SOUTH CAROLINA PARTS AUTHORITY GENERATES $6.3 BILLION IMPACT ON LOW COUNTRY ECONOMY, $53 BILLION STATEWIDE

I recently completed an impact study for the South Carolina Ports Authority (SCPA) to determine the total economic impact associated with port operations and port users during the 2014 calendar year.  The SCPA generates $6.3 billion in annual economic activity in the Lowcountry region and $53 billion statewide.

The impact of port operations derives from business activities at SCPA facilities in Charleston, Georgetown and Greer. The impact of the port users comprises all business activities among South Carolina firms that require a port facility to be completed.

• 1 in every 11 jobs in South Carolina can be attributed directly or indirectly to SCPA. This corresponds to $10.2 billion in labor income that would not exist without the presence of SCPA.

• On average, jobs directly or indirectly supported by the Port pay nearly 40 percent higher than the state’s average annual salary.

• The $53 billion in annual economic output supported by SCPA represents nearly 10 percent of South Carolina’s total annual gross state product.

• Port operations produce more than $912 million in tax revenue annually for the state.

Although the Port’s $53 billion economic impact is significant on its own terms, the Port’s presence in South Carolina also has broader implications for long-run economic development in the state. The key competitive advantage of the Port comes about through its ability to facilitate the ongoing development of export-oriented industry clusters, particularly in advanced manufacturing. As these industry clusters expand, they will build a strong, stable foundation for the state’s economy that will generate higher and more consistent rates of economic growth across the state over time, which will benefit all South Carolinians.

Dr. Joseph Von Nessen to address the Leadership South Carolina Class of 2016

The role of economic indicators in making business decisions is the topic of an address by Joey Von Nessen presented to the 36th class of Leadership South Carolina.

"The strength of the South Carolina economy is evidenced by a 3% job growth, the highest rate since 2010. Job growth is a key indicator in any evaluation of economic activity. But other factors can provide perspective on appropriate expectations for the future. Will growth continue, lag or actually stagnate? Business leadership needs to recognize the supportive role of other economic metrics in order to minimize the risk inherent in any business decision."

Dr. Von Nessen will make his presentation at the meeting of Leadership South Carolina at the South Carolina Chamber of Commerce on September 10, 2015.

Leadership South Carolina was established in 1979 by the Governor's Office and the South Carolina business community. As the oldest and most respected of the statewide leadership programs in the state, Leadership South Carolina provides gifted and highly motivated South Carolinians an opportunity to advance their leadership qualities while broadening their understanding of issues facing the state.

South Carolina’s Aerospace Cluster is Outpacing Southeastern Neighbors

South Carolina’s Aerospace Cluster is Outpacing Southeastern Neighbors

South Carolina is outpacing North Carolina, Georgia and Alabama in private sector aerospace employment and revenue growth, according to Dr. Joseph Von Nessen, a research economist with the University of South Carolina’s Darla Moore School of Business.

In partnership with the South Carolina Council on Competitiveness and the Harvard Business School, Dr. Von Nessen presented his analysis entitled “Aerospace in the Southeast: South Carolina and Its Competitive Markets,” during the second annual South Carolina Aerospace Conference and Expo held in Columbia, S.C.

Among the key findings of the analysis:

• From 2010-2012, South Carolina’s annual private sector aerospace employment growth increased by 15.5 percent, which exceeded North Carolina (increased by 10.7 percent), Alabama (increased by 2.5 percent) and Georgia (declined by 2.3 percent).
• From 2010-2012, South Carolina’s annual private sector aerospace revenue growth increased by 15.5 percent, which exceeded North Carolina (increased by 8.1 percent), Georgia (increased by 6.9 percent) and Alabama (declined by 1.8 percent).
• In private sector aerospace firm growth, South Carolina experienced an 18.7 percent increase, ranking third behind North Carolina (25.3 percent increase) and Alabama (21.3 percent increase) and ahead of Georgia, which ranked fourth with a 14.1 percent increase.

South Carolina’s aerospace cluster includes manufacturing, air transportation and air transportation support services firms operating in the private sector and the state’s four military aviation facilities. The private sector component of the aerospace cluster in South Carolina contains more than 400 firms. Approximately 74 percent of these firms are small businesses, containing five or fewer employees.

“As I’ve always said, when we get a lot of smart people together in one place, good things will happen. We will use the findings included in this report to continue the conversations about the future of our fastest-growing industry cluster,” said SC Department of Commerce Secretary Bobby Hitt. “Above all else, the report shows that aerospace is now a major pillar of South Carolina’s economy and will remain so for the foreseeable future.”

“The findings show South Carolina is competing well with other states, but the findings also show there are is an opportunity to increase firm growth and diversify the sectors within the industry,” said Ann Marie Stieritz, president and CEO of the South Carolina Council on Competitiveness. “The Council is guided by this information as we continue our work with individual companies and the support chain to establish a robust aerospace industry in South Carolina.”

The recent turmoil in the equity markets has prompted questions regarding the overall economic health of the South Carolina Economy. While no one can predict the future, there are a number of indicators that can provide insight on economic activity in our state.

Most comments regarding the market volatility address the current situation in China, and this is an important factor in our economy. It is not widely publicized that South Carolina is one of the largest exporters of products in the United States, so there is substance to the comment that when China sneezes, we catch cold. But there are positive factors also at work.

Construction has come back from a difficult recession to assume its rightful place as a leader of the economic recovery. Manufacturing in our state has shown growth and stabilization. Even the assumed rate increase anticipated from the Federal Reserve will help those living on retirement investments, a significant and growing segment of our population.

The most important factor however, is emotion. The feelings of consumers will impact those intangibles in the economy and either support or undermine our progress, but it is too early to come to a conclusion. There has been no market correction in some time, we are in the seventh year of our recovery and business cycles usually follow a seven year track, but our fundamentals are strong, and we have begun to build momentum. Every sports fan knows that that may be the strongest indicator of the ultimate outcome.

Bottom line is that it is too early to panic but awareness and investigation are always appropriate. Right now that is probably the best course of action to take.

Negative Growth vs. Changes in the Rate of Growth

I gave a talk to the Charleston-Trident Association of REALTORS yesterday and the Post and Courier summarized it. Below is a graph representing the slowdown in employment growth that I talked about here.

As you can see, the rate of growth of Charleston employment has declined significantly in 2013, even as the growth rate itself is still positive. In fact, the current growth rate closely parallels the state average (currently at +1.6%).

Housing demand closely follows employment growth. Thus, if this lower rate of Charleston employment growth persists, it is likely that the rate of growth in the Charleston housing market will also be reduced. Nevertheless, it is important to recognize that a decline in the rate of growth is not the same as a market contraction. A market contraction occurs only when we observe negative rates of growth. In this graph, that would be illustrated if either the blue line or the red line were to go below 0%. Currently there is no evidence that we will see negative employment growth or negative housing growth anytime soon.

Marion County is South Carolina's Unhealthiest County

You can see the story here, which includes a very brief comment by me about the relatively poor economic conditions of the county. Marion County, like several other rural counties in South Carolina, lack many of the incentives that draw businesses in and facilitate economic growth. These include (among others) a large population base with a skilled or educated workforce, access to good transportation infrastructure (interstate highways, roads, bridges, etc...), as well as natural resources and other attractions to draw new residents to the region.

Employment Numbers Revisited

Every month the South Carolina Department of Employment and Workforce releases the latest employment numbers for the state. Yesterday afternoon, we found out that our unemployment rate rose from 8.0 percent in May to 8.1 percent in June.

One aspect of the monthly employment figures that is not often discussed is the fact that there are two sources for the South Carolina employment data that are released every month. The first source is the Current Employment Statistics (CES), which reflects data gathered from surveys of businesses. The second source is the Local Area Unemployment Statistics (LAUS), which reflects data gathered from surveys of households. Because the CES and the LAUS numbers come from different surveys, their monthly employment estimates are almost never in total agreement. The unemployment rate reported each month is based off of LAUS data.

In the employment data released yesterday, the CES figures show that the total number of employed persons increased by 10,100 between May and June. The LAUS figures, however, show that there were 4,769 fewer people working in June than in May. This is why the unemployment rate increased.

The two surveys, while almost never in total agreement, usually report employment going in the same direction. When they do not, however, it is usually due to nothing more than measurement error. In other words, the actual change in employment is so small that it is very difficult to tell whether we gained or lost jobs.

So the bottom line is that when each survey reports total employment moving in opposite directions - as was the case this month - the odds are that the actual change in total employment for the month was very small.