looking around the competitive corner 7trends we should

Looking Around the Competitive Corner

7Trends We Should See Coming

How is the Economy?

U.S. Chamber Small Business Survey

84%

8%8%

54%

27%19%

61%

25%

14%

Headed in Right DirectionOff on Wrong DirectionNot Sure

The U.S. Economy

The Local Economy

Your Business

Source: U.S. Chamber Small Business Survey, July 2011

“American culture is the manic combination of exultant hubris and

profound gloom”George Friedman

The Next 100 Years

“Too often we enjoy the comfort of opinion without the discomfort of thought.”

John F. Kennedy

Quotation

The Last Decade Was….Not Good

27%

22%20%

-1%-5%

0%

5%

10%

15%

20%

25%

30%

1970-1980 1980-1990 1990-2000 2000-2010

Employment Growth

Source: Peter Linneman, NAI Global

The Last Decade Was….Not Good

34%

40% 40%

17%

0%5%

10%15%20%25%30%35%40%45%

1970-1980 1980-1990 1990-2000 2000-2010

Real GDP Growth

Source: Peter Linneman, NAI Global

The Last Decade Was….Not Good

27%

47%61%

-3%

-20%-10%

0%10%20%30%40%50%60%70%

1970-1980 1980-1990 1990-2000 2000-2010

Real Household Wealth

Source: Peter Linneman, NAI Global

And then The Recession Made Things Worse

Recession & Weak Recovery Impacts

Soaring poverty rates (15.1% most since 1993)Black poverty rate 27%Male workers, median income falls to 1973 level6% decline in births between 2008-2010Most educated metros widened gapGovernment budget cuts reshaping competitiveness Corporate profits largest share of GDP since 1950

With Full Credit to TIP StrategiesA Picture is Worth a Thousand words

What Is the New Normal?“The future is not some place we are going

to, but one we are creating.”John Schaar

8 Ounces

6 Ounces

4 Ounces

2 Ounces

0 Ounces

Today Is the Economic Glass ½ Full or ½ Empty ?

“Get your facts first then you can distort them as

much as you like.”

Mark Twain

“4 Ounces”

Globally

Unemployment Rates

9.1%

4.3%

6.1%7.3%

10.0%

5.3%

10.8%

6.0% 6.1%

0%

2%

4%

6%

8%

10%

12%

US Japan China Canada Euro Area Austrialia India Brazil Russia

Source: Economist Oct 8, 2011

Projected GDP Growth 2011

1.6%

-0.4%

9.0%

2.2% 1.6% 2.1%

7.9%

3.6% 4.3%

-5%

-3%

-1%

1%

3%

5%

7%

9%

US Japan China Canada Euro Area Austrialia India Brazil Russia

Source: Economist Oct 8, 2011

Trade balance as % of GDP

-3.3%

2.3%

4.0%

-2.7%

-0.5%

-2.3%-3.2%

-2.5%

4.9%

-5%-4%-3%-2%-1%0%1%2%3%4%5%

US Japan China Canada Euro Area Austrialia India Brazil Russia

Source: Economist Oct 2011

U.S. Exports & Imports (Goods)

$0$500,000

$1,000,000$1,500,000$2,000,000$2,500,000$3,000,000$3,500,000$4,000,000$4,500,000

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009 2010

Exports Imports

In $Millions

Source: Census, World Almanac 2009 & U.S. BEA 2010

U.S. Exports 2009-2011

$-$20,000$40,000$60,000$80,000

$100,000$120,000$140,000$160,000$180,000

2009-Jan

2009-May

2009-Sept

2010-Jan

2010-May

2010-Sept

2011-Jan

2011-May

Exports

42% Increase

Source: BLS Sept 2011

Less than 1% of U.S. firms export and of those that

do more than ½ export to only one country

Nationally

Employment Monthly Net Change 2000- Sept 2011

-800

-600

-400

-200

0

200

400

600

2000 2008

Jobs

Source: BLS Oct 2011

125,000 Jobs/Mo. To keep pace with growthIn thousands

The best year in the last decade averaged 208,000 additional jobs per month…12 years

How Many New Jobs in the Last Year? September 2010 to August 2011

1,288,000 or 1% job growth in private sectorSectors gaining jobs; Manufacturing(+2%),Prof/Bus Services(+3%), Education & Health(+2%)-312,000 government jobs (-1.5% of Government jobs)

Source: BLS September 2011

Job Growth- Last 12 Months44 of 50 states had job growthBiggest growth- Texas +269,000, California +189,600, New York +106,600, Ohio +74,1006 States that lost jobs Indiana, Georgia, Alabama, Kansas, Delaware, Nevada

Employment Changes in the South July 2010- July 2011

-4.7

8.328.1

-24.9

27.9 26.33.6 5.5 1.6 4.4

34.017.3 12.8

269.5

8.3 1.5

-50

0

50

100

150

200

250

300

AL AR FL GA KY LA MD MO MS NC OK SC TN TX VA WV

Source: bizjournals.com Aug 2011

In thousands

% Employment Changes in the South July 2010- July 2011

-0.3%

0.7%0.4%

-0.6%

1.6%1.4%

0.1% 0.2% 0.1%0.1%

2.2%

1.0%

0.5%

2.6%

0.2% 0.2%

-1%

0%

1%

2%

3%

AL AR FL GA KY LA MD MO MS NC OK SC TN TX VA WV

Source: bizjournals.com Aug 2011

Personal Saving as a % of Disposable Personal Income

5.2% 5.2% 5.0% 4.9% 5.1% 5.2% 5.5%5.0%

0%

1%

2%

3%

4%

5%

6%

Dec-10 Jan Feb March April May June July

Source: BLS Personal Income and Outlays, August 2011

Estimates of Monthly Retail and Food Services

$-

$100,000

$200,000

$300,000

$400,000

$500,000

Jan. 2000Sep. 2000M

ay-01Jan. 2002Sep. 2002M

ay-03Jan. 2004Sep. 2004M

ay-05Jan. 2006Sep. 2006M

ay-07Jan. 2008Sep. 2008M

ay-09Jan. 2010Sep. 2010M

ay-11

In million $$

Source: Economics and Statistics Administration Sept 2011

US Firms in Forbes Global 2000

751

536

0

100

200

300

400

500

600

700

800

2004 2011

Source: Forbes May 9, 2011

US Firms in Forbes Global 2000 Growth in 2010

69%

12% 18%2%

0%10%20%30%40%50%60%70%80%90%

100%

Profits Sales Value Employees

Source: Forbes May 9, 2011

Overall, last year was one of the most profitable years for U.S. businesses in history

Stock Market

Source: Daily Yonder; Rural Employment Stagnates in July-Sept 2011

Gender Job Impacts

-5,400,000

768,000

-2,100,000

-218,000

-7,000,000-6,000,000-5,000,000-4,000,000-3,000,000-2,000,000-1,000,000

01,000,0002,000,000

Men Women

Recession Dec 2007- June 2009 Recovery June 2009 - May 2011

Source: Pew Research Center July 6, 2011

(NATIONAL)

Incomes Are An Issue…

-7.9%

-14.0%

-6.8%

-20%-18%-16%-14%-12%-10%

-8%-6%-4%-2%0%

Lessthan HS

AssocDegree

BA

Adjusted for inflation median HH income has fallen 10% since December 2007 (6.7% since recovery started)College educated men 25-34 incomes have fallen 19% since 2000College educated women 25-34 incomes have dropped 16% since 2003

Source: Tim Mullaney, USA Today Oct 20, 2011

Over the past 4 years incomes…

How We Spend Money…22%

7%10%

3%

13%

18%

3%

16%

3%

8%

0%

5%

10%

15%

20%

25%

Food Clothing Housing Health CareFinance/Insur

1950 1970 1990 2010

Source: Time, The Great American Divide Oct 10, 2011

Housing

Regionally

Brookings Metro Monitor

2nd Quarter 2011

Recession and Recovery

% GDP Changes in the South 2009-2010

2.0%2.3%

1.4%1.4%

3.2%

2.6%2.9%

1.4%1.1%

3.4%

1.0%

2.6%

3.5%

2.8%2.6%

4.0%

0%

1%

2%

3%

4%

5%

AL AR FL GA KY LA MD MO MS NC OK SC TN TX VA WV

Source: BEA Economic Recovery Widespread Across States in 2010, June 7, 2011

So What Next?Total Economy- Today the reality economy Minus increased savingsMinus increased debtMinus bubbles in housing wealth and stock market wealthWith slowing growth in new income and new peopleEquals slow growth and new realities

So What Next?Global slowdown will push a weak recover to the edgeIn a national political year businesses usually hold their cardsHousing is close to bottom but “underwater” losses will drag it for several more years…probably slightly increasing sales but values will continue to slideJob growth will be slow…for a while Very Uneven- Regions that succeed will focus on strengths, be globally aware and engaged, and will understand the role of talent

A Few (7) Things To Think About

UrbanizationWe Are Becoming A World Where

People Live in Urban Regions

1

% of Global Population Living in Cities

3%13%

30%

50%

70%

-20%

0%

20%

40%

60%

80%

1800 1900 1950 2000 2025

% Urban

U.S. Population Concentration Metro-Non-Metro

0%

20%

40%

60%

80%

100%

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Metro Non-Metro

Source: Census

80%Almost 60% of US population lives in Cities of 1 million or more

GlobalizationMarco Polo

East India Trading CompanySilk Road or Amber Road

Columbus

2

How Does the United States Rank? Top 10 GDPs

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

US

China

Japan

Germ

any

France

UK

Brazil

Italy

Spain

Canada

In $millions

Source: International Monetary Fund for 2010

The U.S. is 23% of the global GDP Brazil, India, China (Total = 15%)

Global Labor Force-Top 1021%

17%

5% 4% 3% 3% 2% 2% 2% 1%

0%

5%

10%

15%

20%

25%

China India UnitedStates

Indonesia Brazil Russia Japan Nigeria Banglad Germany

Labor Force

Source: IBM Research, 2006

Labor Productivity as % of U.S.

26%

100%

80%75%

21%15%

70%75%

8%

0%10%20%30%40%50%60%70%80%90%

100%

World USA UK Germany Brazil China Japan Singapore India

Source: The Conference Board 2010 Productivity Brief

Export Customers of the Future91%

85% 80%

15%9%

0%

20%

40%

60%

80%

100%

U.S. Japan U.K. China India

% Middle Class

Source: Adler-Miller-McCune 2008

By 2020 80% of the middle income consumers in the world will live outside the “developed” countries

Not So Long Ago…In a Free Market Far, Far, Away

1978 Deng Xiaoping adopts free-market approach1989 fall of Soviet Union1991 Market reforms in India

4.7 3.1

365

92

050

100150200250300350400

1986 Today

Imports Exports

US Trade With ChinaIn $billions

Trade and China Moving Forward

41%

47%

12%

Good Thing Bad ThingDon't Know

40%

7%

53%

Get TougherStronger RelationshipDon't Know

Trade Agreements US Relationship With China

Source: Pew Research Center, Oct 7,2011

Increasing Competition

3

We Are Competing For Economic Success

1) Do you believe that there is greater competition than ever for new jobs and new investment?

2) Do you believe that the competition is global?

3) Do you believe that there will be locations that win the competition and locations that lose?

4) Do you believe that communities can take actions to improve their chances of success?

Site Selection Factors % of Site Selectors Rating as Very Important

1. Highway Accessibility 97%2. Labor Cost 91%3. Tax Exemptions 91% 4. Occupancy Costs 90%5. State/Local Incentives 89%6. Corporate Tax Rate 86%7. Avail. Skilled Labor 86%8. Shipping Costs 84%9. Energy Avail./Cost 82%10. Availability of Buildings 81%

Source: Area Development 2010 Survey

Cost

Labor

Markets

Infrastructure

Regulation

Site Selection Factors % of QOL Factors Rating as Very Important

1. Low Crime Rate 85%2. Healthcare Facilities 72%3. Housing Costs 68% 4. Housing Availability 66%5. Ratings of Public Schools 61%

Source: Area Development 2011 Survey

Safety HealthCare

Housing Education

CEOs Best & Worst States For Business 2011

Best1. Texas2. North Carolina3. Florida4. Tennessee5. Georgia 6. Indiana7. Virginia8. South Carolina9. Utah10. Nevada

Worst50. California49. New York48. Illinois47. New Jersey46. Michigan45. Massachusetts44. Connecticut43. Hawaii42. West Virginia41. Ohio

Source: Chief Executive Magazine Survey of 550 CEOs

Forbes Best States For BusinessVirginia #1North Carolina #5Georgia #6Texas #8Florida #18Oklahoma #20Tennessee #23South Carolina #25

Arkansas #26Alabama #28Missouri #29Mississippi #40Kentucky #43Louisiana #44West Virginia #46

Source: Forbes September 2009

Based on Business costs, labor, regulation, economic climate, growth, QOL

Business Facilities State Rankings

Economic Growth Potential1. South Carolina2. Tennessee3. Virginia4. North Carolina5. Texas6. Arizona7. Utah8. New Mexico9. Kentucky10. Kansas

Best Business Climate1. Texas2. Virginia3. Utah4. South Carolina5. Tennessee6. North Carolina7. Florida8. Louisiana9. South Dakota10. Wyoming

Source: Business Facilities Magazine July/Aug 2010

Small Business Ranking Best Places 2011

1. Austin2. Oklahoma City3. Charleston SC4. Charlotte5. Seattle6. Tulsa7. Raleigh8. Denver9. Washington 10. New York

Source: Business Journals April 2011

2010 INC 500 Companies In the South

4 1

29

104 2 2 3

16

9

16

49 47

105

101520253035404550

Alabama

Arkansas

FloridaGeorgia

Kentucky

Louisiana

Mississippi

Missouri

North Carolina

Oklahoma

South Carolina

Tennessee

TexasVirginia

West Virginia

The Future of U.S.

Manufacturing

US Industry Shifts Over the Past 50 Years (Manufacturing)

0

5,000

10,000

15,000

20,000

25,000

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

Manufcturing

Source: BLS April, 2011

In thousands

Manufacturing Workforce of the Future

The World Has Changed…Has the U.S. Role?

4

America’s Self-Image & Global Image Is Changing

Tallest building…DubaiRichest Man…MexicoLargest Publicly Traded Company…ChinaProducer of the Most Movies….IndiaBiggest Gambling Town…MacaoLargest Ferris Wheel…SingaporeOnly 1 of 10 Largest Shopping Malls

The Rise of the Rest Who and How We Compete

The Talent Imperative

“97% of CEOs surveyed say having the right talent is the most critical factor for their

business growth”

4

Annual % Workforce Growth in The USA

1.1%

1.7%

2.6%

1.6%

1.1%1.1%

0.4% 0.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1950s 1960s 1970s 1980s 1990s 2000s 2010s 2020s

% Growth/Yr

Source: Rand-The Future of Work

I Hate This Bar

If We Don’t Start Expecting More We Need To Start Expecting Less

Educational Requirements For U.S. Jobs 1973-2018

32%10% 11% 10%

40%

34% 30% 28%

19% 17% 17%

12%19% 21% 23%

9% 19% 21% 23%7% 10% 11% 10%

0%

20%

40%

60%

80%

100%

1973 1992 2007 2018

HS Dropouts HS Grads Some CollegeAssoc. Degree BA Grad Degree

Source: Center on Education and the Workforce, Dec 2009

28%73%

Unemployment Rate By Education

14.0%

9.7%8.4%

4.2%

0%2%4%6%8%

10%12%14%16%

Less thanHigh School

HS No College Some College B.A. Plus

10

34 3445

05

1015202530354045

LessthanHigh

School

HS NoCollege

SomeCollege

B.A.Plus

Total Emplyed

In millions

Source: BLS Sept 2011

Average Annual US College Costs

$6,725$8,483

$10,647

$16,140$14,746

$22,530

$28,059

$36,993

$-$5,000

$10,000$15,000$20,000$25,000$30,000$35,000$40,000

Public Private

1980-81 1990-91 2000-01 2010-11

Inflation adjusted Private +151%, Public 140%

Source: Tim Mullaney, USA Today Oct 20, 2011

Creative Work

Routine Work

Outsourced

RoutineWork

Machines

Routine Work

Source: National Center on Education and the Economy, Tough Choices or Tough Times, 2007

Work Shifts

Middle-SkillsRequire more than a high school degree but less than a BA degree52% of employers said in 2011 manpower survey that they were struggling to fill positions, an all-time high

Southern Jobs By Skill Level 2009

Middle Skill51%

High Skill29%

Low Skill20%

High Skill Low Skill Middle Skill

Source: Middle skill jobs in the American South’s Economy, National Skills Coalition, August 2011

Southern Skills Mismatch

32%

43%

25%

29%

51%

20%

0% 10% 20% 30% 40% 50% 60%

High Skills

Middle Skills

Low-Skill

JobsWorkers

Source: Middle skill jobs in the American South’s Economy, National Skills Coalition, August 2011

Acceleration Speed of Change

5

40 Years Ago Alvin Toffler Had a Few Thoughts

“Is the dizzying disorientation brought on by the premature arrival of the future, a product of the greatly accelerated rate of change in society.”

40 Years Ago Toffler Had a Few Thoughts

Durational expectancyTransienceNovelty

Technology Changes Work and Creation of Wealth

Agriculture Fields

Industry Factories

Information Offices

Virtual Internet

The Churn in the Economy

Business Employment Net Private Job Gains and Losses By Quarter

-3,000-2,500-2,000-1,500-1,000

-5000

5001,000

2000-12000-32001-12001-32002-12002-32003-12003-32004-12004-32005-12005-32006-12006-32007-12007-32008-12008-32009-12009-32010-12010-3

Source: BLS Business Employment Dynamics, August 2011

Business Employment Dynamics (Churn)

Net Private Job Gains and Losses

-10,000-8,000-6,000-4,000-2,000

02,0004,0006,0008,000

10,000

2000-12000-3

2001-12001-3

2002-12002-3

2003-1

2003-32004-1

2004-32005-1

2005-32006-1

2006-32007-1

2007-32008-1

2008-32009-1

2009-3

2010-12010-3

Source: BLS Business Employment Dynamics, August 2011

In millions

Businesses Opening and Closing

644,122

-604,201

670,058

-619,695

668,395

-620,732

626,400

-707,446

552,600

-721,737-1,000,000

-800,000-600,000-400,000-200,000

0200,000400,000600,000800,000

1,000,000

2005 2006 2007 2008 2009

Births Closures/Bankruptcies

Source: US Small Business Administration Aug 2011

Mass Customization

If everything is customized will our entire industrial model of both work and

education be a passing era?

Radical Decentralization

Where do you get medical care?How do you watch a movie?

How do you gather information or get educated?

Separation ,Polarization… but too little

Collaboration“The act of joining together to

make possible that which cannot be accomplished alone.”

If I asked you to Stand up, shake hands with the person

next to you…but if I asked you to give them $1,000 or the keys to your house…

Social Capital“Consists of the stock of active connections among people; the trust, mutual understanding, and shared values and behaviors that bind the members of human networks and communities and make cooperative action possible.”

Cohen & Prusak 2001

Why are some regions more successful than others in global competition?

“Regardless of whether a region can bring the right people to the table or develop a strategic plan, the true test is whether the region can act effectively.”

Source: Council on Competitiveness, Collaboration 2010

What is a Commitment to Collaboration?

The Decline of the Elites

6

0%

10%

20%

30%

40%

50%

60%

Banks/Financial

Major Companies

LaborPrint Media

Broadcast Media

ScientistOrganized Religion

Public Schools

Fed GovState Gov

Local Gov

Extremely & Very Not Too or Not

Confidence in Institutional Leadership

Source: AP National Constitution Center Poll August 2010

Why Do We Want and Need Leadership?We want someone, we trust, to make sense of all the information we are receiving.We want someone to take actions that improves our situations or solves our problems

TraditionalHierarchicalLeadership

GrassrootsBottom UpLeadership

Action, Success, Problem Solving

Someone important or

some small groupwith a vision or resources

Someone not important

or some small group with a

vision or resources

Leadership Is Crucial & Models Are Changing

Public

Non 

profit

Private

Catalyst

Solution To a Specific Problem

Regional Leadership

“The key to creating collaboration is effective regional leadership”

“Regional leadership bodies depend on consensus, not hierarchy.”

“The structures are more frequently networked than formalized”

Source: Council on Competitiveness, Collaboration 2010

Complexity & Choice Conundrum

7

US Shared & Unshared Values

Personal control vs. fateChange vs. traditionIndividualism vs. groupFuture vs. past

So think about the big issues that are dividing us, the role of government, energy, education,

environment, health care, capital punishment…

U.S. Energy Public Policy

Strong Economy

Environmental Stewardship

Independence & Security

Personal Freedom &

Quality of Life

AdequateEnergy Supply

Global competition

Saving old jobs

Creating green jobs

Lowest cost delivery

Mobility

Air Conditioning

Electronics

Housing Options

Air & Water Pollution

Global Warming

Nuclear Storage

Land Preservation

Unintended consequences

Diplomacy

Conflict

U.S. Health Care Public Policy

Affordable

Universal

ContinuouslyImproving

Personal Freedom

Health Care

“Choice- It Is About Choice”The Matrix Paradox We want and need to know more and more, but it is so hard. We want an easier way.

Setting National Priorities The Next Ten Years

War or Peace “the greatest risk-the Middle East”Nuclear ProliferationThe U.S. in the World EconomyFederal Spending & DebtEnergy and the EnvironmentCongress and the President

Source: Setting National Priorities, The Brookings Institution, 1976

The Country’s economic miracle exists because its leaders, unlike those in other countries, can make quick decisions and ensure underlings carry them out.

China’s People’s Daily

The Road to Recovery is Named Main Street

The 2010 Report on the Future of the Southwww.southern.org

“Listening to the South”

Despite Our Current Gloom, the United States Will Be One of the Major Global Powers for a Long

Time

Good News…EconomyThe upward mobility of the typical American is still the greatest in the worldThe average U.S. worker is 10-12 times as productive as an average worker in China60 of the world’s top 100 universities are U.S.

Good News…EnvironmentGDP has climbed 210% since 1970 while aggregate emission of the six principal air pollutants has dropped by 60%In 2010 30% of trash was recycled (16% in 1990)For every dollar of U.S. output today we burn ½ the oil as 30 years ago

Good News…CrimeViolent crime dropped 12% last yearJuvenile offenders declined 26% between 2000 and 2008

Good News…HealthIn the 1960s 5-year survival rate for cancer was 1 in 3, Today 2 in 3Average life expectancy is now 78.2 years, (68 in 1950, 47 in 1900)Last year U.S. workplace fatalities were the lowest on record

Good News…The divorce rates dropped by 1/3 between 1981 and 2008 to the lowest level since 1970Teen birth rates in 2009 fell to the lowest level in 70 yearsTraffic deaths/100,000 in 2009, lowest on recordAlcohol traffic deaths are ½ what they were 20 years ago

“Whether you believe you can do a thing or not, you are right.”

Henry Ford

Southern Growth Policies Board

Since 1971,Bringing Together Governors, State Legislative Leaders Business Leaders, Higher Education Leaders, and CitizensHelp communities understand the changing context of competitivenessFollow us on Twitter or LinkedIn or join as an associate member

www.southern.orgPublic policy is about making choices, Southern Growth informs choice

Thank You

Questions?Ted Abernathy

Southern Growth Policies Boardtabernathy@southern.org