  colleges, to help build broadband infrastructure,
  and to develop the regions tourism amenities.
• Source Center for the Study of Rural America

47
Ozark EcotoursNewton County, Arkansas

• Newton County Resource Council (a nonprofit
  community development corporation) developed
  ecotourism project because of the need to provide
  employment for the countys low-income residents.
  
• Used natural resources to create ecotours led and
  operated by local residents.
• These residents local knowledge are used an
  integral aspects of these tours.
• The Ecotourism Society defines ecotourism as
  responsible travel to natural areas that
  preserves the environment and improves the
  well-being of local people.

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• The future aint what it used to be.
• Yogi Berra
• New York Yankees Catcher

49
The Road Ahead
50
What We Know

• Recent Headlines
• Employment Growth and Decline
• Potential job growth sectors
• 2003 - Where are We? Reality and Actions

51
Recent Headlines

• Economy grows at 3.1 rate on strong overall
  spending
• (Wall Street Journal, August 29, 2003)
• Looks like a recovery, feels like a recession
• (New York Times, September 1, 2003)
• Bush to add post to help job picture
• (Atlanta-Journal Constitution, September 2, 2003)
• Manufacturing improves again
• (USA Today, September 2, 2003)
• Productivity jumps in Q2, but weekly jobless
  claims rise
• (USA Today, September 4, 2003)

52
Top 10 Cities Employment Growth 2001-2002

• Elkhart-Goshen, IN (4.6)
• Biloxi-Gulfport-Pascagoula, MS (4.0)
• Fayetteville-Springdale-Rogers, AR (3.8)
• McAllen-Edinburg-Mission, TX (3.5)
• Santa Fe, NM (3.3)

• Chico-Paradise, CA (3.1)
• Tacoma, WA (2.9)
• Las Vegas, NV (2.8)
• Atlantic City-Cape May, NJ (2.6)
• Madison, WI (2.5)

Source Economy.com
53
Top 10 Cities Employment Decline 2001-2002

• Flint, MI (-4.3)
• Decatur, IL (-3.3)
• Boulder-Longmont, CO (-3.0)
• San Jose, CA (-3.0)
• Florence, AL (-2.9)

• Wichita, KS (-2.7)
• Saginaw-Bay City-Midland, MI (-2.6)
• Elmira, NY (-2.5)
• Danville, VA (-2.4)
• Sheboygan, WI (-2.4)

Source Economy.com
Source Economy.com
54

• We are in uncharted waters. In what sector of
  the economy can we find a driver for recovery
  and how do we make it happen? We are at a loss.
• Gary Shoesmith
• Center for Economic Studies
• Wake Forest University
• December 2002

55
Potential Job Growth Sectors

• Health Care Top to Bottom.
• Federal Government (and Contractors)
• Tourism
• Computer related support, software,
  technicians, programmers.
• Logistics entire range
• Headquarters small, international, and
  nonprofits.
• Financial Services

56
What I See September 2003

• This is not the 1990s, and they will never be
  back.
• Regional economy continues to struggle, but the
  bleeding is slowing.
• Number and size of projects down sharply - some
  projects in logistics, transportation, and
  financial services.
• Little business investment, further delays in
  final decisions.
• Consumer confidence hit its lowest level since
  October 1993 in March, and again in July, but
  increased 5.6 in August.

57
What I See September 2003

• Bankruptcies are up and small business starts are
  down.
• The stock market has lost approximately 7.0
  trillion in value since January 2000.
• Job creation leader is the federal government.
• State budgets will get worse.
• The short-term question marks are the aftermath
  of the war with Iraq and dealing with North Korea.

58
Actions for this Economy

• Concentrate on improving the quality of the
  workforce it is and will remain the 1 issue in
  economic development.
• Nurture existing business create
  technology-based system for growth
  companies/businessesdont waste time.
• Support entrepreneurship in new ways a cultural
  issue.

59
Actions for this Economy

• Recruit carefully and smart, based on asset
  advantages and existing connections clear
  strategy for each cluster or area of emphasis.
• Look for overlooked assets and opportunities
  multiple strategies are key.
• Marketing reality quality website and personal
  relationships are the necessities.
• Remember Quality of Life is very important and it
  is an individual choice.

60

• We are going from hunter-gathers to gardeners.
• Dr. David Kolzow
• Executive Director
• Institute for Economic Development
• University of Southern Mississippi

61

• What do we really want? What kind of life and
  what kind of society do we want to bequeath to
  coming generations?
• To purposefully address it we must harness all
  of our intelligence, our energy and most
  important, our awareness. The task of building a
  truly creative society is not a game of
  solitaire. This game, we play as a team.

Richard Florida The Rise of the Creative Class
62
The Road AheadA Look at the South and Rural
America
2003 Southern Institute for Rural
Development September 8, 2003

• Presented by
• J. Mac Holladay, CEO
• Market Street Services, Inc.
• www.marketstreetservices.com