The 2008 SB&D 100
A Clear Indication that Job Deals are Down, Investment Deals are Up
Jobs created in the 2008 SB&D 100 drops for the second consecutive year. Investment total sets new record.
By Michael Randle
The year of 2007 marks the second year in a row that big job generating deals dropped in number in the South. After rising each year for three years after the bottom was reached in 2002, this year's SB&D 100 (2007 calendar year numbers) saw just 71,188 new jobs created by the 100-largest corporate and industrial job announcements made in the South last year. The total represents the second-worst performance in job deals since 1994, the first year the SB&D 100 was published. In 2003 (2002 calendar year), 68,651 new jobs were announced by companies making up the SB&D 100, the worst year on record.
Chart No. 1
Total Jobs Created by the SB&D 100 - 1994 to 2008
* JOB TOTALS ARE DERIVED FROM ANNOUNCEMENTS MADE THE PREVIOUS CALENDAR YEAR
But on the capital side of the 2008 SB&D 100 ledger, a new record was set. In calendar year 2007, over $45 billion was invested by companies that made up the 100-largest investment deals announced in the South last year. The record total was driven by some huge deals in the energy, steel, automotive, IT, semiconductor and pharmaceutical sectors. While the investment side also set a record with last year's SB&D 100 when a total of $44 billion was announced, this year's threshold of $100 million is by far the highest ever.
While job totals of the SB&D 100 have dropped for two straight years after a three-year rebound following the recession of 2002, the investment total continues to climb each year. This year's SB&D 100 represents the fifth consecutive annual increase since the recession of 2002.
The decrease in total jobs created over the last two years is a concern. However, there seems to be two interesting factors partly to blame for the dwindling of big job generating deals. For one, baby boomers are apparently leaving the job market in significant enough numbers to affect the total number of large job generating announcements in the region. Furthermore, the dragging economy is having a huge effect on migration into the region. Less people are moving to the South from other regions of the U.S. Florida, for example, saw about half as many people move into the state last year compared to the period of 2002 to 2006. That trend is expected to continue for the next several years, Sunshine State officials predict.
The South's unemployment rate as of this writing is still a full point below the nation's average. That being the case, apparently there are not as many people in need of jobs in the region as in previous years. An aging population and slowing migration to the region would naturally translate into fewer large job generating transactions, particularly if the unemployment rate in the South remains somewhat low.
One simple, but key indicator we look at each year regarding the South's economic development performance is the SB&D 100 job threshold. That threshold is the 100th-largest corporate announcement. We place great importance on how many jobs are being created by that one specific deal. In the go-go 1990s, the threshold topped out at 600 jobs. Between 1996 and 2000, we didn't see a year when the 100th-largest announcement dipped below 500 jobs. Then the downturn of 2001 and 2002 saw the threshold sink to an all-time low of 320 jobs in the 2003 SB&D 100.
This year's 100th-largest job generating deal (Affiliated Computer Services in Nashville) created only 372 jobs. That threshold is the second-worst in SB&D 100 history.
Just Missed Deals
Another indicator we look at closely in judging how the South is performing at job creation centers on how many deals of 200 jobs or more are announced in any given year. Since it was first published in 1993, the SB&D 100 remains somewhat of a snooty ranking in that it only counts projects of 200 or more jobs. Why such a high minimum you might ask? Well, we publish every deal that earns a market or state points in each SB&D 100. If we dropped the minimum to say 100 jobs, we wouldn't have room in the magazine to publish the proof behind the ranking.
Furthermore, we believe it is of supreme importance that corporate site seekers understand which markets and states are turning the biggest projects. Our belief is if a state or market is capable of landing the largest of deals, then it is even more attractive to those companies that have smaller projects.
In calendar year 2007, there were only 257 corporate announcements with 200 jobs or more announced in the South, one of the lowest totals on record. Again, though, the total is following a trend set in 2006 when there were only 278 deals announced with 200 or more jobs, down from 364 in 2005.
But last year's drop in total deals of 200 or more jobs could have been chalked up to low unemployment in much of the region. Now the average unemployment rate is near five percent in the South, which means there must be something else behind the struggling numbers. Can you say, "Recession?" While slowing migration to the region, combined with an aging population are significant factors in a decline in big job deals, there is no doubt a struggling economy had plenty to do with this year's disappointing performance.
The Big Job Deals
While 2007 wasn't a memorable big deal year in the South in general, don't tell that to the folks in Mobile, Ala., Huntsville, Ala., Baton Rouge, La., LaGrange, Ga., Tupelo, Miss., Little Rock, Ark., Houston, Tex., San Antonio, Tex., and other places in the region that experienced banner years. Once again, automotive-related deals dominated in the region as the South landed another foreign automotive assembly plant with Toyota picking a site near Tupelo last year. Other notable big job deals include one of the South's biggest projects ever, the $3.7 billion ThyssenKrupp steel factory going up near Mobile, Ala. The German steelmaker will hire initially about 2,700 workers in south Alabama.
Top Industry Sector Performers in 2007 in the Big Job Deal Category
One sector reigns supreme each year in the South in large job generating projects and that sector is call centers. Forty new or expanded call centers were announced in the region in 2007, which easily outscored the automotive industry's 23 deals of 200 jobs or more. The automotive industry was followed by IT, new or expanded headquarter announcements, building materials and aviation/aerospace. Finishing up the top 10 were distribution, food and beverage, financial services and electronics.
Chart No. 2
Top 10 Industry Sectors - 2008 SB&D Job 100
1. CALL CENTERS
3. INFO TECHNOLOGY
5. BUILDING MATERIALS
8. FOOD & BEVERAGE
9. FINANCIAL SERVICES
It should be noted that the solid performance of the automotive sector in 2007 was a turn around from 2006, when it placed sixth of all industry sectors in big job deals. This year it rebounded to its normal second place perch. While automotive has ranked at or near the top for years in the South, calendar year 2006 was its worst performing year in several years in large job generating projects.
It is incredibly important for the South's economy that the auto sector remains vibrant in job and investment generation and 2007 was another great year for parts suppliers and OEMs in the region. One of the primary reasons the automotive industry is so important to the South is in the last two recessions (2002 and this year) foreign automakers and their suppliers were not affected. If anything the auto industry grew significantly in the last two recessions in the South. The Southern Automotive Corridor is the only region of the U.S. that can make that claim -- that the automotive industry actually grew during tough economic times.
The year of 2007 also saw another great year from the aviation and aerospace sector. The deals were also nicely spread out throughout the region. Not surprisingly, the financial services sector fell to its lowest level in the history of the SB&D 100. There were only 13 deals of 200 jobs or more that came from the financial services sector in the South in 2007. To give you an idea of how low of a total that is, there have been years in the past when 13 deals of 200 jobs or more from the financial services sector have been announced in one state, or even one market such as Dallas/Fort Worth. In short, the financial services sector is sucking wind in the South right now, as evidenced by its 9th-place finish in the top sectors category. There has never been a year since 1993 that financial services has placed out of the top five industry sectors in big job deal announcements.
Manufacturing vs. Non-Manufacturing: We are not trying to debunk the myth now; we are trying to bury it.
You remember it. You remember when many economists were yapping loudly about the manufacturing sector in this country. They said manufacturing was gone and it wouldn’t come back. Those claims were made earlier in this decade and at the time, folks jumped on the bandwagon. Notable economic minds said hands down that manufacturing in the U.S. had become a dinosaur and that outsourcing most if not all of that work would make sense to countries such as Mexico, India, China, and elsewhere beyond U.S. shores.
"Nothing could be further from the truth" is what we wrote in response. "The South is the least expensive place to manufacture something in the largest economy in the world. There is no way manufacturing is going to disappear from the South. If anything, it will increase after this downturn" is what we wrote way back in 2002.
Now, here we are again in what many are calling a recession. The SB&D 100 numbers are down, as evidenced by the aforementioned numbers. And what happened in 2007? Of the 257 deals announced with 200 or more jobs, 119 were manufacturing projects and 138 were of the service variety.
Recall the call center total written a few paragraphs ago? Of those 138 service deals, 40 came from call centers. That being the case, manufacturing is not only holding its own in the South in large job announcements, it is so much more beneficial to the region in terms of wages and sustainability than much of the services sector.
In other words, if the region is hanging its hat on call centers to climb out of a recession, then we are all in trouble. The fact that manufacturing is holding steady if not growing in the South makes this recession a little easier to take. If you recall, in 2004, two years after many economists had thrown in the manufacturing towel, there were more large manufacturing job projects announced in the South than large service job generating deals. That was the first time that happened since 1995.
Chart No. 3
Manufacturing vs. Non-Manufacturing - 2008 SB&D Job 100
* The total number of projects with 200 or more announced jobs.
On the Investment Side
While the jobs ledger of the SB&D 100 has declined for the second straight year, investment levels in new and expanded projects in the South continue to jump off the charts. Just two years ago, the SB&D Investment 100 put up $26.7 billion on the big board, a total that was a "100" record at the time. Last year that increased dramatically to $44.2 billion. This year, over $45 billion was invested by the 100-largest investment projects announced in the American South. The sum of $45 billion is approximately double what the SB&D Investment 100 has averaged over the last 15 years.
Chart No. 4
Total Investment Created by the SB&D 100 - 1994 to 2008
* INVESTMENT TOTALS ARE DERIVED FROM ANNOUNCEMENTS MADE THE PREVIOUS CALENDAR YEAR
The automotive industry, with 35 projects announced with $30 million or more in capital investment, led the region again in the number of significant investment projects announced in calendar year 2007. Interestingly, building materials placed second, with 31 deals of $30 million or more. Watch that sector fall from the ranks next year as construction of new homes and new commercial and industrial real estate projects in general have slowed dramatically in the region.
Giving the 2008 SB&D Investment 100 a boost again, not unlike last year, is the energy production industry. Along with chemical production deals, those two groups put 57 deals on the board that saw $30 million or more in investments. But, remember, $30 million is our minimum. Maxing out in the energy sector was a $6 billion, multi-county wind farm project by Mesa Power in West Texas. When ThyssenKrupp announced its massive, $3.7 billion steel plant in south Alabama, folks from all over the world were writing that it was possibly the largest single industrial project -- by capital investment -- in U.S. history. Fact is, TK was the second-largest industrial project announced in the South in 2007. Mesa Power's project almost doubled ThyssenKrupp's deal in investment.
Chart No. 5
Top 10 Industry Sectors - 2008 SB&D Investment 100
2. BUILDING MATERIALS
3. OIL & GAS
6. INFO TECHNOLOGY
9. FOOD & BEVERAGE
Other major projects of note announced in 2007 included Eastman Chemical's $1.6 billion gasification facility in Beaumont, Tex., Transcarbon's petrochemical facility in Convent, La., and Toyota's new Highlander model SUV plant in Blue Springs, Miss.
Also, warranting attention, were three $600 million or so data centers being built by Google in Caldwell County, N.C., Pryor, Okla. (at the massive MidAmerican Industrial Park) and another one in Goose Creek, S.C. Microsoft also weighed in with a $550 million data center in San Antonio and Citicorp invested in another ($450 million) in Georgetown, Tex.