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Southwest Virginia Economic Development Summit Facing Today’s Realities and Challenges October 23, 2003

Southwest Virginia Economic Development Summit Facing Today’s Realities and Challenges October 23, 2003. Presented By: J. Mac Holladay Market Street Services, Inc. www.marketstreetservices.com. What Do We Know?. Changing Economy Jobs and the New Economy September 11, 2001

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Southwest Virginia Economic Development Summit Facing Today’s Realities and Challenges October 23, 2003

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  1. Southwest Virginia Economic Development Summit Facing Today’s Realities and ChallengesOctober 23, 2003 Presented By: J. Mac HolladayMarket Street Services, Inc.www.marketstreetservices.com

  2. What Do We Know? • Changing Economy • Jobs and the New Economy • September 11, 2001 • Rural America Today • Virginia and the South • New Reality - 2003

  3. Changing Structure Of The Economy • Undergoing continuing fundamental changes in U.S. 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; and • 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. du Pont • Western Electric • Continental Oil • Tenneco • Procter and Gamble • Union Carbide • Goodyear • Sun Oil • Caterpillar • Eastman Kodak

  5. Wal-Mart General Motors ExxonMobil Ford General Electric Citigroup ChevronTexaco IBM American International Group Verizon Altria Group ConocoPhillips Home Depot Hewlett Packard Boeing Fannie Mae Merck Kroger Cardinal Health McKesson State Farm Insurance AT&T Bank of America AmerisourceBergen Target 2002 Fortune 500: Top 25

  6. 1979 Manufacturing 12 Energy 11 Communications 2 2002 Energy 6 Financial 5 Manufacturing 5 Retail 3 Communications 2 Health 2 Insurance 2 Fortune 500: Top 25 – By Sector

  7. Five Key Trends in Economic Development • Globalization • Technology & Telecommunications • Regionalism • Sustainable Development • Workforce Development

  8. Current Investments in China

  9. 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

  10. 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.” The State New Economy Index Progressive Policy Institute

  11. Transformation To The New Economy • Emerged in last 15 years • Altered industrial and occupational order • High levels of entrepreneurial dynamism and competition • Dramatic trend towards globalization • Revolutionary advances in technology

  12. “Job Churning” • In the 1990s, nearly 75% of all net new jobs are being 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. • “Churning” is driven by new technology, increased competition, and increasing globalization. Source: U.S. Bureau of Labor Statistics

  13. Required Job Skills are Increasing 100 % 15 Unskilled 90 35 80 60 70 60 65 Skilled 50 45 40 30 20 20 20 20 20 Professional 10 0 1950 1990 2000 Source: U.S. Bureau of Labor Statistics

  14. What Kinds of Jobs are Coming • Demand for skilled workers will only intensify; 42% of U.S. 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

  15. Fastest Wage and Salary Growth, 2000 - 2010 Source: U.S. Bureau of Labor Statistics

  16. Fastest Growing Occupations, 2000 - 2010 Source: U.S. Bureau of Labor Statistics

  17. September 11, 2001

  18. Rural America Today

  19. The Rural Economy • In October 2002, the rural economy was still losing jobs, but at a rate below that of a year ago. • Rural job growth exceeded that of metro job growth. • However, wage growth has remained relatively stagnant. • From October 2001 to October 2002, only the Government and Services sectors experienced job growth in rural America. • Transportation, Communications, and Utilities and Manufacturing experienced the largest job losses over this period. Source: Center for the Study of Rural America

  20. 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.

  21. 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).

  22. 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

  23. 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.

  24. “Does anybody know how to play this game?” Casey Stengel Former Manager, New York Yankees & New York Mets

  25. Virginia and the South

  26. Decline of Manufacturing: Manufacturing Jobs Lost in the South2001 to 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 Source: U.S. Bureau of Labor Statistics

  27. Alabama: -7,900 Arkansas: -4,600 Florida: -10,000 Georgia: -11,400 Kentucky: -3,200 Louisiana: -1,800 Mississippi: -7,200 North Carolina: -15,800 South Carolina: -9,400 Tennessee: 100 Virginia: -7900 West Virginia: -500 Decline of Manufacturing: Manufacturing Jobs Lost in the SouthJanuary 2003 to August 2003 Total = -79,600 Source: U.S. Bureau of Labor Statistics Source: U.S. Bureau of Labor Statistics

  28. Net Job Change in the South 2001 to 2002 • Mississippi: -12,500 • N. Carolina: -56,300 • S. Carolina: -24,700 • Tennessee: -24,600 • Virginia: -58,800 • W. Virginia: -10,900 • Alabama: -35,000 • Arkansas: -6,600 • Florida: +72,200 • Georgia: -123,100 • Kentucky: +12,600 • Louisiana: +9,500 Total = -258,200 Source: U.S. Bureau of Labor Statistics

  29. Alabama: -8,700 Arkansas: 0 Florida: 55,400 Georgia: 53,900 Kentucky: -23,700 Louisiana: -9,200 Net Job Change in the South January 2003 to August 2003 • Mississippi: -4,300 • North Carolina: -17,200 • South Carolina: -30,900 • Tennessee: 19,900 • Virginia: 14,700 • West Virginia: -2,200 Total = +47,700 Source: U.S. Bureau of Labor Statistics Source: U.S. Bureau of Labor Statistics

  30. Virginia Sector Employment Change:December 2001 to August 2003 Source:U.S. Bureau of Labor Statistics

  31. Virginia Total Employment Change, 1991 to 2003 (August) Source: U.S. Bureau of Labor Statistics

  32. Virginia ranked 24th out of all 50 states, behind: Florida (5th) Mississippi (15th) Arkansas (18th) Kentucky (20th) South Carolina (21st) Tennessee (22nd) Of all Southern states, Georgia (26th), North Carolina (29th), Louisiana (34th), Alabama (36th) and West Virginia (39th) ranked lower than Virginia. Index of State EconomicMomentum: June 2003 Source: State Policy Reports

  33. Small Business Survival Index: 2003 State Rankings (Ranked from the “Friendliest” State to the Least Friendly) • Virginia ranked 14th out of all 50 states, behind: • Florida (5th) • Tennessee (7th) • Mississippi (10th) • Alabama (11th) • South Carolina (16th), Louisiana (21st), Georgia (23rd), Maryland (24th), Arkansas (25th), Kentucky (28th), North Carolina (37th) and West Virginia (40th) all ranked lower than Virginia. Source: Small Business Survival Committee

  34. Virginia - #8, up from #12 in 1999 2002 1999 Maryland #5 #11 North Carolina #26 #30 Florida #18 #20 Georgia #22 #25 South Carolina #41 #38 Alabama #47 #44 2002 State New Economy Index Source: Progressive Policy Institute

  35. New Reality - 2003

  36. Recent Headlines • “Consumer Outlook Hit by Job Worries” (Wall Street Journal, October 1, 2003) • “Economy Races Ahead, Leaving Jobs in the Dust” (USA Today, October 1, 2003) • “New Jobless Claims Slowly Decline” (Atlanta Journal-Constitution, October 17, 2003) • “Economic Recovery Gains Strength” (Wall Street Journal, October 17, 2003)

  37. What We Know • Organizations and institutions • Economic development – strategy and theory • Competitive positions • 2003 – Where are we?

  38. Change in Organizations and Institutions “To survive and succeed, every organization will have to turn itself into a change agent. This requires the organized abandonment of things that have been shown to be unsuccessful, and the organized and continuous improvement of every product, service and process within the enterprise. The point of becoming a change agent is that it changes the mindset of the organization.” Peter Drucker, The Economist November 1, 2001

  39. Seven Guidelines for Local Economic Development • Know Your Economic Function in the Global Economy • Create a Skilled Workforce • Invest in Infrastructure For Innovation • Create a Great Quality of Life • Foster an Innovative Business Climate • Reinvent and Digitize Government • Take Regional Governance Seriously Source: Progressive Policy Institute

  40. Economic Development Strategy • Enterprise/Small Business Development • Existing Business and Industry Services/ Procurement • Tourism/Film Development/Product Development • Downtown/Main Street/Historic Preservation • International/Trade/Export • Quality Recruitment/ Commercial/ Industrial • Sports/Recreation/Culture • Minority Business Development

  41. What I See – October 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, automotive, and financial services. • Some signs of new business investment; further delays in final decisions. GNP numbers look better for 4th Quarter. • Consumer confidence returned to its lowest level since October 1993 in September, dipping 5 points from August.

  42. What I See – October 2003 • Bankruptcies are up and small business starts are down. • The stock market has lost approximately $6.0 trillion in value since January 2000. • In many areas, the job creation leader has been the federal government. • State budgets will get worse; no real improvement should occur this year. • The short-term question marks are the aftermath of the war with Iraq, the Middle East and dealing with North Korea.

  43. 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/businesses…don’t waste time; • Support entrepreneurship in new ways – cultural issue; • 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; and • Remember Quality of Life is very important and it is an individual choice.

  44. “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

  45. “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

  46. Southwest Virginia Economic Development Summit Facing Today’s Realities and ChallengesOctober 23, 2003 Presented By: J. Mac HolladayMarket Street Services, Inc.www.marketstreetservices.com

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