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 Fall 2015

  
 Features

The light at the end of the tunnel

For the first time in 15 years, full employment in the South is in sight. Can we get there?

By Michael Randle

Mark Vitner, Managing Director and Senior Economist at Wells Fargo Securities, agrees that more job creation is finally materializing from the service sector. We are looking for service sector employment to ramp up this year, as technology firms look to beef up their sales and marketing efforts, and the housing sector gets back on track.The American South has only reached full employment a few times since World War II. Most recently, the region flirted with full employment in late 2006 and early 2007. It was right there for the taking, and then it vanished.

Prior to that, in late 1997. . .through the first quarter of 2001. . .and up to a precious few months before the tragedy of 9/11, the South and the U.S. did indeed reach full employment. It was the first time the feat was achieved since the late 1960s, at least for any extended period of time.

Before we get started, let’s define the term “full employment.” Most economists -- if forced to explain full employment within the character limits of a single Twitter feed -- will say it is an unemployment rate that is 5 percent or less for the South as a region and the nation as a whole.

However, for major markets in the South such as Dallas-Fort Worth, Austin, Raleigh, Charlotte, Houston and Nashville, full employment is best defined as any unemployment rate at or below 4 percent. That 4 percent rate would also hold true for any size market that has grown rapidly in the past two decades, including smaller markets in the South.

The entire decade of the 1950s saw the U.S. in full employment, and millions of Americans worked in offices. Women filled many of these positions, especially low-paying clerical jobs. Prior to the 50s, professional, managerial, clerical and sales workers made up less than a third of the workforce. But by 1970, that number had grown to almost 50 percent. Mark Vitner, Managing Director and Senior Economist at Wells Fargo Securities, elaborated, "I am not sure that 4 percent is full employment for the South as a whole. It probably is for some markets, like Raleigh, Asheville, Washington, D.C., Richmond, Nashville, Austin, etc. Those markets all have large government sectors and are also growing rapidly. Full employment is probably close to 5 percent for the nation and for the region. It is a little lower in the major metropolitan areas, and a little higher in most rural areas of the South.”

You can also look at full employment this way: when you get below a 4 percent unemployment rate in metros and 5 percent in a state, you have people who are working who really don't want to work. That happens naturally when jobs pay more than the benefits the unemployed are receiving for not being employed. Stated simply, when people are working who don't want to work, that is full employment.

To illustrate how rare full employment is, the South as a region never got close to earning it from 1971 to mid-1997. There were brief stretches in 1973 and 1989 when the magical 5 percent unemployment rate was in sight, but never reached.

On January 1, 1999, the South's unemployment rate dipped below 4 percent for the first time since December 1969. And it was exactly 4 percent nationwide in January of 2000. (That rate of 4 percent for the region as a whole was actually better than full employment according to most economists.) Which means that in the late '90s, there were people working who didn't even want to work.

But the two periods -- 1997 to 2001 and 1966 to 1970 -- are the only two lengthy eras of full employment in the region in more than half a century. More importantly, those two full employment intervals had little or nothing to do with the federal government's post-WWII reconstruction and military buildup.

Some will argue that full employment hasn't been reached in the South since the 1950s. According to the numbers, they are wrong. A few folks reading this will remember the '50s as an age when federal government programs were the most important job generating sources in this country. The entire decade of the 1950s saw the U.S. in full employment, but much of the prosperity of that post-World War II period was the result of a federal-government-driven economy in the form of massive infrastructure projects (think Interstates, hydroelectric plants and military bases in the South).

The 1970s saw new trends in the American workplace increasing automation, concern for safety and comfort, and the growing isolation of workers from one another. Shown here are U.S. postal workers in Merrifield, Va. They are listening to music through headphones to relieve the monotony and muffle the noise of their machines.Skeptics will argue that full employment is no longer possible in this country. They will point to the large number of people who are working part-time, but would prefer full-time. They will also cite the millions of undocumented immigrants in the country, many of which are not counted as segments of the labor force. And there is a darker side that wasn't easily detected years ago. The number of people failing drug tests in the hiring process is at an all-time high. Of course, drug tests weren't part of the hiring process in the last full employment period of the 1990s.

It's true that the labor force participation rate has fallen to about 64 percent. However, according to the Congressional Budget Office, about half of those not participating are part of a demographic shift caused by the baby boomer generation. The year 2008 was the first year that baby boomers could qualify for Social Security. So, since the beginning of the recession, millions more Americans -- about 2.7 million new retirees per year compared to 1.8 million in the decade prior to the recession -- are now on Social Security.

The unemployment rate in the South as of this writing is 5.8 percent. The national unemployment rate is 5.7 percent. Expect both rates to keep dropping even though an astounding 703,000 people joined the labor force in January, forcing the rate up by a tenth of a percent. Many of those who joined the labor force are workers who had previously quit looking for a job, but are now reentering the workforce due to improving job prospects and pay scales.

What’s more, the present economy's drive to full employment is far from being federal-government driven. If anything, this era of sequestration makes the federal government a hindrance to achieving full employment. There are no large federal government infrastructure initiatives ongoing right now. And the war machine built by the U.S. in the first decade of the millennium is winding down. Additionally, federal government employment is expected to shrink dramatically in the next few years according to the U.S. Department of Labor.

Which begs the question: just how good is this economy if the federal government isn't assisting as it did in the 1950s? The answer to that question -- today's economy is not just good, it is darn good. This economy, in our view, is better than the late 1990s if it can sustain the kind of job creation seen in 2014 for the next two years. But, that's a big "if."

With little assistance from the federal government, the economy today is surprisingly real in substance. Why? The federal government is not the jobs-generating driver, and federal programs designed to create jobs, such as the establishment of easy credit, are not job drivers as they were in the 1990s and the years prior to the recession. And finally, the manufacturing sector is aiding in the creation of new jobs as opposed to bleeding jobs by the millions as it did from the 1990s until the end of the recession.

Yes, the U.S. has turned into a job-generating machine. Non-farm job creation has topped 200,000 each month for more than a year, the longest such streak since the mid-1980s according to the Bureau of Labor Statistics. Of course, the population today is much larger in the U.S. than it was in the ‘80s; therefore more job creation is possible. So that comparison is not entirely accurate.

From November to January, the U.S. saw its best three months of job growth since 1997. Even more impressive is the fact that the U.S. economy added 3.1 million jobs in 2014, the most since 1999.However, from November to January, the U.S. saw its best three months of job growth since 1997, which was the start of the last full employment period in the U.S. and the South. Even more impressive is the fact that the U.S. economy added 3.1 million jobs in 2014, the most since 1999.

What's more important in today's drive to full employment is not merely the job numbers, it's the industry sectors where the jobs are being created, especially in the fourth quarter of 2014. Unlike the last full employment period, the service sector has taken a backseat to the manufacturing sector in job generating project activity in the South. In the late 1990s, services ruled. Today, manufacturing rules the region when it comes to large corporate deals.

Anything consumer-oriented -- call centers, financial services, internet-related projects and distribution centers -- were the dominant new and expanded job generating deals in the last full employment cycle. The automotive industry was strong as it has always been in the South in the last quarter century. But outside of that sector, manufacturing was bleeding jobs at ridiculous rates in the late '90s and early 2000s.

But the loss of hundreds of thousands of manufacturing jobs in the South between 1997 and 2001 had little effect on the hordes of jobs being generated by the service sector the last time the region saw full employment. In contrast, today’s advance to full employment has been buoyed by manufacturing in the South, while being dragged down by services and employment in the construction category.

If anything, it's the service sector's poor performance at job generation since the recovery began in 2010 (compared to its sparkling performance in the late 1990s) that has kept the South from reaching full employment. If services had performed as well in project activity since the recovery began in 2010 as it did in the late 1990s, there is little doubt in my mind the South would be at full employment today.

For example, in 1997, the first year of the last period of full employment, the South rang up 229 manufacturing projects meeting or exceeding SB&D's thresholds of 200 jobs and/or $30 million in investment. That year, the service sector chalked up 407 large projects meeting or exceeding the same thresholds, nearly doubling deals from manufacturing.

Fast forward to calendar year 2013, and the South saw 410 manufacturing projects meeting or exceeding SB&D's thresholds and only 185 service projects. In terms of large job generating project activity in the South, the service sector and the manufacturing sector have totally reversed their performances since the last full employment interval.

There is no possible way the South's economy today can reach full employment unless the service sector -- particularly long-lagging categories such as financial services, IT, retail and warehousing -- at least doubles its number of large projects in the region. We won't publish 2014 numbers until June, but we already know that in 2014 the service sector had its best big job generating deal year since 2005 when 370 large non-manufacturing deals were announced in the South.

Mark Vitner agrees that more job creation is finally materializing from the service sector. "We are looking for service sector employment to ramp up this year, as technology firms look to beef up their sales and marketing efforts, and the housing sector gets back on track," he said. "The tech sector is the fastest growing part of the South's economy today, driving gains in Austin, the Research Triangle area, Huntsville and Melbourne. The region's larger diverse markets are also seeing strong gains from technology firms, particularly Dallas, Atlanta, Nashville, Orlando and Charlotte.” Vitner added that he believes financial services and retail trade will also show strong job gains this year.

Chart No. 1

Total Deals -- Manufacturing vs. Services in the South

SB&D 100 1996-2001 and 2008-2013

Year Mfg. Services
1996 212 361
1997 229 407
1998 228 344
1999 194 346
2000 209 312
2001 165 282
Avg. 206 342
     
2008 291 138
2009 228 140
2010 335 259
2011 350 189
2012 363 160
2013 410 185
Avg. 330 179

Source: SB&D 100. Total announced deals meeting or exceeding 200 jobs and/or $30 million in investment.       

In the 2015-2016 drive to full employment, there are undeniably some hurdles we will have to clear:

Obstacle No. 1: The performance of the service sector must greatly improve.

There were 17 service sector projects announced (unofficially) in 2014 of 1,000 jobs or more, and Pensacola’s Navy Federal Credit Union (NFCU) expansion was the largest.Without a doubt, obstacle No. 1 to full employment is the job generating performance of the service sector. There is little argument from economists regarding the performance of the manufacturing sector. . .few believe that it will slow anytime soon, especially in the South. The reasons for that are many (reshoring, onshoring, FDI, pent up demand, advances in technology on the factory floor, fracking frenzy, etc.) and have been well documented. The recent rise in the dollar could slow things for manufacturing, but other competitive cost structures will keep the U.S. incredibly attractive for global manufacturers, particularly the Southern region, for years to come. Not only that, the dollar’s value in the last full employment cycle was very high, much higher than it is today.

While manufacturing deals have risen to levels not seen in three decades in the South, large job generating deals from the service sector have languished for a decade in the region. But, that string of poor years from services in the South may have ended in 2013 and 2014. There were 17 service sector projects announced (unofficially) in 2014 of 1,000 jobs or more. That's comparable to 2013, when there were 18 service deals meeting or exceeding 1,000 jobs (officially) announced in the South. Prior to 2013, however, there were only four service sector projects announced of 1,000 jobs or more in 2012, five in 2011 and six in 2010.

Chart No. 2 lists some of the notable service sector projects announced in the region in calendar year 2014. It should be noted that nine of the 17 service deals of 1,000 jobs or more announced in the South last year were announced in the last quarter of 2014 when job creation was at its best for the year. These will not become official until June and the counts will likely rise.

Chart No. 2

*Major service sector announcements in the South -- 2014

Company Jobs N/E Location Service
         
1. Navy Federal 5,000 E Pensacola, Fla. Financial
2. Toyota  4,000 N Plano, Texas HQ
3. Army Cyber  4,000 E Augusta, Ga. Security
4. Macy's 1,500 N Tulsa, Okla. Distribution
5. Under Armour  1,500 N Mt. Juliet, Tenn. Distribution
6. Express Scripts 1,500 E St. Louis, Mo. Pharmacy mgt.
7. WorldPay  1,266 E Atlanta, Ga. Financial
8. HCI Technologies 1,237 N Cary, N.C. IT
9. USAA  1,215 E Tampa, Fla. Financial
10. Xerox  1,200 E Lexington, Ky. Call center
11. CVE Technology 1,200 N Allen, Texas HQ
12. Benefitfocus 1,200 E Charleston, S.C. Software
13. Deloitte  1,000 N Lake Mary, Fla. Tech center
14. IBEX Global 1,000 N San Antonio, Texas Call center
15. Aegis 1,000 E Dallas, Texas Customer service
16. Interactions Corp. 1,000 E Austin, Texas Customer service
17. GEICO 1,000 N Katy, Texas Financial

Source: SB&D. *Service sector announcements in the South in 2014 of 1,000 jobs or more. N=new; E=expanded

There are some huge developments working right now in the service sector's favor. The drop in gasoline prices has essentially given families more spending clout than the Bush and the Obama stimulus programs put together. Fourth quarter 2014 wages increased faster than in any quarter in the past two years. Jobs have increased on average nearly 340,000 from November to January -- 291,000 the past six months and 268,000 the past 12 -- the highest new job counts since 2000. And according to several sources, January saw the largest monthly flow of people not looking for a job to getting a job on record. (Remember the simplified definition of full employment as "people are working who don't want to work?")

The service sector thrives when the employed have more money to spend. But when those out of work find jobs -- and in droves, such as in November 2014 when a revised 423,000 new jobs were created, the highest one month total since 1997 -- collective purchasing power accelerates dramatically. This, in turn, creates more jobs and even more spending, spawning an upward cycle to full employment. That's when job creation in the service sector blows up, the biggest factor in the last full employment cycle from 1997 to 2001.

And, as written, full employment in the South cannot be achieved without the service sector creating gobs of jobs. After all, in this age of technology taking boots off the factory floor, manufacturing can only add so much to new job creation totals.

For example, there are approximately 4.5 million people that work in manufacturing in the South today. Experts have predicted that should rise to 5.2 million or more by 2020. In comparison, there are approximately 45 million people working in the service sector in the American South. The top three sub-sectors in services are health care and social assistance (approximately 7.8 million employed in the South); professional and business services (approximately 7.6 million employed); and state and local government (approximately 7.4 million employed). Of those three, the U.S. Department of Labor expects health care's labor shed to grow the most. But the three together possess the greatest potential for new job creation in the South, therefore the most critical factors in reaching full employment.

Obstacle No. 2: The performance of the construction industry is critical.

The construction industry is critical to the hiring of workers in two groups -- workers without college degrees and workers located in rural areas.When an economy tanks to the degree the U.S. economy did after being so close to full employment in 2006, construction spending collapses. In fact, almost everything collapses except for a few essential industries such as farm and food production. I mean, even in the darkest of times we have to eat.

During the recession of 2007-2009, the U.S. lost 8.7 million jobs according to data from the Bureau of Labor Statistics. There is so little proven data available regarding jobs lost in other U.S. recessions that it is difficult to compare the Great Recession to other downturns. Yet, one thing is certain; peak unemployment nationwide in the Great Recession only reached 10 percent in October of 2009. In comparison, peak unemployment in the Great Depression stood at 24.9 percent in 1933.

As written, the U.S. gained 3.1 million jobs in 2014 alone, and the U.S. economy reached a milestone in the summer of last year when it regained all of the jobs lost during the recession. It should be noted that of this writing, not all Southern states have regained all of the jobs lost in the recession, while some states in the South have exceeded the threshold by a significant margin.

Many times the construction industry is associated purely with commercial or residential building activity. But the construction industry is vast, taking many different forms. Engineering projects such as highways, bridges, ports, pipelines and utility systems can jumpstart job creation in the construction industry far greater than the building category, both commercial and residential.

While there are some large state and federal engineering projects underway, they are essentially nonexistent compared to large-scale ventures of the 1950s and 1960s when full employment was the norm instead of the exception. The U.S. Department of Transportation's Highway Trust Fund is basically bankrupt, even though from time to time transfers from the General Fund prop it up so it won't officially become insolvent.

The situation is a federal political football affected by sequestration and there is little push in Congress to create a fund large enough for significant improvements to highways, bridges, mass transit and our nation's ports. Which means reaching full employment in the next year or two will not be assisted greatly by comprehensive government-backed infrastructure projects, even though many in Washington in both parties, as well as President Obama, believe such projects are in the best interest of the country’s economy.

In a story published by the Washington Post in November titled, "The construction industry is about to take off. And jobs could follow," writer Jim Tankersley was upbeat about the job generating prospects of the sector. "The Great Recession took a huge bite out of construction employment, but looking ahead, the industry remains critical to the job market, especially for workers without college degrees," Tankersley wrote.

Note Tankersley's quote, "especially for workers without college degrees." To reach full employment, the two toughest obstacles to overcome will be job creation for workers without college degrees and workers located in rural areas, college degrees or not. The construction industry is critical to the hiring of workers in those two groups.

Since the recovery began, the construction industry has added about 500,000 jobs. But it lost 2.1 million in the recession, one-quarter of all jobs lost from 2007 to 2009. However, the Bureau of Labor Statistics expects the construction industry to add 1.6 million new jobs by 2022, meaning all lost jobs in the sector will be reclaimed by then.

That will be too little, too late to help us reach full employment with the opportunity we have now. Or is it? The wildcard is housing, a part of the construction sector that has struggled for years now. Tankersley wrote, "Between 2000 and 2006, at the height of the housing bubble, the country added 900,000 construction jobs; that amounted to one-fifth of all the net jobs created in that time across the economy." Evidently, the housing bubble supported most of those construction jobs.

Could we be on the cusp of another housing jag in the South, even if the rest of the nation's residential construction sector remains tepid? After all, there is another significant migration event to the South underway. "We are looking for the housing sector to get back on track in the South," Wells Fargo's Mark Vitner said. "Home sales and home construction may be a major upside surprise this year." If that occurs and at least a third of new jobs created in the South come from the construction industry -- boosted by housing -- then full employment could be achieved this year or next.

Bolstering Vitner's statement is this: Since the recovery began in 2010, 54 percent of the nation's population gains have occurred in the South. Over 1 million more people have moved to major metro areas of the South from other parts of the country than left since the recovery began. The South has also gained nearly 1 million new international residents since the recovery began. That is more than the other three regions combined. In fact, the Northeast and Midwest have seen a net loss of approximately 1 million domestic residents since 2010. Almost all of those losses were the South's gains.

Obstacle No. 3: Significant improvement in job creation must occur in non-metro areas of the South.

Burdened with the state’s highest unemployment rate, rural Wilcox County, Ala., is getting 300 desperately needed jobs with the opening of Golden Dragon Copper plant headquartered in Henan province, China. The South’s non-metro areas unemployment rate was 7.9 percent as of January.  Photo by Jamie Martin, Alabama Governor's OfficeNo area on the South's map got hammered more so in the recession than its rural regions. But the rural South is where you will find the greatest economic development comebacks post-recession. A handful of rural Southern counties have cut their unemployment rates by two-thirds, and many more have cut their unemployment rates by more than half from the height of the downturn.

While the South's unemployment rate is 5.8 percent as a whole, the region's non-metro areas are at about 7.9 percent as of January. So while the region needs its unemployment rate to drop about a point to reach full employment, the rural South's unemployment rate needs to drop more than two points to get there.

It doesn't take an economist to figure out that the South as a whole will not get to full employment until its rural regions do. And that is the hardest part of the equation to solve.

Void of some sort of crisis or unexpected development, it’s a sure bet that most Southern metros are going to reach full employment soon, if not by the end of summer, certainly by the end of the year. Some, like San Antonio, Austin, Dallas-Fort Worth, Asheville, Lexington, Tulsa and Raleigh, are at or below full employment now. But for the region to achieve the rare air of full employment, its rural areas better start landing hundreds of thousands of jobs over the next 12 to 24 months, or at least while this opportunity remains for the taking.

In the last SB&D cover story titled, "The State of the Rural South's Economy," I wrote, "So, five years out of the worst recession post-World War II and some are comparing the current economy to the go-go 1990s. I recall former Nashville Chamber of Commerce President Fred Harris telling me in the late 1990s about the state of Nashville's economy, ‘Michael, Nashville's economy is better than I have ever seen it. We have people who are working who don't even want to work.’ Fred's statement was correct since Nashville's unemployment rate was below three percent when he called me. Nashville is hot again, being called the ‘it’ city, but it hasn't reached full employment yet. Nashville's current unemployment rate is 5 percent."

I followed that paragraph with, "When major markets run out of labor, as Nashville did in the late 1990s, that is typically a good sign for the rural South. What occurs simply is this: job generation ramps up in the South's metros to a point where labor availability is exhausted. That forces growing companies to look outside of metropolitan areas to find labor sheds that are available. In short, for a growing company to build capacity in a white-hot economy, companies must locate in rural areas, the last frontier of labor availability."

That is essentially where we are today. If we get to full employment in the vast majority of the 150-plus metros in the South and the economy continues to grow, non-metro areas will benefit frankly because they will be where the labor availability exists. The South has come close many times in this same scenario, only to be defeated as unemployment rates rise in non-metro areas at the very edge of full employment.

Obstacle No. 4: Slowing worker productivity must be turned around.

Worker productivity in manufacturing grew again in the last quarter of 2014, and U.S. manufacturing output and productivity are at all-time highs. Here, a worker installs parts as Toyota Camrys pass through the assembly line. During the recession and the year after it ended I would ask whatever crowd I was speaking to this question: "How many people out there are doing the job of a former co-worker who was fired, all the while continuing to do your regular job?" Then I would ask, "And without a raise?" Usually about a fourth of the folks in the audience would raise their hands.

Worker productivity soared during the recession as it always does in a downturn. Workers who kept their jobs typically wore several hats as companies squeezed productivity out of their shrinking labor force as profits evaporated. It's called damage control for the employer. It’s one way that companies weather an economic storm; less must do more. When less do more, worker productivity spikes.

But in an economy that is thriving and driving toward full employment as this one is, many of those same workers who did double duty in the recession are now getting some help from their employers as companies try desperately to make hay while they can in expansion mode. As more orders come in, more workers must be hired to fill those orders. And many of the newly employed are not as productive as seasoned workers, and especially not as productive as those that were capable of wearing multiple hats in an effort to keep their jobs during the recession.

According to the Bureau of Labor Statistics, worker productivity "relates output to the labor hours used in the production of that output." The U.S. has a definitive edge over other countries in the labor productivity category. Workers in all sectors in the U.S. are over 80 percent more productive in output compared to 1975. Prior to 1975, wage growth and productivity growth essentially matched. Since then, the average hourly wage has only grown by about 40 percent, half the rate of productivity.

But like the economy at large, it is best to look at productivity in two areas -- services and manufacturing. U.S. manufacturing output and productivity are at all-time highs, even though millions of workers have left the sector in the past two decades. Logically that means that each manufacturing job, because of new technologies on the factory floor, produces much more per hour than it used to.

But the challenge in worker productivity and how it might keep the South from reaching full employment comes from the awakening service sector. According to the Labor Department, overall productivity fell by 1.8 percent in the fourth quarter of 2014 after rising 3.7 percent in the third quarter. The drop in productivity was mainly due to the service sector, since manufacturing productivity grew again in the fourth quarter. The negative rate of 1.8 percent in the fourth quarter created an average rate of productivity growth of just 0.8 percent in calendar year 2014.

At the same time that productivity is well below the 3.3 percent growth seen in 2009 and 2010, wages are now growing faster with a 3 percent increase expected by most experts this year. An increase in hiring and rising wages, combined with less productivity, will eventually slow down corporate profits.

To summarize, two things must happen to reach full employment when productivity is factored. First, more workers must be hired, and of course the service sector is where the bulk of the hiring will come from. That is obviously happening. Secondly, those workers must keep pace with productivity or that hiring at some point will slow dramatically.

The key here will be the productivity rates of the 3.1 million workers hired in the U.S. in 2014. Remember, that is the largest total of new hires in any year since 1999 and the vast majority will have come from the service sector. If information technology advances make significant strides in the U.S., and those workers become accomplished at those technologies, worker productivity will increase more rapidly this year than it did in 2014. If not, hiring will slow, unemployment will rise and it will do so right at the threshold of reaching full employment.

Obstacle No. 5: Continued improvements in workforce training, and educating the workforce that old opportunities for work are now new opportunities for work in the South.

The Kentucky Federation of Advanced Manufacturing Education (KY FAME) was created because Toyota realized it needed to start replacing retirees from its Georgetown plant. Together with Bluegrass Community and Technical College, they created a pipeline of skilled young people to fill the void.To ensure worker productivity continues to improve, advances in workforce training must be ongoing, particularly in a drive to full employment and the quest to stay there for more than a year or two. One of the biggest problems facing employers today is the changing landscape of the economy and how it applies to the current workforce. For example, manufacturing is back with a vengeance in the American South, with project totals setting records each year since 2010. However, finding workers to fill new positions is a struggle.

There are many reasons for this. For one, manufacturing suffered for so long in this country that we lost an entire generation of workers. This is especially true in fields that were thought to be long gone but are now returning -- general manufacturing, textiles and apparel, furniture making and other woodworking jobs.

As discussed, the construction industry is one of the most important hiring sectors in gaining full employment. Like some of the manufacturing industries that are reshoring and nearshoring, construction is back. But finding workers to fill those jobs has been a challenge. "In our main markets, we are already finding it difficult to hire workers," said Tom Garrett, Chief Safety & Human Resources Officer for Birmingham-based Brasfield & Gorrie. The company is one of the South's largest contractors.

Garrett said there are three reasons behind the challenges of finding workers. "First, in some markets like Texas, the Carolinas and around Atlanta, the economy has picked up to a point where labor shortages exist and wages are rising," Garrett said. "Second, due to the rise of the oil shale boom, workers have migrated to other parts of the country in search of work and higher wages, creating labor shortages back home. Finally, in the markets that have not quite rebounded, skilled construction workers were forced years ago to relocate to other regions to find work. Now, as projects are beginning to come back into these last markets, the workers are no longer living in that area. Full employment in the South will come when the construction volume of work levels out so that workers can have steady employment where they call home," Garrett said.

So, not only do we have to train workers in jobs that have been gone for years but are now returning, we have to train them in different ways. Even those traditionally less advanced manufacturing sectors, such as textiles and apparel, are now quickly becoming automated.

The workforce training issue in the practice of economic development in the South has been at the forefront for some years now. But it has never been as important for both the employer and the community as it is today. Complaints from employers aside, there are some incredible advances being made, particularly in the American South, in workforce training.

“Perhaps never before in the history of our nation has there been a stronger need for a strategic connection between education and economic development,” said Dr. Glen Fenter, the President of Mid-South Community College, and now the President of the Greater Memphis Alliance for a Competitive Workforce. Fenter’s workforce models have been cited by the U.S. Department of Labor and have received recognition as a national model in a Workforce Strategy Center report underwritten by the Bill and Melinda Gates Foundation. He also serves on the Manufacturing Institute’s Education Council, an affiliate of the National Association of Manufacturers.

Dr. Fenter continued by saying, “For places like the South, a positive and promising transition is occurring in the communities where conventional educational models are being strategically redesigned to meet current and future workforce needs. Consequently, the opportunities for economic growth and associated higher levels of meaningful employment are unprecedented in many pockets of the region, as they are for almost any community in our country that can produce and sustain a steady supply of highly educated, skilled potential employees.”

Fenter went on to say, “Conversely, those regions that are not busy about the business of morphing their educational strategies based on a workforce-needs driven model that fosters economic development are going to find themselves losing opportunities for growth at an exponential rate. Such strategic economic models in which education directly addresses workforce needs will be critical factors in determining which communities will be winners and which will be losers in the next decade.”

Conclusion

It is certainly encouraging that the South is in a position to attain one of the most difficult goals in any economy -- full employment. Even more encouraging, this economy is real. . .it’s not propped up by some government program or intervention, such as easy credit found in the home equity frenzy in the last full employment cycle.

Back then hundreds of thousands of jobs were created in the financial services sector as millions borrowed against their homes to "Live Richly," as one Citi ad read in the 1990s. And who knows how many jobs were created as those who borrowed against their homes attempted to "Live Richly" by spending their hard-earned home equity on things like new cars, boats and even second homes. Let’s just say the last full employment period was a ruse and we certainly paid for it later.

There are obviously other obstacles to reaching full employment now that the South's economy is in a position to achieve it. Economists that I have shared podiums with recently cite the rising dollar as an obstacle in today’s economy. I disagree. For one, the dollar was even higher than it is today during the last full employment period. Second, there isn’t much you can do about a rising dollar since a strong economy always produces a strong currency.

I believe the biggest obstacle to full employment is finding jobs for those left without one; that last 1 percent in the unemployment rate that must be erased. And that’s where we are now.

According to a recent article in The Wall Street Journal titled,”Economy's Supply Side Sputters," 3.6 percent of jobs went unfilled in December, the highest "vacancy rate since 2001." In the article, Ian Shepherdson of Pantheon Macroeconomics said, "Employers do not view the millions of people who have left the workforce, or the millions of part-timers who want a full-time job, as suitable for their needs." I disagree with that statement. If skilled workers are so scarce, why haven't wages improved more than they have? But that's another discussion for another day.


    
 Southern Auto Corridor

Southern Auto Corridor.com

Steering the Automotive Industry to the World's Fourth-Largest Economy

www.southernautocorridor.com


  
 SmallTownSouth

SmallTownSouth.com

Opportunities in the South's Rural and Urban Small Towns

www.smalltownsouth.com


  
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