Wednesday, March 26, 2008

Statehouse Report

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Sluggish economy to be around for awhile

 So what is it with the odd, sluggish economy in South Carolina?  It seems to be all over the place.
On the positive side is the good news about BMW’s $750 million expansion, which will bring an extra 500 direct jobs and create more jobs among suppliers that are here to meet the needs of the automotive giant. 
And it’s good that Google has started testing at its $600 million data center in Berkeley County.  While the facility won’t bring oodles of jobs, the investment in the Palmetto State will have a huge impact. 
Over in Orangeburg County, six international firms say they want to participate in the Jafza logistics center and its billion-dollar investment.  And there’s a small sign that the housing market may be awakening as Charleston Realtors reported higher February sales and fewer houses on the market.
But then there’s the other side:  unemployment, regional stagnation and high gas prices.  The latest figures show the state’s unemployment rate at 6.1 percent – one of the nation’s highest.  A new Federal Reserve report shows the region’s economy is slowing with less consumer spending, slower factory production and weaker commercial lending activity.  And gas prices, well, they’re way too high as anyone who goes to the pump knows.
State lawmakers responded to the bleak side of the news by crafting a $7.2 billion budget that didn’t include a lot of new spending.  There was an across-the-board budget cut for most agencies, although education and health care got some new funding.  But lawmakers created a cautious budget, which will be debated in coming weeks in the state Senate, because it doesn’t look like things are going to get a lot better very soon. 
“We’re not in a deep, dark recession, but I don’t think it is going to get any better for six to 12 months,” said Columbia economist Harry Miley.  “We have a mixed economy out there.
“A portion of the work force – professionals – is doing fine, but there are lower-skill levels of workers who aren’t re-entering the work force or are not re-entering the work force at the wage they were earning.”
A continuing indicator is the state’s textile industry, once a powerhouse.  Ten years ago, there were more than 70,000 textile manufacturing jobs here.  In recent employment figures, the number had dropped to 28,500, which is 6,000 fewer than last year and the year before.  Losing 500 jobs a month, particularly among workers who have fewer skills to reenter the work force in the global economy, is tough, Miley said.
Clemson economist Bruce Yandle said in a March analysis that he thought the nation wasn’t yet in a recession, but indicators showed it might be moving toward one.  Three factors are instructive:  national employment is slightly down on a large scale; employment appears to be slightly contracting based at a look of what’s happening in various industries; and there’s some despair among consumers.  For example, consumer confidence has dropped in recent months and retail sales nationally were flat in the first two months of the year.  But on the whole, the length of the sluggishness doesn’t yet merit labeling what’s happening as a “recession,” according to Yandle’s report.
South Carolina has avoided some of the pressure being faced by other states because of what’s happening outside of the textile industry and because it hasn’t been hit as hard by the sub-prime mortgage mess, the Clemson economist said.
“While the state is still adjusting from heavy concentration in textile manufacturing, growth in services and other sectors has softened the blow.  In a word, the state economy is relatively healthy.  It can handle some tough blows.”
State lawmakers ought to take economic prognostications to heart.  Reading between the lines yields a pretty clear lesson:  If the Palmetto State wants to better its economy, it needs to focus education and retraining on workers being forced out of manufacturing jobs due to global competition.  By lending a helping hand to low-wage and low-skilled workers now, the state can create a better work force that will be able to attract more investment from companies like BMW and Google.

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