U.S. Jobs Still Lagging

Liberal and conservative economists can debate the issue until they are blue in the face, but the truth is that U.S. jobs are NOT seeing favorable growth. Here is what one recent article has to say, putting the job growth issue in a Minnesota context.

According to the liberal Economic Policy Institute (EPI), comparing national job growth in the current recovery to past recoveries of equal length (at least 49 months), job growth in the current recovery is the slowest on record. On the other hand, conservative-thinking Heritage Foundation researchers say "job creation was robust. Productivity and GDP growth are robust for the year, but the most important measure for the voting public is jobs."

I am more compelled by the longer term jobs competitiveness picture, and I believe the U.S. continues to have a major problem, especially in gaining an edge globally, as more and more work and jobs are being exported overseas. We are clearly not creating enough "quality" jobs, as I examine our situation. Go back and read my analysis last week.

Canton, Illinois Update: ED Groups Look at Combination

The City of Canton and the Canton Area Chamber of Commerce are looking at ways to combine their ED efforts in 2005. They hope that a stroner union will bring better results to the area, especially the City of Canton. Read more here.

Correction: In an earlier version of this article, the wrong Canton was mentioned. This is a story about Canton, IL and not Canton, Oh.

Indiana's ED Performance in 2005

According to a new year-end report by the Indiana Economic Development Corp. (IEDC), Indiana has commitments for more than 18,500 new jobs and retention of 47,000 more as the result of 142 competitive economic development projects and 162 job training and expansion projects completed in 2005 by the Indiana Economic Development Corporation (IEDC), the public/private partnership charged with leading Indiana's economic development efforts. In addition, the IEDC incentives committed in 2005 will leverage approximately $3.8 billion in private capital investment in the state.

The 142 completed projects surpass the total of all competitive projects closed by the former Indiana Department of Commerce (IDOC) in 2003 and 2004 combined. Competitive economic development projects are a good measurement of the state's competitiveness for new business investment opportunities because they are projects in which Indiana is competing against another state. The IEDC's job training and expansion program is aimed at assisting existing Indiana companies.

Read more here.

New ED Newsletter at Colorado State University

The Competitive Edge is a business e-letter direct from Colorado State University System Chancellor Larry Penley that provides insights and information on key Colorado industries, economic development and business excellence.

Check out Issue 1 here.

Baby Boomers and Florida's Palm Coast

The baby boom generation is coming of age --Retirement age, that is. This year the first wave of baby boomers -- the generation born between 1946 and 1964 -- will turn 60 years old.

But the majority of baby boomers about to enter their golden years won't necessarily be ready to sit on the veranda and watch the world go by. And Florida's Palm Coast officials expect to see an influx of newly retired baby boomers in the coming years.

Read more on how local officials see this trend unfolding and how they plan to capitalize on it.

Lansing Area Starts New Development Group

David Hollister, who has led Michigan Gov. Jennifer Granholm's economic development efforts, will leave state government to head a new Lansing-based economic development group that includes Michigan State University.

The nonprofit coalition, called Prima Civitas (First City), hopes to lure new businesses to mid-Michigan by promoting its academic research, auto industry and local agriculture, said Hollister and MSU President Lou Anna Simon.

Read more here.

U.S. Auto Sales in 2005: Domestics Losing Ground

While it might not feel like good times in the Motor City, 2005 was the third-best sales year in history, with consumers buying nearly 17 million cars and trucks nationwide.

Despite the strong level of auto sales, this past year will go down in history as a volatile one -- and largely influenced by the shock of $3-a-gallon gasoline during the summer.

Consumers chose fuel-efficient cars and crossovers over SUVs and pickups. Car sales were up 2.1%, and light-truck sales were down 0.8%.

More than half of all purchases were still pickups, SUVs and vans, but car sales haven't outperformed trucks like this for more than 25 years.

Auto sales for the year were down 4.3% at General Motors Corp. and 5.0% at Ford Motor Co. While the Auburn Hills-based Chrysler Group, part of DaimlerChrysler AG, made impressive gains, with a sales jump of 4.5%, Asian competitors made inroads sure to send shivers through Detroit.

Annual sales were up 9.7% at Toyota Motor Corp., boosted by sales of hybrid gasoline-electric vehicles, the popular Camry model, which was the best-selling car in the car-loving United States last year, and Lexus, which was the best-selling luxury brand again last year.

Read more here.

Another Take on Business Legacy Costs

Business strategists and economists appear to have their heads up their "you know what" at times. I read a several month old Business Week blog article on the subject of "legacy costs," and almost threw up.

The article pertained to General Motors and was driven by the question: Why is GM so plagued by legacy costs? The article raised the obvious issue that GM, a company with 300,000 employees, is supporting the number of retirees appropriate for a company with a workforce of 800,000, almost triple the size.

Why is this any great realization? In short, GM and other older companies have been in business, well, for a long time. Guess what? You can't stay in business for a long time unless you make commitments, including those to your workers. Toyota and other younger companies will have legacy costs as they age. Guess what? They are already acquiring them.

There is another point that disturbs me, which is this view among economists and business analysts that legacy costs are problematic and we should jettison them, which is exactly what many companies are now doing. Guess what? It's little wonder that workers and the American public are less and less commited to employers, "American" product brands, or anything else.

Let's turn this issue on its head and start rewarding companies that have survived by innovating, that are socially conscious, and plan to be around for a long time. Maybe then, GM and its peers will truly reinvent themselves.

Wal-Mart Does So So During Holiday Season

Wal-Mart Stores Inc., which made a big push this holiday season to woo customers with aggressive discounts and marketing, estimated that its December sales will meet only the low end of its forecast.

The world's largest retailer said Saturday that sales at stores open for at least a year, known as same-store sales, are expected to be up 2.2 percent in December. The forecast was for a 2 percent to 4 percent gain. Same-store sales are considered the best indicator of a retailers' health.

The company said that general merchandise sales outpaced demand for food.

My advice: Spend even less in 2006. Save your money. Invest more in your kids or grand-kids' education. Don't spend your last nickel at Wal-Mart or any other mindess retail hangout. And as an economic developer, give some leadership to a local shift away from mindless spending to mindful investing and saving.

Read more here.

Should The Dow Ditch General Motors?

GM's troubles are skewing the index and battering investors who bet on it.

When Charles H. Dow created the Dow Jones industrial average in 1896, he likened it to a stick jammed into the sand at the beach -- a steady reference point for observers to measure the ebb and flow of the U.S. stock market.

Judging from the index' recent performance, the wooden stick might need some repositioning. General Motors Corp. (GM ), one of only 30 "blue-chip" stocks that make up the Dow, plunged in 2005 to a 23-year low -- costing the index nearly 200 points. As a result, through Dec. 23, the Dow lagged behind the other widely followed market gauge, the broader Standard & Poor's 500-stock index, significantly: The S&P 500 was up 6.5%, while the Dow was up less than 1%. (Standard & Poor's, like BusinessWeek, is a unit of The McGraw-Hill Companies.)

The poor performance wouldn't matter if the Dow were merely a statistic cited in newspapers. But beginning in 1998, investors have been able to "buy" the index via the Diamonds Trust, an exchange-traded fund (ETF) that tracks it. Almost $7.5 billion sits in the Diamonds Trust. Since spring, when GM began to slump, investors who bought the ETF based on the S&P 500 have handily beaten those who bought the Dow.

My question is this: "Who would ever have thought GM would reach this point of demise?" I remember in 1976 when I entered the economic development. GM was king back then. Now, take a look.

Read more here.

ED Futures Newsletter

Dear ED Futures Reader:

Welcome to the start of the new year!

I have spent some time assessing developments in 2005 and thinking about 2006. Some of my articles in the past week attempt to point to a direction for the new year. You may want to read these 8 articles: Economic Outlook; How Manufacturing CFOs See 2006 Shaping Up; Book Review: New Check E-mail in the Morning; Delegating: Leadership Basics; Welcome to 2006; U.S. Economic Outook for 2006; Does Optimism Make a Difference?; and World Future Society's Latest Forecast.

Upon deeper reflection, I believe we need to pay close attention to the role of "wild cards," or unthinkable events, which occur and re-shape our world and sense of reality. See the list below of major developments shaping our world over the past five years.

In short, expect the unexpected! This is not a time for incremental thinking. Work at wrapping your mind around a larger piece of reality.

Look back at what has happened in the past five years. Tell me the world is not changing at record speeds and in directions we could have never imagined.

2001

9/11 terrorist attacks occur in the United States in NY City, Washington, DC, and Pennsylvania.

New reports point to growing threat of global warming. Battle lines are drawn among various "camps" looking at the issue.

Cloning research gets increased public attention with new developments. Battle lines are drawn around the issue.

2002

U.S. steps up homeland security with an increased number of terrorist attempts and reports.

Terrorism grows in Bali, Russia, and elsewhere around the world.

Enron, Arthur Andersen, Tyco, Qwest, Global Crossing, ImClone, and Adelphia, scandals surface, shaking public confidence in Corporate America.

Priest-child molestation issues brought out into public. The Catholic Church attempts to tightly "manage" communication on the issue, but the news media brings the issue out into public view.

The battle over human reproductive cloning and stem cell research takes shape.

2003

The Iraq War commences and the bloodshed increases.

North Korea postures on nuclear profileration.

Reports on priest-child molestation grow, and the Catholic Church is forced to come clean on how widespread the issue is.

More U.S. companies announce problems with their financial reporting. President Bush and Congress reluctantly pass legislation to contain the problem.

U.S. companies step up outsourcing of business and jobs to offshore sources. Numerous reports are published talking about the possible impacts of this global business practice on the US economy.

U.S. employment grows at a trickle.

U.S. space shuttle, Columbia, explodes, killing all seven astronauts on board.

Californians throw out Gov. Gray Davis and Arnold Schwarzenegger begins as the state's new governor.

Scientists uncover the fossil of a new species of flying dinosaur in northeastern China thought to have existed 120 million years ago.

NASA produces a high-resolution map that captured the oldest light in the universe. It provides some of the most important cosmological discoveries in years.

2004

Terrorist attack in Spain, killing 200 people.

More terrorism in Russia. 1,200 school children taken hostage. Nearly 400 die.

Enormous tsunami devastates Asia; 200,000 killed and millions left homeless.

Florida hit by hurricanes Bonnie (Aug. 12) and Charley (Aug. 13), and Hurricane Ivan ravages U.S. south (Sept. 15). Hurricane Jeanne hits Florida (Sept. 26).

U.S. corporations continue to offshore jobs to India, China, and other world location, blaming American workers and communities for their declining profits.

U.S. sees continued slow growth in jobs across the year, although some improvement comes in the final annual numbers.

Scientists in South Korea announce they had created 30 human embryos by cloning and had removed embryonic stem cells from them. (Update: This research has now been determined to be fradulent.)

Australian and Indonesian archaeologists unearth skeletons of tiny people who are being called Homo floresiensis.

2005

Hurricane Katrina slams into the U.S. Gulf Coast on Aug. 29, destroying towns in Mississippi and Louisiana, displacing a million people, and killing more than 1,000. Reconstruction costs estimated at $75-100 billion. Debates erupt over who should pay the bill.

London terrorist bombings occur, killing 52 and injuring 700 people.

A massive earthquake strikes the Kashmir region with more than 81,000 people were killed and 3 million left homeless. India suffered about 1,300 casualties.

8,000 Israeli settlers were evacuated from the Gaza Strip, which had been occupied by Israel for the previous 38 years.

A number of criminal investigations roil the GOP. Resignations and charges occur across the Party.

Offshoring continues by U.S. companies. Battle lines are drawn over whether the business practice is good or bad for the U.S. economy.

U.S. employment picture brightens some as 2005 comes to an end.

Oil companies pocket windfall profits from the 2005 energy scare.

Paleontologists discovered the existence of soft tissue in a 68-million-year-old Tyrannosaurus rex fossil.

In 2001 Matt Nagle, a 25-year-old from Weymouth, Mass., was stabbed in a fight that severed his spinal cord. Paralyzed from the neck down, he lost even the ability to breathe on his own. But over the last year, this quadriplegic has performed a seemingly supernatural feat: he can control machines through his thoughts. Nagle is one of the pioneers in the exploding field of neuro-cybernetics.

What lies ahead in 2006? Certainly many of the major issues that faced us in the past five years will be carried over into 2006. While the U.S. economy is expected to see relatively favorable growth from a GDP standpoint, financial worries will intensify as we look at how to cover the costs of the many natural disasters, wars, corporate scandals, and other events rocking the nation and the world.

It is important for us to remember that we live in a highly connected world, and therefore what happens in one part of the world has significant implications for other places across the globe. We should be thinking in more sustainable terms about our world, our health, our financial and economic security, our science, and other aspects of our lives.

I wish each of you well in 2006.

Sincerely,

Don Iannone
ED Futures Publisher
Email: dtia@don-iannone.com
Tel: 440.449.0753
6838 Deepwood Lane
Mayfield Village, OH 44143

World Future Society's Latest Forecast

Here are the World Future Society's top 10 forecasts from its Outlook 2006.

My question is: "What are the implications of these forecasts for local economies across the U.S. and the world?" We should practice more long-term thinking in 2006. As I said earlier, let's get the big picture right before we concern ourselves with the details.

1. Nanotechnology will be used for everything from monitoring the health of soldiers in the battlefield to transforming waste into edible material. Medical therapies based on nanotechnology will reach clinical use before 2025. Ultra-tiny machines will monitor internal processes, remove cholesterol plaques from arteries, and destroy cancer cells before they form tumors.

2. U.S. public education will face an uphill battle for survival. According to the National Education Association, the amount of money required to repair ailing school facilities in the United States, build new facilities where they are needed, and outfit schools with modern technology is approaching $322 billion, or ten times the amount states are currently spending on schools.

3. Wind and tidal power will grow considerably in the next five years. Researchers have projected 5,800 megawatts of offshore renewable capacity will be installed between 2004 and 2008, of which 99% will be in the form of offshore wind farms. Worldwide, the offshore wind market will grow to $3 billion a year by 2008.

4. More doctors and hospitals will use wireless technologies such as wearable computers and mattresses embedded with sensors to help care for patients. This technology will allow for more constant and reliable monitoring of patients’ vital signs. As a result, busy nurses will be freed from having to constantly ensure that patients are connected to EKGs. The technology has already been used in Finland, not only in hospitals, but also in what are being called "smart jail-cells."

5. Digital electronic assistant programs will surf the Net on our behalf and enable us to amass entire digital libraries on a given subject by doing nothing more than setting a few key search guidelines.

6. More people will be affected by Alzheimer’s disease. As life spans increase, a growing elderly population is surviving into the years most prone to Alzheimer’s. In developed countries, about 2% of the population already suffers from this illness. By 2054, the number of Alzheimer’s patients globally could grow by a factor of three. The coming "age-wave" will also put stress on a number of public institutions not equipped to deal with large elderly populations.

7. Death by global warming. Climate changes alone could cause a 4.5% increase in the number of summer ozone-related deaths in the New York metropolitan area by 2050. When population growth and projected growth in greenhouse gases are factored in, the ozone death toll could climb by 60%.

Also, urban heat waves will get hotter and last longer. According to a computer model developed by the U.S. National Center for Atmospheric Research, large urban centers like Chicago and Paris will experience an average of 2.8 heat-waves a year, up from 1.66 heat waves currently, representing an increase of 25%. Heat waves will last, on average, nine days longer.

8. Science in Latin America will rise considerably. Citations of science and engineering research by Latin Americans has increased nearly 200% since 1988, significantly outpacing authors in other developing regions of the world. The surge of science scholarship in the region is considered an indicator of nations’ growing commitment to investing in science and engineering as a vehicle for development.

9. Look out for a job boom in solar industries, with some 42,000 new U.S. jobs by 2015. In the next decade, the U.S. solar industry could generate more than $34 billion in new manufacturing investments. Solar power could displace 6 trillion cubic feet of natural gas by 2025, saving U.S. consumers approximately $64 billion.

10. The open-source phenomenon will transform employment as radically as blogging has changed the fields of media and journalism.

North Carolina Steps Up Marketing Effort

The North Carolina Department of Commerce is getting ready to launch a $1.25 million marketing effort targeted at national newspapers, television channels and Web sites. The initiative will emphasize the state as a great place to do business. NC is seeking proposals for public relations companies to help the state with its new marketing effort.

Read more here.

Hyundai Motors Update

I visited Hyundai Motor Company in 1983 in Seoul, Korea. The company was just a blip on the world automotive radar screen at that time. And look the company 23 years later.

Hyundai Motor Co., South Korea's largest automaker, targeted an 18 percent increase in group sales to 100 trillion won ($99 billion) this year, as it invests in new factories in the U.S. and China.

The group, which includes affiliate Kia Motors Corp., expects sales to accelerate from growth of 13 percent last year. Unit sales may rise by 16 percent to 4.12 million vehicles.

Chairman Chung Mong Koo is building factories overseas to achieve a goal of making the group one of the top five global carmakers by 2010. Hyundai Motor in May started producing a redesigned Sonata sedan at its first U.S. plant in Montgomery, Alabama, and last month released the V-6 engine Azera model to shift the company's image from producing only inexpensive cars.

Read more here.

Bank of America Now Owns MBNA

Bank of America Corp completed its acquisition of MBNA Corp in a deal worth about $US34.2 billion, the second-largest US bank said.

Bank of America now has 40 million active credit card accounts on its ledger, making it one of the leading worldwide payments-services companies and issuers of credit, debit and prepaid cards based on total purchase volume.

Bank of America said today it expects to record $1.3 billion in "restructuring'' costs. The bank said when the deal was announced June 30 it would cut $850 million in annual combined costs by the end of 2007, in part by slashing 6,000 jobs.

And so, what will be the future of MBNA facilities and jobs in the Cleveland area?

Does Optimism Make a Difference?

This is a very relevant question every economic developer should be asking as he or she prepares for the 12 months ahead.

There has actually been some research done on the issue. What did the research find? Optimism clearly influences individuals’ economic decisions. Optimists - defined as those who expect to live more than predicted by statistical evidence - believe the economy will improve in the near future, and act accordingly. They are more likely to be self-employed, to work longer hours, and expect to retire at an older age. Optimists also tend to be “stock-pickers”, although the overall composition of their portfolios does not appear to be biased towards equities.

Source: Report on "Optimism and Economic Choice", a Working Paper by Manju Puri (Fuqua School of Business, Duke University and NBER) David T. Robinson (Fuqua School of Business, Duke University).

My take: Be cautiously optimistic in 2006 and keep close track of how events and developments unfold in the new year. I think we miss a lot and are at times "shocked" by the situation that has materialized before our very eyes. We are not good at seeing things unfold.

Private Sector Development Blog

Can the business sector and other private sector institutions play a role in fighting poverty? Duh. The Private Sector Development Blog (PSD Blog) gathers together news, resources and ideas about the role of private enterprise in fighting poverty. The bloggers are a group of economist types from the World Bank.

It's worth a look if you're looking for new ideas on how markets can (perhaps) respond to social and economic development issues.

The Sports Economist Blog

Late December and early January are known as "Bowl Time" to football lovers. For those interested in the economics associated with football and other sports, you may want to tune into the Sports Economist Blog.

U.S. Economic Outook for 2006

Here are some key points from the National Association for Business Economics new U.S. economic outlook.

Despite turbulence from hurricanes and high energy prices, the economy is expected to log respectable growth in 2005 and 2006, a panel of 45 business economists said in a recent survey. The economy, as measured by GDP, is projected to grow by 3.6 percent in 2005 and 3.3 percent in 2006, according to the National Association for Business Economics.

NABE’s projections mark a moderation in growth from 2004 but still represent a decent performance, economists said. In 2004, the U.S. economy grew by 4.2 percent, the best showing in five years.

Against this backdrop of the economy’s resiliency, the Federal Reserve is likely to raise short-term interest rates at least one more time in 2006 to keep a lid on inflation. The Fed has boosted interest rates 13 times since June 2004 to bring rates from 1 percent back to 4.25 percent, the highest in more than four years.
The NABE panel forecast the U.S. trade deficit at $769 billion in 2006, reflecting higher oil prices, and the federal deficit at $376 billion, reflecting in part increased federal spending for reconstruction in the states devastated by the Gulf Coast hurricanes.

The U.S. consumer price index is expected to advance by 3.8 percent in 2005. For 2006, the panel sees all-items CPI inflation of 2.3 percent, held down by moderating energy prices. The core CPI — excluding food and energy prices — is projected to increase by 2.1 percent in 2005 and 2.4 percent in 2006.

Welcome to 2006

Economic Development Futures would like to welcome all of its readers and subscribers to 2006.

Your area is likely to experience its fair share of both challenges and opportunities during the year. We hope that ED Futures is of some small help to you as you approach both types of situations during the next 12 months.

This is the year of "doing what is most important" for your area's economic competitiveness. As the saying goes, don't sweat the small stuff! This is also the year for strengthening your leadership for economic development. Your organization and community will need stronger leadership in 2006 to reach their top economic objectives.

We wish you great success and a very Happy New Year!

A Look at the Wealth of Nations

A new book by the World Bank presents estimates of total wealth for nearly 120 countries, using economic theory to decompose the wealth of a nation into its component pieces: produced capital, natural resources and human resources.

The wealth estimates provide a unique opportunity to look at economic management from a broader and comprehensive perspective. The book’s basic tenet is that economic development can be conceived as a process of portfolio management, so that sustainability becomes an integral part of economic policy making. The rigorous analysis, presented in accessible format, tackles issues such as growth, development and equity.

Where is the Wealth of Nations? is organized in four sections. The first part introduces the wealth estimates and highlights the main facts on the level and composition of wealth across countries. The second part analyzes changes in wealth and how they matter for economic policy. The third part deals with the level of wealth, its composition and links to growth and inequality. The last part reviews existing applications of resource and environmental accounting.

Order the book from World Bank.

Connecticut Business Leaders Fret About State's Economic Climate

In the words of Kenneth O. Decko, president and chief executive officer of the Connecticut Business & Industry Association: "The state has enormous potential for economic growth and job creation, but is falling short of achieving its potential. Recent polls, including the association’s 2005 Annual Membership Survey, the Connecticut Economic Resource Center Inc. report and a UConn/Hartford Courant poll, show both residents and businesses want action taken to improve the state’s business climate and help create jobs." Read more here.

Arizona Expect 100,000 New Jobs in 2006

After generating more than 200,000 new jobs over the last three years, Arizona is expecting an additional 100,000 jobs in 2006 thanks to continued growth in the service, construction and health care sectors.

From November 2004 to November 2005, the state generated 97,400 new nonfarm jobs, according to the latest data from the state Department of Economic Security.The bulk of new jobs are in service industries, but there was strong growth in construction with 25,000 jobs, said Dennis Doby, DES Arizona's assistant research administrator.

Read more here.