Who is winning the economic development game?

2015-2016 are the best two years back-to-back in the 22-year history of the SB&D 100. . .

By Michael Randle

At a speaking engagement last spring in Martinsville, Va., respected Wells Fargo economist Mark Vitner focused on how poorly the global economy is performing. He did mention that the U.S. economy is in pretty good shape. Not remarkable growth, Vitner said, but steady growth despite the global downturn. 


Moody’s Investors Service agrees with Vitner on the shape of the world economy as a whole. A Moody’s press release in May stated that weak growth in emerging markets, “driven by low commodity prices and waning export demand,” will act as a drag on the global economy this year. Moody’s predicts that G20 emerging markets will grow by 4.2 percent this year compared to 4.4 percent in 2015. It also predicted that G20 advanced markets (like the U.S. and the EU) will grow at 1.7 percent this year compared to 1.9 percent in 2015.


Growth at around 2 percent has been the norm in the U.S. since the recession ended. Growth of GDP or what I call Gross Regional Product (GRP) in the South is also around 2 percent, and that’s with the oil-producing states of Oklahoma and Texas not contributing at all. Those two state’s third quarter 2015 GDP grew at 0.1 percent. So, prior to the oil collapse, the South’s economy was growing faster than the nation’s as a whole.


Nonetheless, it is remarkable that since February 2010, the U.S. has generated jobs every single month, including the dismal 38,000 plus jobs in May. That’s 75 straight months, the longest consecutive monthly job gain streak in U.S. history. In those 75 months, more than 14 million jobs have been created, offsetting the recession’s loss of 8.8 million jobs. And let’s point out that never in the history of the U.S. economy has it slipped into recession while creating jobs.


Joe Brusuelas, the chief economist at RSM, believes job growth will continue throughout the year, averaging 175,000 to 200,000 a month, which has been its average for the last two or three years. In a video released by Forbes, Brusuelas stated the nation’s unemployment rate will drop to 4.5 percent by the end of the year, which essentially is full employment. This country hasn’t celebrated full employment since 2000.


So, the economy is settled in between anemic and steady growth. Job growth has been incredibly consistent and long-lasting, though no one would call it as robust as in a V-shaped recovery. Regardless, in calendar year 2015, economic development in the South soared. If the global economy is struggling, you wouldn’t know it in the American South.


The 2016 SB&D 100: There is a lot to love about current economic conditions

For the second consecutive year, the economic development community in the South has captured a record number of projects meeting or exceeding 200 jobs and/or $30 million in investment. Before last year’s then-record 668 projects, the previous record was set in 1997 with 636 projects announced meeting or exceeding our thresholds. This year’s haul of 730 deals has set another record by a wide margin for the most large projects announced since 1994 when the SB&D 100 was first published. Only twice since 1994 has the total number of projects topped the 600 mark, and those were the 2015 SB&D 100 and the 1997 SB&D 100. With this year’s SB&D 100, we boldly go where we’ve never been. . .and that is breaking the 700 mark of projects of 200 jobs and/or $30 million or more in


Like last year’s “100,” both the service sector and the manufacturing sector had outstanding years. That phenomenon has rarely occurred. In the 1990s and early 2000s, services dominated the South’s economy while much of the South’s and the nation’s manufacturing base were making beelines to China. By 2007, manufacturing began to dominate the deal-making scene, as the South suddenly became incredibly competitive for new and expanding capacity. Reshoring, onshoring, “make it where you sell it” (whatever you want to call it) began in earnest. Yes, we even became competitive with China seemingly overnight. But while manufacturing was staging a bold comeback, the service sector collapsed, cratering in 2008 and 2009 at only 138 and 140 projects respectively. This year, the service sector posted 306 big deals.


As written, both sectors had banner totals as consumerism kicked in, which naturally boosted projects from the financial services, distribution, logistics and headquarters sectors, among others. In fact, the fintech (financial technology) industry is dominating the traditional financial services industry in job generation and much of it is based in Atlanta. The 306 service deals announced in calendar year 2015 were the most since 2005, and the 424 manufacturing projects meeting our thresholds is an all-time high. 


As for the manufacturing sector, 2015 was the year of the automotive industry. Ten of the 17 major automotive assembly plants in the Southern Automotive Corridor (see SouthernAutoCorridor.com) are currently expanding, and that OEM (original equipment manufacturer) activity has forced the supply chain for those plants to grow as well. Automotive has led all sectors in the number of large projects in the South 21 of the last 22 years. The only time automotive didn’t lead all sectors was a year in the late 1990s when call centers posted a ridiculous total of deals.


In a record-setting year, the automotive industry posted 111 big projects of the manufacturing sector’s 424 deals in this year’s SB&D 100. That’s more than one-quarter of all manufacturing projects meeting or exceeding 200 jobs and/or $30 million in investment coming from the auto sector. There is no question what is the most important industry in the South. It is the automotive industry, hands down.


Seeking full employment for the first time in 16 years

We have written in the annual SB&D 100 for years now that there is no chance for the region to reach full employment unless the service sector brought its large job generating project totals to around 300 or more, as it did this year. In fact, in the cover story of an issue in 2012, I wrote, “There is no possible way the South’s economy today can reach full employment unless the service sector at least doubles its current number of large projects in the region.” That year, services posted just 160 deals.


Between 1996 and the recession of 2001, the service sector averaged 342 projects of 200 jobs or more each year in the South. Most of those deals averaged just over 500 jobs each year. That total dropped to an annual average of 179 service projects from 2008 to 2013. So the 306 service projects this year and the 293 large job generating service projects captured in the 2015 SB&D 100 don’t quite double the low averages seen between 2008 and 2013, but it is close enough to make a huge impact on the South’s economy and its methodical drive to full employment.


I think it is safe to say that after one more year like this one, full employment will be reached in the South for the first time since 2000. And like full employment periods in the past, the late 1990s for example, if projects keep flying, some employers will be forced to rural areas where some labor will still be available.


The rural South’s recovery from the recession is improving. Rural South employment grew by more than 1 percent in 2014 and 2015 after several years of stagnation, according to the USDA. Expect those figures to rise somewhat dramatically as major- and mid-markets all get closer and closer to the magical and rare achievement of full employment.


Right now the labor shed is vanishing in places like Nashville, Charlotte, Raleigh, Dallas-Fort Worth, Northern Virginia and Orlando. Even Houston’s unemployment rate is below 5 percent, which is remarkable considering the state of the oil and gas industry over the last 18 months. Currently, there is some wiggle room for labor in Atlanta and South Florida.


The labor shed has already vanished in Austin. Sure, thousands of people move to the South’s major markets every week, but there may never be a time in those markets’ histories where growth has been better. I know for a fact Charlotte and Nashville’s (this year’s Co-Major Markets of the Year with 185 points) economic growth has never been better, not even in the late 1990s.


In fact, just about every major metro in the South is killing it right now, including those dependent on oil and gas extraction jobs. The highest unemployment rate of any major market in the South as of March was right here in Birmingham at 5.8 percent. I would estimate Birmingham’s full employment to be about 4.5 percent, so it’s not that far off. While Birmingham has the highest unemployment rate among major markets in the South, you wouldn’t know it. The city is transforming itself, specifically its central business district.


As for Austin, it is a prime example of what happens when full employment is achieved. Currently, Austin’s unemployment rate is 2.9 percent. That is beyond full employment, meaning there are people working in Austin who would rather not work. Therefore, Austin’s labor shed is exhausted, which is reflected by its numbers in this year’s SB&D 100. In the Austin metro, including Round Rock, in calendar year 2015, there were only four projects announced meeting our thresholds. Austin normally lands way more deals in a typical year.


Financials lead the service sector boom for the first time since 2004

Leading the services parade this year is the financial services industry for the first time since 2004. Back then, financial services were one of the most powerful job generators in the region, second only to automotive. North Carolina and Florida were particularly strengthened a decade ago as banks and insurance companies were growing like never before.


But as early as 2005, the housing crisis had begun in Florida, and financial services cratered from 52 big deals in 2004 to 9 in 2008 and 2011. No other business sector saw that much bloodletting in the recession. Financials averaged 43 big projects each year in the late 1990s, and the surge to 69 financial services deals this year is encouraging. However, most of those deals came from the financial technology (fintech) sector, and it is too early to fully know if technology-based borrowing is something that will be a solvent business model. Of course, the traditional banking industry believes it will not.


Other than financials, distribution had its best year in almost a decade. Amazon is leading the distribution sector as each year several new warehouses are announced. Wal-Mart also posted a few big distribution projects on this year’s “100.” When the consumer is spending more, distribution rallies in the form of more deals. That was true in the late 1990s as well.


For some reason, healthcare was way off its average deal count, dropping from 43 projects last year to 19 this year. It was the only service sector really off its annual averages. All other service-based sectors had pretty good years.


So, for the first time in many years, the massive job machine that was the non-manufacturing, service sector is now getting on its feet and contributing to deal counts in the South. The largest non-manufacturing projects announced in 2015 in the South were Liberty Mutual Insurance’s 5,000-employee project in Plano, Texas, and Navy Federal’s 5,000-employee projects in Pensacola, Fla.


No sign that the manufacturing beachhead building in the South is slowing

The non-manufacturing sector’s significant improvement in the number of projects on this year’s SB&D 100 is vital for the region in reaching full employment for the first time in 16 years. But it’s the unlikely surge of manufacturing projects since the recession ended that remains the South’s No. 1 economic development story.


From 1996 to 2005 (some of the darkest years in the history of manufacturing in the South), the region averaged 210 manufacturing projects meeting or exceeding 200 jobs and/or $30 million in investment. Every single one of those years, the service sector beat manufacturing in the total number of projects, some years, like 1997, by a ratio of 2-to-1. In fact, services averaged 334 big projects from 1996 to 2005.


On the other hand, from 2010 (the first full year of recovery from the December 2007 to June 2009 recession) to 2015, the average yearly total of manufacturing deals in the South meeting or exceeding our thresholds is 378. So, to anyone who says, “We don’t make anything anymore,” it is impossible not to see the trend — in the American South, at least — that manufacturing continues its incredible streak of increased capacity in the region.


Also consider the fact that the U.S. has added about 900,000 factory jobs — about 450,000 in the South — since 2010 when the sector lost jobs every year from 1989 to 2010. It is a legitimate argument that manufacturing is driving the economy more than it has in decades. And manufacturing is creating jobs when technology is taking boots off the factory floor in record numbers.


Not everyone is on the same page regarding the manufacturing sector’s methodical comeback. “Throughout history, at the center of any thriving country has been a thriving manufacturing sector,” said presidential candidate Donald Trump. “But under decades of failed leadership, the United States has gone from being the globe’s manufacturing powerhouse — the envy of the world — through rapid deindustrialization.” Is Mr. Trump right? Sort of.


Yes, jobs in manufacturing have declined in the U.S. by about 5 million since 2000, but since 2010, as mentioned, they have risen by 900,000. Why? The U.S. (and specifically the American South) has become so much more competitive from a cost-to-operate basis. Just the fact that you can tap into the cheapest, most abundant natural gas supply in the world to power your plant is a huge deal. . .a huge savings for manufacturing in many parts of the U.S.


Manufacturing remains the country’s largest gross output sector, valued at $6.2 trillion in 2015. That is 36 percent of the nation’s total gross domestic product, and nearly double the output of the next-largest sectors, which are government, business services and financial services. Manufacturing is also at the center of innovation in this country. It accounts for about 77 percent of what the private sector spends on research and development in the U.S.


Today, factories in the U.S. make twice as much product as they did in 1984. And they are doing it with one-third of the manufacturing workforce. In fact, the output of durable goods in 2015 was the highest in the nation’s history. So, we do have a strong manufacturing base, at least in the South, much of the Midwest and parts of the West, and it is getting stronger. On a cost basis, we can compete with any major manufacturing nation in the world.


As written, automotive was the No. 1 industry — service or manufacturing — by a large margin in 2015. The 111 projects meeting or exceeding our thresholds was also a 22-year record. At no point since 1994 has any industry topped 100 projects. And why not? U.S. car sales in 2015 set a record, beating the record reached 15 years ago. Automakers sold 17.5 million cars and light trucks in 2015, and overall Americans spent about $570 billion on new vehicles. Automotive sales are a prime indicator of how the economy is performing. Cheap gas and low interest rates were also factors in the car sales record.


Also in 2015, the Southern Automotive Corridor gained two new assembly plants, both in the Charleston, S.C., region. Volvo and Daimler Vans are the first two major automotive OEMs to announce new plants in the South since Volkswagen’s 2008 announcement that it would build an assembly plant in Chattanooga, Tenn. And with more than half of the plants in expansion modes, and automakers spending billions on more space and equipment, the automotive industry in the Southern Auto Corridor has never been more active.


It is not only manufacturing that the South is gaining thanks to the automotive industry. Mercedes-Benz is relocating its North American headquarters from New Jersey to the Atlanta metro. Toyota will be moving upwards of 4,000 people, primarily from California, as it relocates its North American headquarters to Plano in the Dallas-Fort Worth metro. Of course, Nissan relocated its headquarters to the Nashville metro several years ago. Those projects are huge for the Southern Auto Corridor in that they bring value-added automotive jobs in addition to the manufacturing base.


Other highlights of the 2015 manufacturing deal record year

While the automotive industry in the South can’t seem to meet demand for vehicles, the oil industry, because of oversupply, is sucking wind. Oil saw just 37 projects in this year’s SB&D 100. Yet, the chemical industry set an all-time high with 70 large project announcements, almost all of which were on the Gulf Coast in Louisiana and Texas. Low natural gas prices are driving the chemical boom on the Gulf Coast. Ports such as the Port of South Louisiana, Lake Charles, Baton Rouge, New Orleans, Houston, Corpus Christi, Brownsville, Port Arthur and others on the Gulf Coast are preparing to export petrochemicals at double, if not triple, current rates in the near future.


The U.S. shale boom has created hundreds of billions of dollars’ worth of new refinery and petrochemical capacity on the Gulf Coast. This is a surge not seen since the industry was birthed there during and shortly after World War II. But not everyone believes this massive manufacturing expansion of petrochemicals can be sustained. Nick Vafiadis, the global business director for polyolefins and plastics for the consulting firm IHS, believes there will soon be a glut of petrochemical products, specifically the two most common plastics, polyethylene and polypropylene, as a result of so many new and expanded petrochemical plants on the Gulf Coast, as well as in China. The “economics will be challenged in the near term as global capacity expansion exceeds demand growth and pressure margins,” Vafiadis said. 


Glut or not, tens of thousands of construction workers are building numerous new petrochemical plants on the Gulf Coast. IHS estimates more than 24 million metric tons of new polyethylene capacity will be available globally by 2020, with a fourth of that coming from the Gulf Coast. The 24 million metric tons of new capacity is a fourth of current global consumption. That being the case, not all of the announced plants on the Gulf Coast will be built.


Two of the highest value industries in the South — petrochemicals and automotive — both set records for the most projects announced. As a result, another record was set in the total value of the 100 largest projects announced in 2015. The previous record was set last year with $78.2 billion. This year the total value of the 100 largest projects announced in the South was $90.5 billion. That total was aided by five large LNG export project announcements. Those announcements were made in Cameron and Calcasieu Parishes in Louisiana, two in Brownsville, Texas, and one in Port Arthur, Texas. Last year, six of these monsters were announced. The G2 LNG export facility in Cameron Parish is an $11 billion project, the largest value of any announcement made in 2015. 


Even though we are swimming in natural gas from the fracking frenzy, only one large LNG export facility is operating in the U.S., and that’s the recently completed Cheniere Energy terminal in Cameron Parish, La. Cheniere’s second export terminal in Corpus Christi is under construction. There are six more approved by the FERC that are also under construction in Louisiana, Maryland and Texas, with three others approved in Southwest Louisiana that haven’t broken ground.


Natural gas is not the only rock star right now in the energy industry. Renewables are thriving as well. It was only a couple of years ago that renewables on the SB&D 100 surpassed traditional coal energy projects. Now renewables are pulling away from fossil-fired projects. There were 19 large renewable energy projects announced in the South in 2015 compared to seven fossil fuel deals. 


Another high value sector that performed well in the 2016 SB&D 100 is the aviation and aerospace industry. Airbus opened its plant in Mobile, Ala., where it makes the A320 single-aisle jetliner that competes directly with Boeing’s 737 family of commercial aircraft. Now, with Boeing’s plant in North Charleston, S.C., the South boasts of two of the three final assembly plants for jetliners operating in the United States. The other, of course, is Boeing’s massive manufacturing complex in Washington’s Puget Sound.


Also, the space industry is flourishing in the South. Brevard County, Fla., had an exceptional year in 2015 as it captured several aerospace projects, as did Huntsville, Ala.


Finally, one other industry had a record year — the food and beverage sector. With 63 big deals, food and beverage had its best year in 22 years. Several of those projects came from Kentucky’s bourbon industry, which has never seen better years than the last three or four. 



It’s another record year for the SB&D 100, as the largest projects announced in the South break the 700 mark for the first time. Few industries suffered poor years, and the automotive, food and beverage and petrochemical industries broke existing records in project totals. Add a very strong performance — second-best ever — from the financial services industry, and you get one of those rarities when the service and manufacturing sectors both have outstanding years.


It should be noted that 668 projects meeting or exceeding our thresholds of $30 million in investment and/or 200 jobs in last year’s SB&D 100, and a whopping 730 deals in this year’s SB&D 100, make the two best performing years back-to-back in this ranking’s history. That being the case, based on business and industry project activity, the South’s economy is performing better than it has since the late 1990s. . .maybe ever. Let’s keep it going. One more year and full employment will be achieved in the American South. If we slip up when full employment is on our doorstep that would be a shame. 


Chart No. 1


Total Projects, Manufacturing vs. Non-Manufacturing


SB&D 100 1994-2015


Year          MFG.                  NON-MFG.         Total Projects


2015          424            306            730

2014          375            293            668

2013          410            185            597  

2012          363            160            523

2011          350            189            539

2010          335            259            594

2009          227            140            367

2008          291            138            429

2007          301            209            510

2006          257            225            482

2005          219            370            589  

2004          292            297            585

2003          189            277            466

2002          164            245            409

2001          165            282            447

2000          209            312            521

1999          194            346            540

1998          228            344            572

1997          229            407            636

1996          212            361            573

1995          310            243            553

1994          281            189            470


Totals are derived from all projects announced in the American South 1994-2015 meeting or exceeding 200 jobs and/or $30 million in investment. Source: SB&D



Chart No. 2


Top Industries                             Number of Projects 2011-2015 


                                                      2015 2014 2013 2012 2011


1. Automotive                               111   81     83     81     82

2. Chemicals                                  70     47     37     51     46

3. Financial Services                     69     42     31     19     9

4. Food & Beverage                      63     45     50     36     33

5. Distribution                               54     51     26     39     30

6. Oil & Gas                                    37     51     53     73     57             

7. Headquarters                            36     42     14     15     10

8. Call Centers                               26     33     26     15     25

9. Aviation/Aerospace                  26     28     30     18     23

10. Misc. Manufacturing              24     36     18     40     35

11. Building Materials                  21     35     29     15     15

12. Information Technology       20     25     16     7       9

13. Misc. Services                         19     3       9       10     5

14. Renewable Energy                 19     12     15     8       24

15. Healthcare                               19     43     37     23     39              

16. Logistics                                   15     12     7       4       7

17. Data Centers                           14     16     15     7       6               

18. Metals                                       14     15     22     12     5      

19. Paper                                         12     5       4       6       7      

20. Textiles                                      11     7       13     4       0

21. Software                                  11     8       4       3       2      

22. Traditional Energy                   7       19     8       5       14

23. Pharmaceuticals                      7       6       6       2       3               

24. Electronics                                6       6       18     15     12             

25. Furnishings                               5       3       7       6       1               

26. Life Sciences                             5       2       4       8       1

27. Apparel                                      5       8       6       9       0      

28. Telecomm                                 4       5       7       7       2


Totals are derived from all projects announced in the American South 2011-2015 meeting or exceeding 200 jobs and/or $30 million in investment. Source: SB&D




Chart No. 3


Financial services sector performance 2004 to 2015


Year          Projects


2015          69

2014          42

2013          31

2012          19

2011          9

2010          27

2009          18

2008          9

2007          13

2006          14

2005          21

2004          52


Total number of financial services projects announced from 2004 to 2015 of 200 jobs or more in the American South. Source: SB&D



Chart No. 4


Total Investment by the SB&D 100 1994-2015


Year                                     Total Investment


2015                                     $90.5 Billion

2014                                     $78.2 Billion

2013                                     $53.9 Billion       

2012                                     $50.8 Billion

2011                                     $41.9 Billion

2010                                     $35.9 Billion

2009                                     $27.4 Billion                         

2008                                     $53.7 Billion                                  

2007                                     $45.1 Billion

2006                                     $44.2 Billion                

2005                                     $26.7 Billion

2004                                     $22.2 Billion

2003                                     $22.1 Billion

2002                                     $18.3 Billion

2001                                     $25.0 Billion

2000                                     $25.8 Billion

1999                                     $24.6 Billion

1998                                     $22.6 Billion

1997                                     $19.8 Billion

1996                                     $23.8 Billion

1995                                     $22.6 Billion

1994                                     $18.8 Billion


Totals are derived from the 100-largest investment announcements made in the American South from 1994-2015. Source: SB&D

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