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© Market Street Services, Inc. 2003 Reprints permitted with attribution Southwest Virginia Economic Development Summit Facing Todays Realities and Challenges.

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Presentation on theme: "© Market Street Services, Inc. 2003 Reprints permitted with attribution Southwest Virginia Economic Development Summit Facing Todays Realities and Challenges."— Presentation transcript:

1 © Market Street Services, Inc Reprints permitted with attribution Southwest Virginia Economic Development Summit Facing Todays Realities and Challenges October 23, 2003 Presented By: J. Mac Holladay Market Street Services, Inc.

2 © Market Street Services, Inc Reprints permitted with attribution Changing Economy Jobs and the New Economy September 11, 2001 Rural America Today Virginia and the South New Reality What Do We Know?

3 © Market Street Services, Inc Reprints permitted with attribution 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. Changing Structure Of The Economy

4 © Market Street Services, Inc Reprints permitted with attribution 1.General Motors 2.Exxon 3.Ford 4.Mobil 5.Texaco 6.Standard Oil – California 7.IBM 8.General Electric 9.Gulf Oil 10.Chrysler 11.International Telephone and Telegraph 12.Standard Oil – Industrial 13.Atlantic Richfield 14.Shell 15.US Steel 16.E.I. du Pont 17.Western Electric 18.Continental Oil 19.Tenneco 20.Procter and Gamble 21.Union Carbide 22.Goodyear 23.Sun Oil 24.Caterpillar 25.Eastman Kodak 1979 Fortune 500: Top 25

5 © Market Street Services, Inc Reprints permitted with attribution 1.Wal-Mart 2.General Motors 3.ExxonMobil 4.Ford 5.General Electric 6.Citigroup 7.ChevronTexaco 8.IBM 9.American International Group 10.Verizon 11.Altria Group 12.ConocoPhillips 13.Home Depot 14.Hewlett Packard 15.Boeing 16.Fannie Mae 17.Merck 18.Kroger 19.Cardinal Health 20.McKesson 21.State Farm Insurance 22.AT&T 23.Bank of America 24.AmerisourceBergen 25.Target 2002 Fortune 500: Top 25

6 © Market Street Services, Inc Reprints permitted with attribution 1979 Manufacturing12 Energy11 Communications Energy6 Financial5 Manufacturing5 Retail3 Communications2 Health2 Insurance2 Fortune 500: Top 25 – By Sector

7 © Market Street Services, Inc Reprints permitted with attribution Five Key Trends in Economic Development Globalization Technology & Telecommunications Regionalism Sustainable Development Workforce Development

8 © Market Street Services, Inc Reprints permitted with attribution Current Investments in China CompanyOperationsEmployeesInvestment Coca-Cola31 plants20,000$1.1 B Kodak5 plants; 8 outlets 5,000$1.2 B Motorola2 plants12,000$3.4 B Proctor & Gamble 5 plants4,000$1 B Siemens40 companies21,000$610 M YUM Brands 800 KFC; 100 Pizza Huts 50,000$400 M Danone50 plants25,000N/A

9 © Market Street Services, Inc Reprints permitted with attribution 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 © Market Street Services, Inc Reprints permitted with attribution 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 Definition of New Economy

11 © Market Street Services, Inc Reprints permitted with attribution 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 Transformation To The New Economy

12 © Market Street Services, Inc Reprints permitted with attribution 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. Job Churning Source: U.S. Bureau of Labor Statistics

13 © Market Street Services, Inc Reprints permitted with attribution % Professional Skilled Unskilled Source: U.S. Bureau of Labor Statistics Required Job Skills are Increasing

14 © Market Street Services, Inc Reprints permitted with attribution 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 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: million jobs vs. 158 million workers. A worsening labor deficit. In 2000, 146 million jobs, 141 million workers. What Kinds of Jobs are Coming Source: U.S. Bureau of Labor Statistics

15 © Market Street Services, Inc Reprints permitted with attribution Fastest Wage and Salary Growth, Business Groupings/Sectors Average annual rate of change in wages, Computer and Data Processing Services6.4% Residential Care5.0% Health Services, not elsewhere classified4.6% Cable and Pay Television Services4.2% Personnel Supply Services4.1% Warehousing and Storage3.8% Water and Sanitation3.8% Miscellaneous Business Services3.7% Miscellaneous Equipment Rental and Leasing3.6% Management and Public Relations3.6% Source: U.S. Bureau of Labor Statistics

16 © Market Street Services, Inc Reprints permitted with attribution Fastest Growing Occupations, Business Groupings/Sectors Education and Training Required Computer Software Engineers, ApplicationsBachelors degree Computer Support SpecialistsAssociates degree Computer Software Engineers, Systems SoftwareBachelors degree Network and Computer Systems AdministratorsBachelors degree Network Systems and Data Communications Analysts Bachelors degree Desktop PublishersPostsecondary Voc Award Database AdministratorsBachelors degree Personal and Home Care AidesShort-term on-the-job training Computer Systems AnalystsBachelors degree Medical AssistantsModerate-term on-the-job training Source: U.S. Bureau of Labor Statistics

17 © Market Street Services, Inc Reprints permitted with attribution September 11, 2001

18 © Market Street Services, Inc Reprints permitted with attribution Rural America Today

19 © Market Street Services, Inc Reprints permitted with attribution 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 © Market Street Services, Inc Reprints permitted with attribution Population Shifts In the 1990s, about 25% of nonmetro counties lost population. Counties that lost population were characterized by: 1. Location away from metro areas 2. Low population density 3. Low level of natural amenities (i.e. climate, topography, lakes and ponds) From , 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 © Market Street Services, Inc Reprints permitted with attribution 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 © Market Street Services, Inc Reprints permitted with attribution 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 Mclaughin, Diane. Income Inequality in America. Rural America, 17(2), Summer 2002

23 © Market Street Services, Inc Reprints permitted with attribution 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 © Market Street Services, Inc Reprints permitted with attribution Does anybody know how to play this game? Casey Stengel Former Manager, New York Yankees & New York Mets

25 © Market Street Services, Inc Reprints permitted with attribution Virginia and the South

26 © Market Street Services, Inc Reprints permitted with attribution Decline of Manufacturing: Manufacturing Jobs Lost in the South 2001 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 Source: U.S. Bureau of Labor Statistics Total = -390,700

27 © Market Street Services, Inc Reprints permitted with attribution Decline of Manufacturing: Manufacturing Jobs Lost in the South January 2003 to August 2003 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 Source: U.S. Bureau of Labor Statistics Total = -79,600 Source: U.S. Bureau of Labor Statistics

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

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

30 © Market Street Services, Inc Reprints permitted with attribution Virginia Sector Employment Change : December 2001 to August 2003 Source: U.S. Bureau of Labor Statistics

31 © Market Street Services, Inc Reprints permitted with attribution Virginia Total Employment Change, 1991 to 2003 (August) Source: U.S. Bureau of Labor Statistics

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

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

34 © Market Street Services, Inc Reprints permitted with attribution Virginia - #8, up from #12 in Maryland#5#11 North Carolina#26#30 Florida#18#20 Georgia#22#25 South Carolina#41#38 Alabama#47# State New Economy Index Source: Progressive Policy Institute

35 © Market Street Services, Inc Reprints permitted with attribution New Reality

36 © Market Street Services, Inc Reprints permitted with attribution 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) Recent Headlines

37 © Market Street Services, Inc Reprints permitted with attribution Organizations and institutions Economic development – strategy and theory Competitive positions 2003 – Where are we? What We Know

38 © Market Street Services, Inc Reprints permitted with attribution 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 © Market Street Services, Inc Reprints permitted with attribution Seven Guidelines for Local Economic Development I. Know Your Economic Function in the Global Economy II. Create a Skilled Workforce III. Invest in Infrastructure For Innovation IV. Create a Great Quality of Life V. Foster an Innovative Business Climate VI. Reinvent and Digitize Government VII. Take Regional Governance Seriously Source: Progressive Policy Institute

40 © Market Street Services, Inc Reprints permitted with attribution 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 © Market Street Services, Inc Reprints permitted with attribution 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 4 th Quarter. Consumer confidence returned to its lowest level since October 1993 in September, dipping 5 points from August.

42 © Market Street Services, Inc Reprints permitted with attribution 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 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 © Market Street Services, Inc Reprints permitted with attribution Actions for this Economy 1. Concentrate on improving the quality of the workforce – it is and will remain the #1 issue in economic development; 2. Nurture existing business – create technology-based system for growth companies/businesses…dont waste time; 3. Support entrepreneurship in new ways – cultural issue; 4. Recruit carefully and smart, based on asset advantages and existing connections – clear strategy for each cluster or area of emphasis; 5. Look for overlooked assets and opportunities – multiple strategies are key; 6. Marketing reality –quality website and personal relationships are the necessities; and 7. Remember Quality of Life is very important and it is an individual choice.

44 © Market Street Services, Inc Reprints permitted with attribution 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 © Market Street Services, Inc Reprints permitted with attribution 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 © Market Street Services, Inc Reprints permitted with attribution Southwest Virginia Economic Development Summit Facing Todays Realities and Challenges October 23, 2003 Presented By: J. Mac Holladay Market Street Services, Inc.


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