Rural Economic Performance

The U.S. Department of Agriculture has just released a new report on the performance of rural economies in recent years.

During the 1990s, the United States experienced the longest economic expansion on record. Rural areas shared in the Nation’s prosperity: earnings and incomes rose, poverty lessened, and population grew. In fact, many demographers declared it the decade of the “rural rebound.” In late summer 2000, manufacturing went into a downturn. Afterward, in March 2001, the economy slipped into recession. According to the National Bureau of Economic Research, the recession lasted 8 months, ending in November 2001. The U.S. economy still has some weak patches, however, making the recovery less robust than the first 2 years of a typical expansion.

Despite a continuing soft job market, rural areas fared better than urban areas in 2002, with higher job growth and lower unemployment. Employment levels rose significantly in many nonmetro counties, particularly in the Northeast and the West. Employment losses in rural areas in the South and Midwest are largely a reflection of declines in manufacturing and mining. The sharp drop in exports, induced by a very strong dollar and sluggish world growth, contributed to a sharp decline in manufacturing jobs even before the recession started. Manufacturing employment has continued to drop despite recent export increases, due to continuing productivity gains, sluggish domestic demand for manufactured goods, and increased worldwide competitiveness. The loss of manufacturing jobs has disproportionally affected rural communities, but the steep decline in manufacturing jobs seen in 2001 subsided by early 2003.

Go here to download the report.

New Mexico ED Corp Gets New President

The 45-year-old head of economic development for Glendale, Arizona, has been chosen to run a similar agency for the state of New Mexico.

Jim Colson was named economic developer of the year in Arizona last year.

But New Mexico Economic Development Secretary Rick Homans says that now Colson has accepted the job of president of the New Mexico Economic Development Corporation.

He will have an annual salary of $150,000 plus bonuses if he exceeds performance goals.

Colson says New Mexico is in a great position to attract businesses large and small.

Congratulations Jim!

Source: Associated Press.

Imports and U.S. Manufacturing Jobs

A recent analysis by Economy.com finds that from 2000 to 2002, a rising tide of manufactured imports cost the U.S. economy 1.1 million actual and potential jobs. The decline in manufacturing jobs is causing concern within political circles in Washington, D.C., and is prompting demands from industry for protection from imports. However, restricting imports is not the answer. Rather, policy should focus on increasing the skill level of U.S. work force through education and re-training.

It is true that U.S. manufacturing has taken a beating during the recent downturn. Overall, U.S. manufacturing has lost 2.7 million jobs since July 2000. Economy-wide, the job loss was 2.1 million, implying that other industries gained 623,000 jobs during this same period. This deep decline in manufacturing jobs is not unprecedented. From June 1979 to December 1982, the manufacturing sector lost 2.9 million jobs, out of which more than one-half were never recovered.

According to Economy.com, there are three simultaneous forces at work behind the decline in employment. First, there is a long-term secular trend brought about by gains in labor productivity. As labor productivity rises due to innovation, less labor is required to produce the same amount of output.

Second, there is a cyclical component in the decline of jobs. After the IT bubble burst, a large number of companies shut down and an increasing number of workers found themselves without jobs. Inter-industry linkages caused a cascading impact across the country resulting in higher unemployment throughout.

Finally, the unrelenting spread of globalization, and the incessant pressures to reduce costs, forces firms to relocate production facilities to countries which offer a more competitive environment, or to outsource production to a foreign company altogether. Another reason for relocation to a foreign site could be that the foreign market has become sufficiently large that establishing a factory there makes more economic sense than exporting to there from the U.S.

What should we do to respond to this situation? A knee-jerk reaction to such large losses in manufacturing jobs would be to call for protectionist measures. However, erecting walls around manufacturing industries will only hurt them over the long haul by neutralizing an important source of pressure to innovate and improve productivity—a good example being the steel industry. Besides, denial of cheaper manufactured imports will hurt consumers by reducing the amount of disposable income available for other goods and services.

The Economy.com analysis finds that the bulk of manufacturing jobs lost have been in industries which add much less value than the average. The output per full-time equivalent employee in textiles and apparel, which lost almost one-third of its jobs, 324,000, since 2000, is less than one-half of the manufacturing sector as a whole. These low-skill, low-value-added jobs will naturally move to areas where there are plenty of low-skilled workers available for lower wages.

Go here to read more if you subscribe to Economy.com.

Top Utilities Supporting Economic Development

Site Selection Magazine has selected its Top Utilities for 2002. An annual competition based upon economic development performance in four categories — capital investment, job creation, capital investment per capita and jobs per 10,000 population — the award tests the ability of energy companies to remain resilient in the face of increasing competition between states and regions and dwindling economic development resources.

Indiana-based Cinergy scored the highest overall ranking in the survey. Cinergy and Georgia Power have won the award five straight years since its inception in 1999, while Philadelphia-based PECO Energy has won four times. Their results indicate that while some utilities have chosen to downsize their economic development efforts, others know the power of corporate attraction.

Winners are:

Cinergy Corp., Plainfield, Ind.
Northeast Utilities, Hartford, Conn.
Georgia Power, Atlanta, Ga.
PECO Energy, Philadelphia, Pa.
Entergy Arkansas, Little Rock, Ark.
Niagara Mohawk, Syracuse, N.Y.
DTE Energy, Detroit, Mich.
FirstEnergy Corp., Akron, Ohio
Omaha Public Power District Omaha, Neb.
Hoosier Energy, Bloomington, Ind.
Progress Energy, Raleigh, N.C.

Congratulations to the winners and thanks for all your contributions to economic development.

Read more here.

Plastics

Remember that famous line from the movie, The Graduate? That is the message in a recent article in August 2003 issue of Business Facilities Magazine. It ranks the states in terms of their competitveness in developing plastics-related industries and businesses. Interesting reading. Texas is #1, Ohio is #2, Tennessee is #3.

Online.

Investment Priorities for a Stronger Northeast Ohio Economy

The region's major foundations will gather today to discuss ideas and strategies to help them better target their funding to serve the economic development needs of local communities and the region.

Earlier this year they agreed to try to work together in forwarding a consolidated regional economic development agenda. Today many of the area's foundations, from the largest to the smallest, will meet to further their thinking and priorities.

Likely immediate term prospects for help are new entrepreneurship efforts by the Northeast Ohio Technology Coalition (NorTech) and some new innovation initiatives to spark more technology business development across the region. These are worthy priorities, provided they are organized and undertaken in the right way. Whatever is done in this area must give full recognition to new global economic realities and it must relate to the needs of established and emerging industries alike. There is other work to be done, which I describe below.

First, as an editorial comment, I agree with this joint effort and I believe private philanthropic should play a stronger and better defined role in stimulating greater entrepreneurship, innovation, and broader based prosperity across the region. This job will not be easy, given the region's slippage over the past decade or more. Plus, external competition is much stronger, which speaks to the need for innovative initiatives that allow regions across Ohio and in other states to collaborate on common objectives. To achieve the latter priority, we need to assess what regions across Europe have been doing to promote exchanges, interactions and joint action for regional economic improvement. The Innovating Regions in Europe (IRE) makes sense.

Here is a set of priorities, which hopefully foundation executives and their board members will give consideration to as they look at the future:

1. The Cleveland part of the NEO region needs to get over its "hangover" from the failed convention center development effort. My recommendation is for Cleveland officials to work with their counterparts in other cities trying to build large convention and sports facilities and roll these projects into a real estate investment trust (REIT)--at least to raise the funding for these projects, and perhaps also their management.

2. The Cleveland part of the region also needs to come to resolution about how it will refocus the resources of Cleveland Tomorrow, the Growth Association and the Greater Cleveland Roundtable. My recommendation is to look seriously at the Pittsburgh Regional Alliance's "holding company model," which appears to be working quite well.

3. Manufacturing is the tie that binds all the metros within the NEO region. We need a cross-cutting action strategy and roadmap that improves our competitive position for growing industry cluster-based manufacturing, small and medium-sized manufacturing companies that are locally owned and manufacturing companies that are growth-oriented in general. Do away with the "old versus new economy" distinction and embrace an integrated model that sees manufacturing as a vibrant and vital component of the emerging knowledge economy.

4. Craft a human capital strategy that: effectively deals with the issues of talent retention and attraction; helps companies here manage "globally networked" workforces; and connects NEO labor and jobs to the new emerging "international division of labor." This strategy should actively involve area colleges and universities and advance their ability to create and develop talent for the region.

5. Move forward with a focused, but aggressive, region-wide marketing strategy that positions the region in a realistic way with business investors locally, nationally and globally. The centerpiece of this strategy should be strategic customer relationship development.

6. Work on competitive site development in all NEO counties. In my assessment, we are lacking in this basic area. We still do not have an adequate supply of ready sites to accommodate future business expansion across the region. We need a strategy to guide that effort so we do not saturate the market with too much supply at once.

7. Get Team NEO up and running--but do it in a sensible way. So far, the effort has stumbled for a variety of reasons--not the least of which is the inability to attract the right professional to spearhead the organization. Team NEO will need time and a lot of help to grow into a productive role as a regional arm that stretches across the region's many metro areas. My suggestion is to look closely at the Greater Phoenix Economic Council (GPEC) as a best practice model for building Team NEO.

8. Finally, NEO needs to create the next generation of leaders for economic development. This is both a board and staff consideration. New "team leadership models" should be explored that bring together both established (existing) and emerging (new) leaders to work together on the challenges described above. Set aside the old linear model of leadership transition in favor of a more dynamic one that encourages "inter-generational" leadership for economic development.

This is no small agenda, and there is no guarantee that if the region does these things it will be any better off tomorrow than it is today. I'm not going to lie to you. There is a risk, and a significant one from what I can tell. How do we mitigate this risk? The answer is through the design and implementation of a carefully designed performance monitoring and measurement system that informs leadership, economic development professionals and the general public on an ongoing basis how well the overall economic development system and the individual organizations and programs comprising it are working. Think "team effort" and "team results."

In conclusion, hope that the current economic recovery continues and that American businesses will see communities like those in Northeast Ohio as the future places they will do business.

Greater Phoenix Issues Updated ED Strategic Plan

The Greater Phoenix Economic Council (GPEC) has just released its latest strategic plan update. Here is a summary of what it says. As always, this piece of work by GPEC is first-rate in quality and is a class act.

Greater Phoenix is responding to complex economic challenges by preparing a long-range economic strategy and plan, in realization that:

- The share of employment in key tech sectors has actually declined.

- 40,000 private-sector jobs were lost in 2001 and the billion-dollar state deficit has tested the sustainability of the Arizona revenue model.

- The region’s current business image is neither accurate nor positive.

- The five-year plan’s focused economic identity, development strategy with specific goals, and firm deadline … is now enjoying broad-based support. A recent survey revealed that nine out of 10 GPEC stakeholders believe the plan to be on target, improvements in key foundations are essential, and that GPEC is the appropriate organization and well suited to coordinate the new strategy.

- Confidence in the new plan is growing with 75% of stakeholders believing that needed change can occur to move the region forward.

Three fundamental actions are required. First, development must shift from quantity to quality. A comprehensive economic development plan must be organized and executed. Education, transportation and tax/fiscal policy must be aligned with the economic development strategy.

Second, GPEC’s new five-year plan will change the mix and quality of jobs created by the regional economy by initially focusing on the higher-wage industries of aerospace/aviation, high technology, bio-industry, software, and advanced
business and financial services.

Third, Maricopa County, member communities and more than 100 major firms currently commit $3.4 million* annually to the GPEC regional economic development program. Today’s challenges require that this effort be intensified.

Download the strategic plan summary report here. Download the Turning Point summary report here.

Some Bright Spots for Manufacturing

Economic activity in the manufacturing sector grew in August for the second consecutive month, while the overall economy grew for the 22nd consecutive month, say the nation's supply executives in the latest Institite for Suppy Management's (ISM) Manufacturing Report On Business®.

According to ISM, "the manufacturing sector showed improvement for the second month as the PMI is at its highest level since December of last year. Though two months of growth do not establish a trend, there is strength in the various segments of this report that we have not seen for some time. New Orders and Production have both been above 50 percent for four consecutive months; the continuation of a second half recovery appears on track."

ISM's Backlog of Orders Index indicates that order backlogs improved again in August. However, manufacturing Employment continued to decline in August as the index remained below the breakeven point (an index of 50 percent) for the 35th consecutive month. ISM's Prices Index indicates that manufacturers experienced higher prices for the 18th consecutive month. New Export Orders grew in August for the 20th consecutive month, while August's Imports Index grew for the 10th consecutive month.

Comments from purchasing and supply managers appear to be divided by industry. Reports from the Food and Primary Metals industries indicate continuing softness, while the Electronic Components & Equipment, Fabricated Metals, and Industrial & Commercial Equipment & Computers industries claim to be improving. Manufacturers supplying the construction industry continue to mention a positive effect from the seasonal upswing in the industry. Natural gas costs have stabilized somewhat, but are still at a rate that concerns manufacturers.

ISM's PMI is 54.7 percent in August, an increase of 2.9 percentage points when compared to 51.8 in July. ISM's New Orders Index rose 3 percentage points from 56.6 percent in July to 59.6 percent in August. ISM's Production Index rose 8.3 percentage points from 53.3 percent in July to 61.6 percent in August. The ISM Employment Index is at 45.9 percent for August, a decrease of 0.2 percentage point when compared to the 46.1 percent reported in July.

Go here to read more.

New ED Funding Legislation in New Jersey

NJ Governor James E. McGreevey recently signed into law the Business Employment Incentive Program (BEIP) legislation, which establishes a stable funding source for the program, as well as enacts critical enhancements to BEIP.

The new law authorizes the Economic Development Authority to fund grants through the issuance of economic development bonds, if no appropriation is authorized for BEIP grants in the State budget.

The new law also expands BEIP benefits to companies that could not take advantage of the program due to New Jersey's reciprocal agreement with Pennsylvania. Under this agreement, New Jersey employers pay no withholding taxes on employees who reside in Pennsylvania. The Governor's plan allows BEIP awards be made to companies that meet all the criteria, but would otherwise be hindered by the reciprocity agreement. This initiative would allow all new jobs brought by a company to the state with the BEIP incentive, including New Jersey jobs filled by residents of Pennsylvania, to be factored into the BEIP grant to the employer

The changes to the business incentive program include a more targeted job growth strategy by allow larger grants to businesses within targeted industries, including high technology, biotechnology, financial services, logistics and transportation. In addition, the new program allows for a lower job creation threshold to allow more companies to utilize the incentives. Overall, the threshold will be lowered from 75 jobs to 25 jobs created. However, if the company is within the high tech or biotech industry, the minimum jobs required to be created will be 10.

Revamping the BEIP program also means incorporating an important principle of the McGreevey Administration smart growth. Originally, BEIP applicants could be eligible for a maximum grant award of up to 80% of the total amount of the State income taxes withheld by the business during the calendar year for the new employees hired. The new BEIP sets a new maximum grant award of 50%, but allows for awards up to 80% 5o if the company utilizes smart growth principles.

Read more here.

China and India Leading Global Economic Growth

This news is not new news to those following the global scene, but it helps to know what the numbers say. China and India are out-performing the rest of the world in economic growth this year, the World Bank says in its 2004 global outlook.

The two Asian giants, each with a population of more than 1 billion, are expected to grow at up to 8 percent and 6 percent respectively in 2003.

But the rest of the global picture is far less rosy. The Bank says that for the third year in a row, the global economy is growing well below potential in 2003, at an expected rate of 2 percent.

It says that while there are some signs of a turnaround in the United States, Europe seems to be losing momentum and Japan appears positioned for another disappointing year.

These are encouraging signs for local economies in the U.S., assuming they can capitalize on the new growth opportunities expected to develop through the remainder of this year and into next year. That is a big "if," since an increased share of both office and production capacity are expected to head to China and India.

Read more here.

Latest Fed Survey: Economy Gaining Ground

The U.S. economy continued to improve in July and August, the Federal Reserve reported yesterday in its latest nationwide survey, bolstering recent reports that suggest economic recovery is gaining momentum.

Eleven of the Fed's 12 regional banks reported that business activity had increased. Consumer activity improved in most districts, and manufacturing rose in 10 districts.

The surveys are conducted by the Fed's regional banks eight times a year, and Fed policymakers use the results, among other factors, to determine whether interest rates should be changed.

Also yesterday, the Commerce Department reported that construction spending rose in July for a second consecutive month, and economists attributed that increase at least in part to low interest rates.

The Fed's survey said few labor markets reported job shortages. Employers in several districts said that wage increases, when they occur, are usually modest and that the increasing costs of benefits such as health insurance have further raised compensation costs.

These are positive signs for economic development, although employment continues to limp along.

Read more here.

Regional Innovation: Examples from Europe

Looking for ideas on how to promote collaboration related to regional innovation. You may want to contact the Innovating Regions in Europe (IRE) Network to learn about the many projects it has underway to help regions across Europe to work together in promoting innovation and economic development.

This is what we should be doing here in the U.S. This is the perfect thing for Pittsburgh, Cleveland, Indianapolis and other metro areas to work together on.

What is IRE? The Network of Innovating Regions in Europe (IRE) is the joint platform for collaboration and exchange of experiences in the development of regional innovation policies and schemes. The IRE Network is open to all European regions, including those in Central and Eastern Europe and Cyprus.

The network aims to enable regions to access new tools and schemes for innovation promotion and to create an inter-regional learning process. It also seeks to put innovation at the top of the regional policy agenda. It is open to all European regions that can demonstrate good practice in the promotion of innovation.

Since 1994, more than 100 European regions have received support from the European Commission for the formulation of regional innovation strategies through RITTS and RIS projects managed by Enterprise DG and Regional Policy DG respectively

Go here to learn more.

Poverty Numbers Grow

According to a recent Census analysis, the number of Americans living below the poverty line increased by more than 1.3 million last year, even though the economy technically edged out of recession during the same period, a Census Bureau report shows.

The spike in economic hardship has hit individuals and families alike. The report indicated that the total percentage of people in poverty increased to 12.4 percent from 12.1 percent in 2001 and totaled 34.8 million. At the same time, the number of families living in poverty went up by more than 300,000 in 2002 to 7 million from 6.6 million in 2001.

The number of children in poverty rose by more than 600,000 during the same period to 12.2 million. The rate of increase in children under age 5 jumped a full percentage point to 19.8 percent living below the poverty line from 18.8 percent a year earlier.

These numbers amplify the need to get people back to work. Workforce readiness remains a challenge in many communities. Many workers are not prepared to enter the workforce and assume skilled jobs. More training and better training is a part of the answer, but solidifying workers' educational foundation is crucial if they are going to be ready for higher skilled and better paying jobs.

Read more here.

Another Caution on China Bashing

This is the third article I've posted on why we should not stoop to China-bashing as a politically convenient explanation for our economic problems. This is an important issue for economic developers to keep in perspective. Here is what a recent New York Times editorial has to say:

"Unemployment in America is high, and elections are on the horizon. It must be time to look east again for scapegoats. Japan is only starting to recover from its protracted recession, so China will be handed the role of economic villain in the coming election cycle. Expect to hear a chorus of presidential candidates blame unfair Chinese competition for the nation's manufacturing woes."

Should we be concerned about the trafe deficit with China? Yes, we should be. China's trading partners do have legitimate grievances, but it would be irresponsible and inaccurate for American politicians to pin our economic sluggishness on scheming culprits in Beijing.

Bear in mind that short-term fixes can lead to more serious long term problems. China's financial system remains fragile, and sudden currency volatility could lead to a banking crisis that could spell disaster for the world economy. Washington would do better to urge China's leaders to focus on their lack of preparation to assume their proper role in the world's financial order, rather than to demand any supposedly quick fix. Moreover, China's refusal to devalue its currency in the aftermath of the late 1990's crises in East Asia (much appreciated by its neighbors and Washington at a time when the yuan seemed overvalued) adds credence to its leadership's insistence that it prizes stability when it comes to exchange rates, not short-term advantage. With most economists concerned that China's robust growth could fuel inflation and a speculative bubble, there are valid reasons for Beijing to fear a surging currency.

I would encourage U.S. states and communities to increase their efforts to promote trade and cross-investment with Chinese companies. Position your area as a leader in this area. Eventually we will see Chinese companies investing in the U.S. much like the Japanese have been doing for sometime and the Koreans started doing in the 1990's.

Read more here.

Global Insights: Employers Will Hire Soon

A recent article by Global Insights says that employers can be expected to start hiring people again soon.

Faced with a jobless recovery and the most stagnant job market since World War II, workers and investors are searching for signs of renewed job creation. Indeed, recent initial unemployment claims have slid below 400,000 to reach their lowest levels in months. But this was countered by a recent Challenger, Grey, and Christmas report indicating that layoffs surged 43% in July from the prior month. This news was further augmented by a surprising 5.7% year-over-year increase in second-quarter labor productivity, indicating that companies are getting more from less.

How should we interpret these conflicting signs? And when, if ever, will employers be confident enough to bolster their payrolls? The short answer is soon. Global Insight believes we need to look no further then the recent surge in temporary help employment to find the answer: 122,000 seasonally adjusted jobs added since April. This industry tends to be a bellwether for overall employment movements.

Let's hope Global Insights is right. Everyone in economic development is ready to get back to creating more jobs.

Go here to read more.

Beacon NY Taps Its Creative Advantage

Beacon is a small former factory town along the Hudson River, which has gotten with the creative economy program in a significant way. Recently, the Dia Art Museum opened in an old abandoned Nabisco factory.

Beacon is located in Duchess County, which also is the home of Franklin D. Roosevelt in Hyde Park and the new Richard B. Fisher Center for the performing Arts at Bard College. The Center is a creation of architech Frank Gehry.

Local economic development officials are not idealistic in their assessment of what the arts can do for the local economy. According to Ron Coan, director of the Dutchess County ED Corporation, new investments by IBM and a variety of other companies have helped to create the disposable income needed to support the local arts economy. Coan advocates the growth of a balanced economy that includes a creative component.

This is a sensible strategy in my estimation. And yes, Cleveland and other cities hoping to capitalize on the arts as a component of a future growth engine should look at what Beacon is doing.

Read more here.

Folks Are Working L-O-N-G-E-R

According to an analysis by the U.S. Bureau of Labor Statistics, the number of people of 65 or older working or trying to find a job has grown since the late 1980's.

In 1987, 19.4 percent of folks in the 65 to 69 age group were working or looking for work. In 2003, that percentage has jumped to 27.2 percent. Meanwhile, the percentage of people 70-74 years old working or seeking work increased from 10 percent to 14.4 percent.

Why are people working longer? Pension fund losses and rising medical care costs are the two biggest factors. For some seniors however, it is desire to remain active and stay vital.

Source: U.S. Bureau of Labor Statistics

President Talks Up Manufacturing in NE Ohio

In a Labor Day speech in the crossroads town of Richfield, President Bush talked up the need to do something for manufacturing.

Ohio has lost nearly 200,000 jobs - many in manufacturing - since Bush was inaugurated in January 2001, the Bureau of Labor Statistics has reported.

"Any part of a good recovery for the state of Ohio and other manufacturing states has got to be for the manufacturing sector," Bush said.

U.S. Senator George Voinovich, who spoke before Bush arrived, has been pushing legislation to create a new high-level position for manufacturing within the Department of Commerce.

"Manufacturing is under siege by high energy costs, litigation expenses and unfair foreign trade," Voinovich said in a statement issued after the president's speech.

"The president's move today is a welcome one that will give manufacturers and manufacturing workers a Washington insider on their side."

Read more here.

Clusters Key to Malaysia's Future Economic Development

In the Global Competitiveness Report 2002-2003 of the World Economic Forum (www.isc.hbs.edu), Malaysia was ranked 27th out of 80 countries in terms of growth competitiveness.

The ranking suggests the relative strength of Malaysia’s ability to return to a sustained growth path upon a global recovery.

It was lagging far behind the United States and Finland, the top two countries, and its Asian neighbours, Taiwan and Singapore, which came in third and fourth respectively.

How is a nation’s competitiveness measured? What makes a country more or less competitive than another?

Michael E. Porter, a key figure in the Global Competitiveness Report, said competitiveness is determined by productivity – how a nation uses its human, capital and natural resources. It is “not what industries a nation competes in” but rather how firms compete in those industries, he said. Productivity in a nation is a reflection of what both domestic and foreign firms choose to do in that location.

Malaysia has fared well, considering that it has weathered the Asian economic crisis of 1997-98 better than most of its Asian neighbours. It also has in place a sound macroeconomic, political, legal and social structure, all of which are the foundations for productivity and growth.

Yet Malaysia is not quite there in terms of global competitiveness.

Porter’s focus on Malaysia’s competitive agenda for 2003 at a recent conference in Kuala Lumpur elicited an important area for attention: cluster development.

Engaging in cluster development is probably the next big step Malaysia could take to raise its productivity, and hence its global competitiveness. This, Porter argued, was because “competitiveness ultimately depends on improving the microeconomic capability of the economy and the sophistication of local companies and local competition.”

Read more here.

Ottawa Struggles to Energize Tech Economy

Ottawa, like San Jose, Calif., at the heart of the Silicon Valley, has seen technology activity shrivel. In Ottawa, Nortel has laid off thousands; Newbridge was acquired by Alcatel SA of Paris; and there are major executive changes at Corel with major battles with the Ontario Securities Commission over a settlement relating to accusations of improper insider trading.

Ottawa has even suffered the indignity of Air Canada ending direct flights from that city to Silicon Valley.

And then there's the news that JDS is moving out and Corel is about be taken over by a group of San Francisco investors.

With that, a recent article says "the bloom finally appears to have gone off Ottawa's technology rose. Or, at the very least, the rose -- to continue the metaphor -- is in hibernation, waiting for a new spring."

Paul Bradley, a technology analyst at Dundee Securities Corp. of Toronto, said Ottawa rightfully earned the title of Silicon Valley North, but mostly for activity in the telecommunications and semiconductor sectors. "In the software and information technology services sector, it's really been centred elsewhere, such as Toronto or Montreal," Bradley said.

Despite the withering of Ottawa's highest-profile tech stars, the community's boosters point to many technology companies who can anchor a much-changed technology cluster.

There is Cognos Inc., for example, a maker of sophisticated business software with a market value of greater than $2.5-billion (U.S.) and more than $580-million in revenue for its past four quarters. Its stock is trading within a few dollars of its Nasdaq Stock Market 52-week high of $32.48.

Ottawa's semiconductor companies are also enjoying good times. Tundra Semiconductor Corp. has been among the best performers this year on the Toronto Stock Exchange.

Adam Chowaniec, Tundra's chairman, said the executives, engineers and other employees who have left those first-generation high-tech stars are already building new companies. "That is happening in spades here," Mr. Chowaniec said yesterday.

"The entrepreneurial spirit is stronger than I've ever seen it here. I don't think it's all over. It's part of the cycle."

Other Ottawa semiconductor players, such as Zarlink Semiconductor Inc. and Mosaid Technologies Inc., have also been reasonably strong performers and are considered by many analysts to have bright futures.

But other Canadian centres may now vie for the title of Canada's technology capital. Markham, Ont., for example, is the home to more than 500 technology-related companies, according to that town's city hall, including ATI Technologies Inc., Geac Computer Corp. Ltd., IBM Canada Ltd. and the Canadian operations for international tech stars like Sun Microsystems Inc., Motorola Canada Ltd., Apple Computer Inc. and others. Markham's Mayor Don Cousens has frequently said that his city, on Toronto's northeastern border, and not Ottawa should be recognized as Canada's technology industry capital. The Waterloo region, in Ontario's southwest corner, also has a strong technology cluster, anchored by tech stars such as software developer Open Text Corp., and BlackBerry maker Research In Motion Ltd.

Read more here.

Clusters Get More Attention in Washington State

Washington state is giving more attention to clusters to drive local economic development. Their approach appears to be practical and focused on trying to get something done. This is important.

Industry and business clusters are getting a good bit of attention nationally and internationally by economic development groups. Many areas are asking this question: "Which industry locally could be what software is to Seattle, what cars are to Detroit and what wine is to the Napa Valley?" That is essentially the approach associated with clustering.

Clustering looks at geographic concentrations of related businesses, including primary employers, suppliers, supporting businesses and educational and work force training institutions. Michael Porter from Harvard University has received considerable attention for his work with industry clusters over the past nearly two decades.

The goal is to promote growth in key industry sectors, which will add jobs and revenue to the area economy. Silicon Valley has served as the poster child for clustering for many years. Boston's Route 128 and North Carolina Research Triangle area, Austin's microelectronics cluster, and many other areas have been heralded as cluster successes.

Clustering, a term coined in the 1970s, is hardly a new development strategy, but it's one that has seen resurgence lately.

A Washington State House bill passed last year encouraged its use statewide, and the State's Department of Community, Trade and Economic Development is looking at pilot programs, including a $165,000 one for the Olympic Peninsula's marine services industry, to show how cluster-based growth may help regional economies.

Kitsap County, WA commissioners recently approved a $35,000 contract for the study of the area's local tourism cluster.

The clustering approach combines both recruitment and retention. It encourages businesses to buy materials and services from area providers, creating a business-to-business "buy local" campaign. It also seeks out complementary businesses, particularly for smaller firms, so they can expand by combining their efforts.

Clusters, according to the Kitsap Regional Economic Development Council, create a critical mass that "provides a cauldron of innovation and cooperation" that encourages similar kinds of businesses to locate to the area.

While the group acknowledged the defense industry at the county's developed clusters, it pinpointed emerging clusters in technology, tourism and marine services.

Read more here.

Toronto Area Tech Group Closes Doors

Smart Toronto Technology Alliance, the industry group that represents the interests of technology companies in greater Toronto abruptly closed its doors two weeks ago, claimed insolvency, and re-emerged as a division of the Canadian Advanced Technology Alliance (CATA), a national interest group for high-tech industry.

In doing so, Smart Toronto left a handful of its business sub-tenants, many of them organization members, stranded without phones or e-mail. Having paid rent for August, these tenants were shocked to find themselves on their own and forced to find new office space.

They want to know why an umbrella organization like Smart Toronto, looked upon as a role model for the city's emerging high-tech community, resorted to a Friday "midnight move" and left its tenants in a Monday-morning lurch.

Meanwhile, the Ontario government, which awarded Smart Toronto a $275,000 grant in January for the creation of a 4,000 square foot "Innovation Lab," wants to know what happened to most of that money and whether anything will result from it.

The situation has left a foul taste with those affected by the shutdown, particularly after watching the nine-year-old organization re-emerge days later as a one-person division within CATA. About 170 Smart Toronto members gain automatic membership in CATA as part of the amalgamation.

The merger itself is not in question, but rather the way in which Smart Toronto conducted itself leading up to the announcement.

I'm sure there is more to this story than meets the eye in the news article, but this strikes me as the wrong way to go about engendering trust and support for fledging businesses that must already face great risk and uncertainty as startup businesses. I'm finding that the "herd is thinning" in many areas right now as tech assistance groups struggle for the two big R's: resources and results.

Read more here.

Manufacturing Job Losses Number 2.5 Million

Manufacturing is the problem child of the U.S. economy, according to a recent Washington Post article. Of the 3.1 million jobs lost since President Bush took office, 2.5 million have been in manufacturing.

July was the 36th consecutive month that manufacturing jobs have fallen, the longest stretch since the Depression. But while the past several years have been particularly bad, with manufacturing jobs down 16 percent in three years, the trend lines have been bleak for years.

In the mid-1960s, manufacturing accounted for 30 percent of all jobs; now it's down to 11 percent. That's in part because production has moved overseas, where it can be done more cheaply, in part because of improved technology that's made it easier to create more goods with fewer workers. Indeed, while manufacturing jobs have fallen over the past few decades, manufacturing output has grown.

Is this cause for concern? Some economists don't think so. Federal Reserve Board Chairman Alan Greenspan was uncharacteristically plain-spoken in recent congressional testimony in which he essentially wrote off manufacturing as the job creator of the past. "Ideas," not physical goods, "are becoming increasingly the predominant means by which we create wealth," Mr. Greenspan said. "I think that's good, not bad, for the economy as a whole. But if you're a maker of stuff, it isn't."

Not surprisingly, the makers of stuff and their employees didn't take terribly well to this brush-off. They argue that sustaining a vibrant manufacturing base is essential to maintain U.S. productivity and even national security -- particularly if, as has begun to happen, high-paying, high-skill manufacturing jobs begin to move overseas. National Association of Manufacturers President Jerry Jasinowski dismisses what he calls "the silly notion that we can all be shopkeepers."

My advice: don't give up on your manufacturing base. At the same time, don't expect miracles from it. We need a balanced economy that contains a strong manufacturing component. If we give up on manufacturing, then we are giving up on more than just the "making of stuff." We are giving up on a big part of our knowledge economy.

Delaware Says Think Small for Growth

Growth has been hard to come by during the past 3 years anywhere. If the situation in Delaware is any indication, the recovery underway may be getting more help from small business than the nation's Fortune 500 companies.

Delaware may be known as the home of large corporations, but small businesses experienced greater job growth in the past year.

A recent report by the Delaware Department of Labor found that employers with fewer than 100 workers experienced 1 percent job growth for the year ending in mid-March, the most recent data available. Businesses with 100 or more workers lost 3 percent of their jobs in that period.

The nation's economy has shown some signs of recovering, but the lack of overall job growth has kept the forecast somewhat murky on this Labor Day. Still, the performance by small businesses, traditionally an early indicator of recovery, is encouraging.

"We are reasonably optimistic that things will certainly be better by the end of the year," said William J. Dennis Jr., senior research fellow at the National Federation of Independent Business Research Foundation.

He expects a 3 percent rise nationwide in revenue for small businesses by the end of the year. State officials have not issued an official small-business outlook, but state labor analyst Ed Simon predicts that small companies will continue to produce more jobs than larger employers and set the pace for the recovery.

Read more here.

Lots of Tire Kickers, Few Takers

I believe the business investment environment will continue to improve over the course of this year. For now, things remain slow for most communities. Here is one example from Texas.

Despite the city’s offerings, the BEDC — a nonprofit agency contracted to "enhance" economic development — hasn’t lured a sizable new company to set up operations in Brownsville, Texas for more than a year.

Few have criticized the organization’s recruiting strategy and its return for use of $800,000 for a six-member staff operating budget and millions of dollars in incentives for incoming companies. The BEDC’s 35-member board of directors supports staff efforts.

Retail sales and home construction projects have soared, but few industrial-type jobs have been added to the payrolls. Unemployment rates in Brownsville recently hit a four-year high.

Manufacturing jobs in the city have declined from 12,800 in 1998 to 10,383 in 2002, according to the Texas Workforce Commission.

"I can’t work miracles," BEDC Chief Executive Officer Jason Clay Hilts said. "I can’t change a bad economy."

The BEDC’s plan to attract companies includes advertising in trade magazines Mexico Now, Site Development and Call Center, attending economic development trade shows, traveling to visit with prospective companies and trying to convince existing company suppliers to set up shop here.

Even recruiting telemarketing call centers — the fast food of economic development — has been difficult for the BEDC.

Read more here.

Do Cash Incentives Lure Jobs?

Why not ask Palm Beach County (Florida) that question? They say yes; they work pretty well. You might want to read what they have to say to decide for yourself. My assessment is that these programs have some impact, but they only work if the "planets are otherwise aligned," or other business location factors can be met in a favorable way.

Read the article here.

Just How Hip is Saginaw?

While Saginaw Michigan may not hang with the nation's hippest cities, a study released by state economic development agencies finds that the city is not altogether out-of-step when ranked against peer cities in the Midwest.

Saginaw ranked first for health care, first for women in management and first for globalization, but languished behind its peers in transportation access and educational climate.

The study comes amid growing concerns that so-called "hip" cities such as Miami, Chicago and Los Angeles -- known for their bustling nightlife, outdoor cafes and high-tech employment -- will eclipse Michigan communities in attracting young urban professionals.

Those fears were largely confirmed by a Michigan Economic Development Corp. study that ranked the state 47th for attracting young professionals.

Most Michigan cities ranked below average when matched against Midwest communities of similar size and geography. Lansing, Kalamazoo and Flint placed eighth, 10th and 14th respectively in a study of 14 communities.

The Saginaw area, which included Bay City and Midland, ranked fifth overall out of 14 when compared to cities such as Madison, Wis., Des Moines, Iowa, and Peoria, Ill.

National and statewide "cool places" rankings are fine as starting points, but maybe Michigan officials should consider a full court press to address some of the priorities on the minds of the "young creatives." Why not turn over a block of Saginaw or another Michigan city to a group of young creatives, ask them to create a redevelopment plan for the area, invest some risky venture capital in the project, train them as entrepreneurs, and let them express themselves. That may do more to swing attitudes about how cool the place is than anything else. And yes, you have to hold their feet to the fire to make sure they accomplish something. Just a thought.

Read more here.

Michigan Takes Aim at In and Out-of -State Students

The MichBio BioConnections Program, a collaborative effort between industry partners for life sciences recruiting, business and workforce development in Michigan, and the Michigan Economic Development Corporation (MEDC) have joined forces for the MiCareer e- newsletter. The first issue of MiCareer is scheduled for early September 2003 with a target audience of 17,000 junior and senior college students in Michigan and the Midwest.

This newsletter is delivered directly to students in the Midwest -- Michigan, Ohio, Indiana and Illinois -- and supplies a host of engaging topics to reference during the important job-search process. Readers will find these features in every issue:

- Job Opportunities from information technology and life sciences to engineering.
- Feature Articles: Each month, an article on the business, technology and culture that's driving Michigan.
- MiCompany Profile: Michigan is home to many cutting edge companies. Students receive all the vital stats as the newsletter spotlights one high-tech, high-pay company each month.
- MiPlaces: Every issue discusses a Michigan community, region, lifestyle and culture.
- MiEvents: A one stop source for all the industry seminars and networking events.

Will it work? Are students willing to read direct mail or email flyers from the State of Michigan? My experience in working for a university for 15 years is that you are lucky if students read required assignments for their classes, let alone extraneous flyers and brochures they receive in their campus email boxes. What works better? Show up on campus and have informal conversations with students on their terms and in their environment. Now that's an idea!

Read more here.

Illinois Governor Assesses Southern Illinois Prospects

Southern Illinoisans are frightened about their economic security. They fear their economy may not bear much economic fruit in coming years, and they are probably right, if things continue on the same path they've been on.

"This is the part of the state where the sense among the people of economic fear, the fear of the future, economic insecurity a sense that they might not be able to hold on to their job or that they can't get a job is more palpable here than anywhere else." That is the analysis of Gov. Rod Blagojevich, who finishes a week in Southern Illinois today coinciding nearly with the run of the Du Quoin State Fair.

In an appearance before The Southern Illinoisan Editorial Board, Blagojevich laid out plans that he hopes will improve the conditions in the region that chronically trails other areas of the state in its rates of poverty and employment.

"The numbers bare out the fear people have, so yes, it's very real," Blagojevich said. He said his strategy to improve the economy of Southern Illinois contains several elements:

Back Southern Illinois University as an economic engine for the region.

Support tax breaks for the coal industry and for clean coal technology.

Encourage tourism in the region such as the Southern Illinois Wine Trail, on the rivers and a new trapshooting complex unveiled last week in Sparta. He suggested a NASCAR racing project might even be possible.

He says he wants a venture capital fund that would use tax breaks to drum up money for business ventures in economically depressed areas of the state. He promised a venture capital fund during his gubernatorial campaign.

The Southern Illinois economy has come to depend heavily on prison jobs as the coal industry declined throughout the 1990s and successive Republican governor's built prisons in the region.

Sound familar? Read more here.