High housing costs have reached a breaking point in some big metro areas, thwarting talent locating there, according to a new report from LinkedIn's Economic Graph team.
The report, based on a study of recent job-migration patterns in the 20 largest U.S. metro areas, found that migration is slowing to high-cost regions such as the San Francisco Bay Area, Seattle and Miami-Ft. Lauderdale.
That in itself poses potential recruitment opportunities to economic developers in less-expensive communities.
One obvious strategy: Go to those high-cost cities, especially the West Coast's biggest cities, where housing costs can top 40 percent of residents' income. You just might get a sympathetic ear. (That's what former Texas Gov. Rick Perry did.)
In the San Francisco-to-Silicon Valley hub, housing costs have climbed to a terrifying 51 percent of income, according to Zillow.
Business Insider reported in May that the typical rent in San Francisco exceeds $4,500, which is more than 2.5 times the typical national rent. Some people are dishing out $1,200 a month for bunk beds in co-living buildings to save on rent.
U.S. manufacturing is not doing so well right now.
The Labor Department reported that manufacturers lost 2,000 jobs in September, well below the 18,000 positions it added this time last year and even below the 2,000 gain it saw in August.
The U.S. manufacturing purchasing managers’ index from the Institute for Supply Management showed the lowest reading in more than 10 years for September as exports dived amid the Trump administration's trade war with China and Europe.
The index came in at 47.8 percent, the lowest since June 2009, marking the second consecutive month of contraction. Any figure below 50 percent signals a contraction.
“We have now tariffed our way into a manufacturing recession in the US and globally,” Peter Boockvar, chief investment officer at Bleakley Advisory Group told CNBC.
On a local level, economic developers, many of who view manufacturing as a mainstay and a prize, can slimmer pickings, with expansion projects put on hold or cancelled altogether.
I would suggest that there is life beyond industrial recruitment. Now is the time to strengthen and employ strategies related to business retention and expansion (BR&E), entrepreneurial development, and vocational training/education.
Recruitment is always a long shot. There is more to economic development than it alone.
Preparing Them for Work
Universities are called ivory towers for a reason. The truth is they are an archaic, ineffective solution to a skills gap, which transcends virtually all industry groups.
As a college student many years ago, I came to recognize that many if not most of my professors were book smart but that was about it. They had placed themselves in an academic bubble -- big on espousing theories and hearing themselves talk, but showing little interest that most of their students were headed for work in the private sector.
Frankly, I couldn't graduate early enough and get away from these people, who I viewed as being way out of touch. (Keep in mind, I had worked in an iron foundry for two years before going to college and had a blue collar, no bs attitude. Still do.)
I'm convinced that higher education in this country needs a radical overhaul or we risk putting a lot of young people in debt who are unprepared for a future of work. I believe all institutions of higher learning, that beyond high school, should have a vocational slant to them.
Yes, we absolutely need research in a big way. But preparing students for "what's out there" in the real world should also be a guiding principle.
The Mother Ship
Because I have a passion for economic development, I want to share my knowledge so as to help communities get to the next level. That is the purpose for this newsletter.
But I would be disingenuous if I didn't acknowledge that an underlying goal is to also create awareness and generate leads for BBA. Surprise, Surprise.
Generating leads and awareness should also be a primary purpose of a digital marketing campaign/strategy for an economic development organization. It would include newsletters and postings on social media. (You can also go analog, with printed materials.)
Of course, the ultimate goal is to develop and retain relationships that can result in a business transaction. Economic development (and my consultancy) is no hobby.
I like to think of social media, especially LinkedIn, as bait. I post topical and meaty content so as to prompt people to go to the BBA website to learn more. ED people can employ that very same strategy.
An economic development website should be viewed as the mother ship for all ED digital marketing that follows. It should also be an ever changing repository where one can learn about the possibilities of a place.
Of course, the goal is to make the human connection -- to go beyond the website or a social media posting so as to create real conversations and established relationships. Economic development is very much a people business.
By the way, I don't build ED websites and never will, but I do critique them at no charge. If that might interest you, let me know.
A Growing Gap
Look, I don't foresee revolution around the corner, but the growing gap between the haves and have-nots concerns not just politicians, but also a growing number of CEOs who worry that the future of capitalism is at stake. (See story below in What We're Reading.)
The gap between those at the top and everyone else in the U.S. grew last year to its highest level in more than 50 years, according to U.S. Census Bureau figures.
"The gap between the haves and have-nots is the biggest powder keg in America right now and that’s saying something," John Dick, founder and CEO of CivicScience, said in a note and reported by Axios.
"Even as consumer confidence remains high, concerns over income inequality reached the highest point we’ve seen this month. But that’s a little misleading because the term 'income inequality' evokes a tribal response," Dick said. "When we asked whether CEOs and company execs are unfairly overpaid relative to workers, 78 percent of people said yes, 11 percent say no."
Some CEOs, like Bridgewater Associates’ Ray Dalio, worth almost $17 billion by Bloomberg’s calculations, are listening.
"I’m a capitalist, and even I think capitalism is broken, Dalio told the Financial Times.
Who answers the telephone and how that call is subsequently routed is incredibly important for economic development organizations. It can actually make or break a project.
Earlier this week, a senior executive with a defense contractor told me a story that made me shudder because of the consequences. He said that he telephoned a chamber of commerce in a community that interested him in terms of siting an operation.
It just so happens that I know this community and it has a topnotch economic development division that is part of the chamber. But apparently, his call was not transferred there.
Rather, he said he was told by someone that the information that he sought would be available only if his company were to join the chamber. He was dumbfounded by that.
When I related the story to the vp of economic development, she was naturally horrified. The good news is that I have put her in touch with the company exec and maybe this can be salvaged.
I'm not against chambers having economic development components, such as a department or division. I've seen places where that works just fine.
Bottom line: Just make sure that economic development inquiries are routed to the right people.
It Don't Mean a Thing
The truth is that a SWOT analysis -- determining strengths, weaknesses, opportunities and threats -- should be the bedrock of formulating goals and taking action by all economic development groups in all communities big and small.
For an economic development organization to attempt this in house is like someone giving oneself a haircut -- you're too close to the matter at hand.
"It Don't Mean a Thing (If It Ain't Got That Swing)" was a 1931 composition by Duke Ellington and is now an accepted jazz standard.
My economic development standard: "If you don't do a SWOT, you won't know your spot."
Know your spot by letting us do your SWOT. Our BBA Community Review/Asset Mapping and BBA Action Initiative both include SWOT analyses.
What We're Reading (and Watching)
Mapping Scotland's Grim History of Witch Hunting CityLab
How LA Became the Land of Strip Malls Curbed
Why Can't California Solve Its Housing Crisis? Rolling Stone
Why American CEOs Are Worried about Capitalism Financial Times
The Evolution of the Hard Hat New York Times
What We Lose When Animals Go Extinct National Geographic.
Country Music: A Film by Ken Burns. Episode 1: The Rub (Beginnings -- 1933) PBS
As chief justice of Delaware’s Supreme Court, Leo Strine has helped decide many of the biggest cases affecting the American business community. But in a Financial Times op-ed, Mr. Strine, who is retiring this fall, writes that companies have warped capitalism by failing their employees.
“Companies have become more responsive to the immediate desires of the stock market but are failing to move quickly toward sustainable business practices, adequately invest in human capital and, most importantly, fairly share gains from corporate profits with the workers who create them," Strine wrote.
Strine noted that worker productivity has grown nearly 70 percent since the late 1970s, while hourly pay has increased 12 percent. During that time, corporate profits have reached record highs. His other written commets:
• “From the late 1940s to the early 1970s, workers and investors did share in the wealth generated by a strong, growing economy. But since then that social compact has frayed.”
• “We should appoint board committees focused on fair treatment of company employees and those who work for its subcontractors.”
• “Business leaders must also support sensible labor law reforms giving unions a fairer opportunity to represent and bargain for their workers.”
• “Institutional investors should be focused on EESG, adding an ‘E’ for the interests of company employees,” he said, referring to environmental, social and governance measurements.
• “We must change tax and accounting rules that encourage speculation and rapid portfolio turnover, rather than productive, sound, long-term investments. Investments in employees should get as much credit as investments in robots.”