SB&D takes a look back at the road that led to the South’s manufacturing boom, and the roadblocks that could lie ahead.

By Michael Randle

Fifteen years ago, this nation needed something good to happen to its economy. Anything good. 

The “Great Recession” of 2007-2009 was a financial disaster for most. It did not matter the industry sector, they were all negatively affected. Families, large corporations, small businesses, services, manufacturing, governments. . .we all went dark, at least temporarily, during the Great Recession. 

It was the start of the year 2010 — a new decade — as the dregs of the U.S. Great Recession hung on like gum on your shoe. 

Are we headed for another recession? That depends on who is elected president in November, I would guess, more than any other factor. The other factors are simply the ones the South is best at — reshoring and the advancement of green energy projects. As of the end of the summer, the South had captured over 60 percent of all EV projects announced in North America since 2020, according to the Center for Automotive Research based in Ann Arbor, Mich.  

The Great Recession began in December 2007, and statistically ended 18 months later in June of 2009. By the end of 2009, the Great Recession was technically toast. . .finished, or so we were told. Tell that to small business owners like myself in January 2010, when the U.S. unemployment rate was still sitting at 9.8 percent, more than double the number needed for full employment, which is generally viewed at 4 percent. We have been beyond full employment (yes, even folks who started working when they didn’t even want to work) for three years now. 

Interestingly, in the Great Recession (2009) many employers could not afford to hire. They could only fire and lay off staff in a collective effort to cut costs. Fast forward to today, and we can’t find enough workers to work. 

A huge story that is not being properly covered 

This is a story of how 2010 to today became manufacturing’s brightest moment in the South, at least in our lifetimes. This is the story of a sector of this nation’s economy that was essentially dismissed. 

But, no! Huge global cost issues changed around 2010 and 2011, when wages in China began to skyrocket. More than any other year, 2010 is regarded among economists as the year everything changed regarding manufacturing in the region. The U.S. became very competitive with regard to costs for producers who make stuff. The South and Mexico? So much more competitive than the U.S. as a whole. 

What brought that change to reverse manufacturing’s struggles in the South? The book, “Made in America, Again,” published by the Boston Consulting Group (BCG) in 2011, gave us the answers. 

The answer to that question was revealed in 2011 with Hal Sirkin’s book, “Made in America, Again.” Other Boston Consultant Group execs contributed to the book that outlined why manufacturing was beginning to ramp up in the South, “Made in America, Again.” 

“Made in America, Again”

The first clue indicating something was up occurred in 2007, when manufacturing projects took over the No. 1 spot from services in the region meeting or exceeding our thresholds of the SB&D 100. That was the first time manufacturing projects bested services of $30 million and/or 200 jobs in 11 years, going back to 1996. We noticed it and were astounded.

Manufacturing deals have beaten services in game-changing projects every year since. So, is the year 2007 the bright light we saw in making products in the South for U.S. consumption. . .you know, cars and all? Yes, but 2010 and 2011 were the years when reshoring began in earnest. 

In 2008, I said on a CNBC live broadcast, “A manufacturing beachhead is being formed in the American South,” a full three years before Boston Consulting Group’s report titled “Made in America, Again.” It was not a difficult prediction since manufacturing took over services when ranking the South’s largest projects in 2006. But then BCG published its book. 

“The Chinese advantage is shrinking fast. Rising Chinese wages, higher US productivity, a weaker dollar and other factors will virtually close the cost gap between the U.S. and China for many goods consumed in North America.” 

Then, BINGO: “When all costs are taken into account, certain U.S. states, such as South Carolina, Alabama, Tennessee, others, will turn out to be among the least expensive production sites in the industrialized world. As a result, we expect companies to begin building more capacity in the U.S. to supply North America, from the U.S., not China. The early evidence of such a shift is mounting.” 

In 2011, the Boston Consulting Group’s report contained these words, “The relocation of production is still in its early stages. The New York Times, The Financial Times and the Boston Globe saw the report and commented on it first. “The relocation of production is still in its early stages, but we believe it will accelerate in the years ahead. It could mean the creation of 3 million new manufacturing jobs in the U.S. by 2020.” That prediction was close, but no cigar.

Two million net jobs were created in manufacturing from 2011 to 2023. On a net basis, the U.S. generated almost 3 million manufacturing jobs from a low of 13 million net jobs in 2010 to 15 million net jobs in the sector employed in 2023. 

So, BCG’s prediction of 3 million jobs gained in the manufacturing sector by 2020 was two-thirds fulfilled and now we are approaching 2025. In addition to a massive GDP surge over the last 15 years, this is a blue-collar comeback tale that is happening on a technological level where the blue-collar label may not even apply anymore. New technologies in automation have taken over the factory floor. 

There are lots of “Secret Squirrel” manufacturing processes and methods that are now firmly implemented in advanced manufacturing in the South and Mexico. Those sectors where the magic has occurred can be seen everywhere. Next-generation vehicles, planes, weapons, advances in energy production. . .these and more are all being completely redefined as we knew them for decades. 

In short, BCG’s predictions of 3 million manufacturing jobs by 2020 were a little high. Then again, the investment totals of tens of billions were not 
predicted. 

Let’s compare recessions

The prior recession to the Great Recession was in 2001, when the 9/11 attack occurred smack dab in the middle of that downturn, therefore, no doubt, extending it. Emerging from that one wasn’t easy either.  

The Great Recession was the fifth recession I have covered since 1981. Here are the outlines of the last six recessions if you count the COVID-19 version of just two months. Note years 1980 and 2020, when the U.S. saw an almost 20 percent in GDP decline. 

The Go-Go 1990s

That statement, “We have people working who don’t want to work,” did not come from me. I heard it first from the legend Fred Harris, who ran the Nashville Chamber before Nashville became NashVegas. Fred told me in 1999, “Mike, I have never seen anything like what is happening in the Music City. We have people who are working who don’t want to work.” 

If you recall, the dot-com era and the entire services sector went nuts in the late 1990s, as manufacturing went the way of the dodo bird.

Does anyone remember the “smart growth” strategies of the last half of the 1990s? Here are some statements I remember well during that period:

“Michael, we no longer chase ‘smokestack industries’ such as manufacturing. There is just no point. The days of the South being a global manufacturing center are over.” (1998).

“What are you saying, Randle? That manufacturing is making a comeback? No, manufacturing is a dinosaur and you should know. We have lost that game to China and Mexico mainly through free trade. But every community in the South wants to land a semiconductor factory.” (1999). 

Note: In that entire decade and emerging into the one after, the South landed two greenfield semiconductor plants in Orlando and Richmond. Maybe there was one turned in Sherman, Texas, which has a huge chip industry cluster. They have been successful for decades recruiting Texas Instruments.  

“Anyone recruiting manufacturing right now is an idiot.” (2001, confidential). 

Let’s take a look at the manufacturing versus services numbers in the late 1990s. All projects meeting or exceeding 200 jobs and/or $30 million in 
investment.

As you can see in the graphic, manufacturing’s average project totals from 1994 through 2005 are completely inverted from the average number of large manufacturing projects captured from 2010 to 2023. In short, our talented industry recruiters’ target lists have been turned on their ears since 2010. 

Since 2005, manufacturing projects meeting our thresholds have grown by more than double in the South, and service deals have collapsed by almost 40 percent. 

In April 2009, we saw the beginning of the end of the Great Recession. On April 16, 2009, Ben “hard-landing” Bernanke told us that he sees “green shoots” regarding the recession. President Obama said the same that day and added he was observing “glimmers of hope.” 

Aside, Bernanke was one of the worst Fed Chairs of all time in my opinion. We will see if current Fed Chair Jerome Powell ends up being not so good either when history books define his role regarding the inflation issue. 

The Bailouts Compared: Great Recession vs. COVID-19 Recession

President Obama’s and President Biden’s approach to the bailouts of the last two recessions were as different as night and day. Both were elected when the economy became sketchy — banking, automotive, the housing crisis, then COVID. Who knows which of the two bailouts in the two busts in our generation were more effective? 

For one, the Obama administration approached the bailout of the Great Recession conservatively. President Obama’s $1 trillion bailout was essentially created to prop up failing banks, the housing industry and domestic vehicle assembly — Chrysler (now Stellantis) and GM. There wasn’t much of a bailout of small businesses or the unemployed when President Obama began to tackle the Great Recession’s recovery. 

In a side note, President Obama was also trying to fund the Affordable Care Act (“ObamaCare”) during the Great Recession. Remember? 

The reds were up in arms at the cost of ObamaCare, which was $940 billion over 10 years. We find out 14 years later that ObamaCare has insured tens of millions of Americans who could not be insured previously. A “good effing deal,” our current, outgoing president said at the time in May of 2010. Furthermore, the fed’s overall cost of $940 billion in 10 years to implement the Affordable Care Act was almost equal to the Great Recession’s total Fed bailout of two years, or $1 trillion. 

It should be written that at the time, the War in Afghanistan was still raging. Osama bin Laden, the co-founder of the terrorist group Al Qaeda, was killed May 2, 2011. Given that, the U.S. Defense budget at the time was approaching $940 billion — for one year, not 10 years. One year. 

President Biden’s subsidies to virtually all of America

In terms of the Biden administration’s bailout plan, it was far from the conservative one Obama’s administration dished out. Much of the $7 trillion the feds threw out in the COVID recovery was earmarked for workers and small businesses. Remember, Obama’s subsidies totaled just $1 trillion compared to Biden’s $7 trillion. 

Looking back, the COVID subsidies were excessive. But they kept Southern Business & Development open and alive since it was almost impossible to sell advertising or organize an event like the Southern Economic Development Roundtable (SEDR@ThePearl). How can you sell advertising to folks who have no customers? How could anyone organize an event during COVID? They could not. 

Small businesses closed by the tens of thousands during COVID. Biden’s bailout was great for small business. It remains to be seen how great it was for this country given three years of pesky inflation. 

It is my thought that the high inflation we have seen for the last three years is directly tied to the excessive $7 trillion pandemic bailout. There was just too much free or no interest federal money on the street. Under Biden, the administration was kind to the American people and small businesses to a fault. 

Then again, that bailout and incentives for next-generation manufacturing were approved by both the reds and the blues (bipartisan) at a time when COVID-19 was blowing the job market gasket in a manner not seen since the Great Depression. 

Now that the dust has settled from COVID, employment records have been set since the end of the pandemic; the most consecutive months in the nation’s history of below 4 percent 
unemployment.

Heather Long wrote in The Washington Post: “The big picture: U.S. unemployment has been below 4 percent for 27 months. That’s an incredible stretch that hasn’t happened since the late 1960s.”

Twenty million lost jobs in no time

Therefore, the feds were flying blind in the battle with COVID. For example, what if COVID was still raging? At the time, the feds had no idea if that disease was here to stay or not. Imagine if we were still wearing masks today, etc? Social distancing, few planes flying, your favorite restaurant’s chef and maître d’ chucked work and retired. Think about it.

Yet, a significant part of the $7 trillion federal infusion included the Inflation Reduction Act’s tax incentives, much of which has gone to clean energy manufacturing solutions, such as carbon capture, the reshoring of the semiconductor industry and, of course, this deluge of EV investments. 

Evidence? Let’s just conclude with the data.