It is not news that rapid global changes are impacting our local economy. A few years ago no one would have believed you if you had suggested that daily activity among Greek public workers could impact the U.S. stock market; and yet today, that is our reality. This month, revised (downward) growth numbers for China, Brazil and India have resulted in drops in the markets and reduced optimism among corporate executives. What are the big trends that are having an impact on our job market and what can we do to exploit the opportunities that arise?
As we have highlighted in the first two commentaries in this series, Wake County has lead the state in labor force growth and job growth over the last decade, and enjoys the lowest unemployment rate among North Carolina’s large metropolitan counties. Since our first commentary in June, the unemployment rate has continued to fall and now stands at 7.6 percent. Almost 17,000 more Wake County residents are employed today than this time last year. The economy continues to grow.
A recent Atlantic Cities study recognized the Raleigh-Cary metro area as having the 4th fastest economic growth among large metros from 2000-2010, and the 6th fastest growth from 2008-2010. During these recent years, only 12 large metros in the country had positive growth of 1 percent or more. As the chart below shows, three of those are in Texas, but the rest are spread out across the country—and all have very different local economies.
Large Metros with the Highest Rate of Economic Growth 2008-2010
Rank Metro % Change in GDP
1 San Jose-Sunnyvale-Santa Clara, CA 5.48%
2 New Orleans-Metairie-Kenner, LA 3.95%
3 Austin-Round Rock-San Marcos, TX 3.25%
4 Hartford-West Hartford-East Hartford, CT 2.88%
5 Houston-Sugar Land-Baytown, TX 2.36%
6 Raleigh-Cary, NC 2.14%
7 Washington-Arlington-Alexandria, DC-VA-MD 1.80%
8 San Antonio-New Braunfels, TX 1.50%
9 Oklahoma City, OK 1.37%
10 Baltimore-Towson, MD 1.29%
11 Buffalo-Niagara Falls, NY 1.16%
12 Pittsburgh, PA 1.11%
Why are some places, like Wake County, having success while others are struggling? Big global trends are impacting place success. Competition, both globally and among U.S. metros, is more intense and more sophisticated than ever. Whether it is to find a new location, or to decide where to make an expansion investment, most companies today use a complex filtering system to narrow their options. It is not unusual for a company, or their hired site selectors, to begin with 1,000 global locations and use computer programs that measure many individual factors to decide which communities are eliminated.
Area Development magazine has surveyed site selection consultants and corporate executives for over 25 years to determine which factors are viewed as the most important. With a few exceptions, the list has remained remarkably consistent. Every year, some combination of labor, costs and infrastructure lead the list. In 2011, the top 10 factors deemed “very important” are listed below.
Factor % Responding Very Important
Highway Accessibility 94%
Labor Cost 88%
Avail. Skilled Labor 88%
Corporate Tax Rate 86%
Occupancy Costs 86%
State/Local Incentives 86%
Energy Avail./Cost 85%
Tax Exemptions 83%
Proximity to Markets 83%
Low Union Profile 81%
Other studies reinforce the value of labor (talent), infrastructure, and costs as determining factors. Wake County obviously scores well in these types of comparisons. Inside each of those areas are complexities worth recognizing. For this region, infrastructure includes obvious things like roads, water and sewer, air service, and telecom. It also includes education infrastructure (colleges and universities), innovation infrastructure (R&D funding and patents), and institutional infrastructure (public bond ratings, cluster networks).
The cost of doing business is also a multiple measurement exercise. Labor, energy, and occupancy costs all matter. So do tax rates, tax exemptions and tax composition. The key measure is the overall tax burden paid by businesses and the value of what they receive in return. For different companies, property, sales or income taxes can be the most important. Fees for services also vary greatly from place to place and are considered.
Corporate restructuring is another of the trends that impacts the local economy. Corporate mergers and acquisitions have both helped and hurt the region. As local companies acquire new firms or technologies, they expand and add jobs. Some outsourcing has caused job losses, but many foreign companies have outsourced to our region. Local companies have outsourced non-core activities, creating small businesses across the region. Outsourcing R&D and professional services has resulted in large job growth in those sectors.
The “so what” of these trends for our region is that more than ever we are judged from afar on numerical data. Wake County has been prospering because our data looks good. Our labor looks educated and skilled. Our cost structure shows good value. Our quality of life factors demonstrate affordable housing, good health care and high performing schools. But all data is in two contexts: how we are doing over time and how we are doing compared to our competitors. Regular, vigilant reviews of our data and everyone else’s are the only way to see a problem in time to address it. Regular conversations with businesses can identify problems before they show up in the numbers.
Later this year we will conclude this four-part series by looking at the state and local policies that could accelerate our job growth and strengthen the economy.
Greater Raleigh Chamber of Commerce
800 S. Salisbury Street
Raleigh, NC 27601
Wake County Economic Development
800 S. Salisbury Street
Raleigh, NC 27601
Southern Growth Policies Board
P.O. Box 12293
Research Triangle Park, NC 27709