Dean Barber

Archive for January, 2013|Monthly archive page

Not So Wild a Dream

In Uncategorized on January 27, 2013 at 6:04 am

Most freight in this country continues to be moved by truck, so not surprisingly, proximity to an interstate highway is often a key component for companies that have product to ship. Welcome to Site Selection 101.

But if you look at a map, you will notice there is no interstate highway connecting Memphis to Birmingham, two major industrial cities of the Southeast. That lack of good road certainly did not help the growth prospects in Northwest Alabama, which historically based its economy on natural resources – coal and pulpwood — and smaller cottage industries.

This isolated nature of the region will be changing with the completion of the future Interstate 22. Following the US 78 corridor, a once truly hellish road to drive on in Alabama as it was slow, winding, and laden with coal trucks, the soon-to-be-interstate highway is essentially done already. Only a small sliver needs to be completed on Birmingham’s doorstep connecting into Interstate 65. That should happen by early next year.

Interstate 22 will open up Northwest Alabama. Thousands of undeveloped acres now skirting this limited access highway may now become viewed in a different light.

I visited the region earlier this week and spoke at the annual meeting of C3 of Northwest Alabama Economic Development Alliance, a two-year-old regional economic development organization working on behalf of Lamar, Fayette and Marion counties. C3 President David Thornell, an old friend and a talented economic developer, asked that I share my views on where we have come from and where we are going in terms of our national economy and how that relates to economic development.

Deviating from my norm, I went the speech route and not a PowerPoint. One big revelation resulted during my preparatory efforts — writing and delivering a good speech is a lot harder.

The remainder of this blog will be dedicated to excerpts from my speech that I gave on Thursday in Winfield, Ala. I won’t reprint the whole thing because you don’t deserve to be inflicted with such harsh treatment. Of course, I could say the same for my listening audience in Winfield but they got both barrels.

On Economic Development and Citizenship

“That notion that we are inextricably tied together as community is foundational to economic development. Not only are we thinking of how economic development effects our own lives, but that of others as well. Economic development is designed to touch lives with the creation of wealth and jobs, an increasingly difficult goal in reaching because of certain dynamics and realities at work.

“The practice of this imprecise art and science is a gaze into the future – how things could be, how things should be – with a goal that we may have and sustain a good and productive life in our community, but also that our children might be afforded the same or even greater opportunities if that is their choice.

“There is a link between building wealth, which really should be the bottom line goal of economic development, and citizenship. That is not to say that those with the most marbles necessarily make for the best happiest or best citizens among us. Nor does it mean or imply that those with the least cannot contribute in their own right. Being a good citizen of a community has more to do with what is in your heart and your head than what is in your bank account.

“In the end, being a citizen is about caring and acting upon the well-being of home, family and neighbors. It may sound a bit odd, but citizenship is a form of love and economic development only helps to spread that love if you can only imagine that. I try to imagine that.”

On Job Creation

“Despite what some may believe, economic developers do not create jobs. The very best they can do, really the only thing they can do, is to help create and foster a better business environment in which capital investment, job creation, wealth creation, economic development, takes place.

“Economic developers then are not the great chefs but rather the careful place setters, hoping that their efforts and leadership might somehow prompt and influence the actions of others. I can tell you from good experience that you have some excellent place setters in this room – dedicated men and women who work tirelessly to create a better business climate that can lead to better economic opportunities in their communities.

“But in the end, the economic developers can only wait and hope that their actions, no matter how proactive they may be, should take root. For it is business and industry – the private sector – that is the great job generator for our economy and in most places. If you elected officials think that recruiting a company to your community should be a rather simple and straightforward affair, please understand that it does not work that way. This is not room service.”

The Disadvantages for US Manufacturers

“Self-imposed obstacles to growth will remain. This may sound a bit disjointed or obvious, but it is our decline that keeps us down. The structural costs – corporate tax liability, tort litigation and regulatory compliance – taken together, were 20 percent higher in 2011 than for our nine largest trading partners, up from 17.6 percent in 2008, according the Manufacturing Institute. And get this, that cost differential does not include the cost of labor.

“This erosion of our competitiveness is the primary reason why we lost 5.5 million manufacturing jobs from 2000 to 2010. More than 60,000 manufacturing plants were closed, averaging more than 15 per day. Consider for a moment the following:

“The United States has the highest statutory and effective corporate tax rate in the industrialized world.

“The regulatory burden on manufacturers is equivalent to an 11 percent tax on their businesses. Manufacturers spend an estimated $180.5 billion complying with regulations annually.

“US students lag behind their global counterparts in science and math.

“In a nutshell, what this means is that it is not principally what other countries are doing to overtake us. Rather, it is what we have been doing to ourselves.”

On Re-shoring and Productivity

“It is now apparent that many US corporations did not accurately ascertain their total costs when they picked up and moved operations to China. For some, their actions were almost lemming like. They soon discovered the savings were not always substantial if at all because of long and vulnerable supply lines and the associated fuel costs for transport. Also, some US companies did not take into account the just-in-time requirements of their customers or concerns about quality control. Add to this mix rising wages in China and management soon realized that they had to rethink this competitive scenario.

“Still, it is clear that competitive pressure from offshore has had a depressing effect on wages in the US. New technologies have raised productivity and profits, but have also enabled companies to do more with less people. Robots have pushed aside many factory workers and that trend will only continue.

“Clearly, there is no law that says that when productivity goes up that everyone must benefit. The truth is that from 1973 to 2011, worker productivity grew by 80 percent, while median hourly wages grew by just one-eighth of that amount.”

How to Respond

“Certain types of jobs, particularly those of a lowered skilled nature, will never return as manufacturing continues to shift toward automation and robotics. While technology creates some jobs, it surely destroys others. So how do we respond to this digital world?

“Historically, Alabama has depended on lower cost mass production manufacturing as the answer, especially when in comparison to industrialized northern states. The competitive model has been to offer lower taxes and lower wages. Developing innovative capacity, essentially new technologies, to gain a competitive advantage has not been the Alabama game plan or for much of rural America, although it is clear that is the German mindset.

“Ultimately, for the United States, for Alabama, for Northwest Alabama, to be competitive in the long run, more resources and emphasis should be placed on innovation and entrepreneurship and less on cost, because there will always be a China, an India and a Mexico. So it would stand to reason that we should strive to make things that they are unable to make or would have a difficult time to make. We should incentivize high growth startups and even mature industries that embrace technological innovation, knowing full well that jobs are at stake if we do or we don’t.

“It means building a workforce with higher skills, but I am not the first person to tell you that. But it’s absolutely true. In this end this is a choice about investing in yourself and betting on a future. It’s not so wild a dream that this can happen here.”

About half-way through my speech, I got this gnawing feeling of dread that I was sounding like some pointy-headed professor from the big city. Afterward, some audience members said that my remarks were “real interesting,” which made me feel better, as I wondered if I had delivered a dud.

Of course, they may have just been saying that to be nice. And that’s why I love the South.

Dean Barber is the principal of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at http://www.barberadvisors.com

Hail to the Tinkerers

In Uncategorized on January 20, 2013 at 7:29 am

Some believe and warn that we – the United States as a country – are losing our edge as a great source of innovation — that much of the advances of technology in the future will come from other countries where students are more proficient in math and science and where more engineers are being turned out.

And there is no doubt some truth to such dire warnings. Only 4.4 percent of first university degrees were in engineering in the US, compared to 17.1 percent in Japan and 12.4 percent in Germany.

But there is something else at work here that gives me a least a modicum of hope for our future as an innovation nation. I am referring to our long tradition of tinkering.

Maybe it has its roots in our frontier mentality and history of carving out a civilization from a wilderness. But for whatever reason, Americans seem to have a penchant for not only making do with what we have but go rummaging around in a spare parts bin to develop new ways and things to solve problems.

An example from World War II comes to mind. June 1944: The Allied forces had successfully landed an invasion force in Normandy and were making their way inland from the beaches only to be confronted by the bocage countryside. The bocage was characterized by huge and thick hedgerows, centuries old, that separated farmers’ fields.

Almost impenetrable, the hedgerows made for excellent defensive positions for the Germans. In short, the Allied forces were stuck.

Gitter done, boys

Enter one Curtis G. Culin, a sergeant in the U.S. Army’s 2nd Armored Division’s 102nd Cavalry Reconnaissance Squadron, who came up with the idea of taking angle iron salvaged off the beaches and fashioning out with some creative cutting and welding a hedge-breaching device to be attached to tanks.

Military historian Max Hastings said Culin got the idea from a Tennessean who reportedly said, “Why don’t we get some saw teeth and put them on the front of the tank and cut through these hedges?”

Whether it was Culin, a New Jersey boy, or the Tennessee boy, really matters not. Both American GI’s lived in the tradition of tinkering – rank amateurs, typically with no formal education or training, who recognized a problem and devised a practical, hands-on solution. I don’t think that bottom-up idea would have happened in a European army.

And I submit, that it is our American tradition of tinkering that has served us incredibly well throughout our history and continues to do so even to this day. Currently the biggest American company in terms of net worth was founded by two tinkerers – Steve Jobs and Steve Wozniak, both college dropouts and both members of the Palo Alto-based Homebrew Computer Club. The rest is, as they say, history.

There is a way with you Yanks

Sometime back in the mid 1990s, a group of British automotive journalists were in Alabama where I was living and had toured the then new Mercedes-Benz plant. I remember joining them for dinner one night and the discussion got around to the respective strengths of our two countries. Keep in mind that the beer was flowing and the conversation was free-spirited to say the least.

The Brits, I said to my guests, displayed a daunting sense of courage under fire that can only be admired. They had an indomitable way of facing adversity with that famous stiff upper lip. “Even when you are getting your asses handed to you, you take your whippings with such incredible class and style.”

My new British friends laughed and someone returned the favor: “You Americans may not always have the best engineering, sometimes it is best described as duct tape and baling wire, but you do come up with ways to solve a problem. Where there is a will, there is a way with you Yanks.”

There were a lot of nods and “here, here’s” around the table and suddenly I felt I was sitting in the House of Lords, or in the case of the gathered journalists, the House of Commons.

“Well, thank you, gentlemen,” I said. “That is very kind and thoughtful for you to say that, but please just be careful about referring to us as “yanks” here in Alabama. It’s too close to “yankees,” a word that is often preceded by the modifier ‘damn.’ ”

As a hybrid son of both the North and the South (my father was from Pittsburgh and my mother from Chattanooga, Tenn.) and having grown up in both Dixie and the Great Lakes foundry culture, I figured I owed my guests that much

In his new book, “The Tinkerers: The Amateurs, DIYers, and Inventors Who Made America Great,” Alec Foege holds that the tinkering tradition is a core American virtue that lives on. “Puttering around with the mechanical devices that surrounded us was practically a rite of passage,” he writes, “and for many, a way of life.”

Foege argues that tinkering has three essential characteristics. First, it involves “making something genuinely new out of the things that already surround us.” Second, it “happens without an initial sense of purpose.” And third, it’s “a disruptive act in which the tinkerer pivots from history and begins a new journey.”

Those attributes would characterize the life of Erle P. Halliburton, a great American tinkerer, and who I learned about this past Thursday from a group of economic developers from the great state of Oklahoma.

Sooners in Texas

We gathered for a reception at the chic Hotel Zaza in uptown Dallas. Our economic development hosts were bent on evangelizing just how fine a place Oklahoma really is. Well, I can tell you from experience that Oklahoma, with one of the fastest growing economies in the nation, really is a fine place.

As a site selection consultant, I would have little qualms of taking a corporate client to Oklahoma should the requirements of the project dictate as much. Of course, I can say that about a lot of places – if the requirements of the project dictate as much.

In that sense, I’m like Will Rogers, who said he never met a man that he didn’t like. Similarly, I have never met a state that I didn’t like, but in serving my corporate clients well, I hope to take them to only those places that are a best fit for their particular needs. And that means literally means from Maine to California, from Canada to Mexico. (And let’s not forget Alaska.)

But let’s go back to Erle Halliburton. Like so many great American tinkerers, Erle, a native of Tennessee, had very little formal education. He was certainly no degreed engineer, even if he were to be eventually granted 38 patents, including the design of aluminum suitcases.

Halliburton left home at the age of 14 to work various jobs, and would join the Navy in 1910. He found himself working in the California oil fields in 1915. He apparently only lasted a year at the Perkins Oil Well Cementing Co. as he was fired for his constant (and unwanted) suggestions on how to improve oil well cementing process.

With his wife Vida, he made his way to Texas and then Oklahoma, where he borrowed a wagon, a team of mules and pump and built a wooden mixing box to start what would become the Halliburton Oil Well Cementing Co., based in Duncan. Along the way, he would pawn his wife’s wedding rings to pay the hired help.

There is a stone statue of Erle in Memorial Park in Duncan. Seated on a couple of wooden boxes, he is labeled “An Uncommon Man.” And so he was, but he followed this American tradition of inventors as tinkerers. Motivated by their own curiosity, in the course of trying to solve one problem, they may end up solving another and then another.

Erle Halliburton and Steve Jobs prove there is a great democratization of ideas at work, that tinkering is something that everyone can do and not just for the trained engineers. This speaks of a certain American ingenuity and optimism. Something broke. You take it apart, try to fix it, and put it back together. Maybe you didn’t put it back together right, but you at least tried and you learned something in the process of getting in there with your hands and your brain.

So parents, if you can bear the thought, let your kids play with fire. Give them a pocketknife. And hand them an unworking (and unplugged) toaster to take apart. These are things that Gever Tulley advises in his Ted Talk called “Five Dangerous Things You Should Let Your Kids Do.”

Chances are they might burn or cut themselves or smash a finger, but in the process of you letting them figure out how things work, you are unleashing a new creative world to them with future brainstorms to come. In short, you are creating the tinkerers of tomorrow.

I used to have a sizeable workshop in a former home where I puttered around, often not knowing what exactly I was doing, but still having fun at trying to fix things that I refused to throw away. I hope to have a workshop again one day. I found tinkering, fun and relaxing.

No great inventions yet, but just you wait. I’ll see you down the road.

Dean Barber is the principal of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at www.barberadvisors.com

 

Oh, to Be Back Home Again

In Uncategorized on January 13, 2013 at 7:30 am

I don’t care how efficient your manufacturing operations might be, the human factor must always be factored.

World-class automakers in Alabama – Mercedes-Benz, Honda, and Hyundai – well understood this as they shut down their production lines for the national BCS championship football game between University of Alabama and the University of Notre Dame.

The Mercedes plant in Tuscaloosa County canceled its night shift because of the big game. At the Hyundai plant in Montgomery, all three shifts were off on game day. For the Honda plant in Lincoln, Ala., night shift employees put in extra hours on Friday so to be able to watch the championship game Monday night.

No doubt the Germans, Japanese and the Koreans have learned that in Alabama, football is not just a game, but it’s an all-encompassing way of life in which you must identify with one of two camps, whether you like it or not. More on that later.

Now I should make no bones about it — I love Alabama. I lived in Alabama for about 25 years and found it an incredibly beautiful place with very nice people, most of whom want to make you family if you only let them. This hospitable, welcoming attitude comes in spite of a history that can be or at least should be painful for anyone with a brain.

The courage to remember

To this day, Alabamians, black and white, wince at old newsreel images of fire hoses and German shepherds unleashed in Birmingham on people who were seeking basic rights that are taken for granted today. Back in the early 1960s, Birmingham was “Bombingham,” where homes and churches were systematically bombed to wage terror on those who dared to ask for equal rights for all.

During the Civil Rights struggle, people died, not just in Birmingham or Alabama, but all over the South, where segregation and white supremacist policies were the law. The worst came on Sept. 15, 1963, when four little black girls were killed with the bombing of the 16th Street Baptist Church. Like Newtown, Conn., this was a senseless and evil act.

Today, there is a very good civil rights museum that sits across the street from the church, attempting to document and  make sense, if that is possible, of man’s inhumanity to man. In that sense, every city, town and village in this great country of ours could probably house its own museum. But Birmingham had the courage to build it and remember.

I left Alabama about six years ago, but will return later this month for a speaking engagement with a regional economic development group. I am really looking forward to coming “home” again, to see old friends and get an update on the statewide economic development scene there. Much has changed, as the former Alabama Development Office is no more, replaced by a Department of Commerce, which is typical of most states.

But I would have to liken economic development in Alabama and the rest of the South for that matter to SEC football – fast and furious, especially when compared to much of the country. As both a practitioner of economic development and representing the interests of corporate clients, I have sometimes found a certain lack of urgency, almost a degree of disinterest, in economic development in other regions.

Mind you, that is changing. Indiana and Michigan have seen the light, becoming the latest right to work states (as has been the case for many southern and western states), all in a play to become a more business friendlier place. I look forward to be meeting next month with executives with the Michigan Economic Development Corporation to learn more about their new initiatives.

North vs. South all over again.

But still, and this is a generalization that can be proven wrong with countless of individual cases (so please curb the urge to prove me so mistaken), economic development is more process-oriented in the Midwest and the Northeast when compared to the South.

In the South, the prevailing attitude is “let’s make a deal.” Tell us what you can bring to the table and we’ll be right back at you to tell you what we can do to help. In the meantime, let’s go get some barbecue. It’s a business negotiation among friends, sweetened with sweet tea, cornbread and just about anything fried.

By its very nature, there’s a bit of a horse trading or gun slinging ethos taking place, usually all on the up and up and sanctioned by state and local governments. In the South, more so than anywhere else, economic developers are empowered to be dealmakers.

I could probably name you a dozen economic developers in Alabama who have the authority to give away land in their respective publicly-owned industrial parks if that is what it takes to win a viable project that would bring good-paying jobs to their communities. (Naturally, any such offer would depend on the size and scope of the project and need the approval of a governing body.)

Whereas, in other parts of the country, that is almost unheard of, particularly so if there are no publicly-owned industrial parks in existence. In certain jurisdictions, I have encountered a mindset that has been something to the akin of this: “Fill out these 30 pages on what your corporate investment will be in our state, and we’ll get back to you in a few weeks to let you know if we might be able provide you with any incentives in any form.”

Compare this antiseptic, bureaucratic approach to a more business friendly way of doing things, characterized by a less intrusive tax bite and regulatory climate and favorable wage differentials, and you begin to understand why there has been a historic megatrend for decades for capital investment shifting from North to South. (And from the United States, with its onerous regulatory climate and where corporate taxes rank among the highest in the world, to offshore.)

Fit goes beyond costs

Having said all that, sometimes – and this is something difficult for some economic developers to get their head around – sometimes, it makes for good business sense  to locate a future capital investment in a higher-cost locale, depending on the proximity of customers and suppliers and the technical nature of the product or service. (And here I am making the case for re-shoring in some circumstances.)

There can be beneficial tradeoffs to higher costs in terms of talent pool and supply chain. Sometimes, depending on the company and its needs, that right location actually could be San Diego or Boston or New York. Believe it or not, Alabama, Arkansas, Texas or Louisiana (or insert your state here) are not always the right choice. Actually, I think most economic developers do understand that “fit” encompasses many factors and can go beyond costs alone.

In my role as a site selection consultant, if I am serving a corporate client well, I should harbor no prejudicial thinking on where that better place may be until or unless we delve deep into the true drivers of an expansion project. (Which is the subject of a corporate brochure that I am currently writing.)

You’re going to have to choose

What I am about to tell you might be a slight exaggeration, but not by much. If you were to move to Alabama, a new friend would probably approach you at some point for a private talk that you would need to take to heart. It happened to me.

New Friend: “You know, we are really glad you are here in Alabama (even if you are a Yankee), and we hope that you have a wonderful life here. But you should know that you’re going to have to choose between Alabama or Auburn on who you are going to root for.”

You: “What?”

New Friend (smiling): “You’re going to have to choose between Alabama or Auburn. (Your friend’s voice now lowers ominously). And we’ll give you six weeks to decide.”

You: “Whoa, whoa, whoa. I went to the University of (Insert school here, Wisconsin in my case.) I don’t have a dog in this fight. I don’t really care to choose.”

New Friend (no longer smiling and now with maniacal stare): “Six weeks.”

As I did not want to be hated by everyone, I made my choice. I chose the Crimson Tide of Alabama, but I continued to associate and be close friends with those from the Auburn camp.

(I even secretly rooted for Auburn except when it was pitted against Alabama in the “Iron Bowl,” that annual matchup that divides the state now far more than race or politics. In Alabama, when graduates of Alabama and Auburn marry each other, that’s called a “mixed marriage.”)

And while I am now a proud Texan, a historic place of big dreams and, well, just about big everything, I am so looking forward to coming “home” to Alabama, even if for a little while. So even if you do no quite understand what I am about to say, please understand that I have to say it. It’s been inbred in me now.

ROLL TIDE!!!

Dean Barber is the principal of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at http://www.barberadvisors.com

My Look Ahead

In Uncategorized on January 6, 2013 at 6:49 am

If I was smart, I would be a futurist. Those are people who lay claim, usually in book form, to knowing what is going to happen years from now, with a sprinkling of the outlandish to make us sit up and take notice.

And here is the key, a futurist has parlayed his or her visions into money, which is far more clever than whatever they might say, most of which will never be realized or even remembered within their lifetimes.

Now I have not yet broken the code to call myself a futurist, although a book, regardless of its content, might well seal the deal. No, the truth is that I am but a mere business consultant, albeit one with some ideas on where we might be going.

In my last blog – My Look Back — I related where we have been. Not surprisingly 2012 was by no means a stellar year in terms of economic growth but there was at least some growth, although mass unemployment remains endemic in our country. The massacre of the innocents in Newtown, Conn., still haunts me.

Now at the start of the New Year, we face certain uncertainties. So this blog will be “My Look Ahead” in suggesting the challenges and opportunities that may come our way.

The Boob Factor

I think I should start with our dysfunctional federal government. All too often government action (and lack of action) simply adds to uncertainty. We hear this from the business community time and time again, and it’s true. In order to plan for the future and make needed changes and investments, business people want to see and walk over the playing field and understand the rules.

It is unlikely that we are doing worse with the new 113th Congress that was sworn into office this past week. It follows the departing 112th Congress, which because of its stupendous lack of productivity, had a favorability rating that polled lower than the idea of a Communist takeover of America. To call these people (members of Congress and not communists) “boobs” would be an insult to boobs everywhere.

As you all know, the outgoing Congress voted in favor of legislation this past week that raised tax rates for the wealthiest Americans while making Bush-era tax cuts for the middle class permanent. But the balanced approach to reduce the national debt, as promised by President Obama, was not evident. There were effectively no spending cuts, although the president hints that they are coming. 

Now we learn that more cliffs await us — the debt ceiling crisis and the will-the-government-shut-down crisis, promised by some Republicans who felt they got rolled. Obama has vowed that he will not negotiate on the debt ceiling, hoping to avoid the 2011 conflict that led to a credit rating downgrade and pushed the country close to default.

It is worth noting that the fiscal cliff crisis and the automatic $600 billion spending cuts and tax increases in 2013 that were to result was an invention of Congress precisely because of the 2011 debt ceiling showdown.

“To praise this new deal as an accomplishment is to praise an arsonist for extinguishing his own fire,” wrote Peter Coy, economics editor with Bloomberg Businessweek. A glum David Brooks, columnist with the New York Times, questioned whether any wisdom can be forthcoming from Washington to put the nation’s finances in order.

“I’d say we’ve accelerated our trip to disaster. My big puzzle is why young people are not in the streets. They are really being hosed, sentenced to a living standard much lower than their parents because of boomer greed.” 

Now those are rather stark assessments from two serious journalist who would not make for good futurists because they exhibit too much common sense. 

By delaying painful decisions on spending cuts, we can only see more confrontation and uncertainty, which means that many businesses are likely to remain wary of expanding or hiring. As a result, many economists believe, and your all-knowing, sage-like consultant (that would be me) predicts that the U.S. economy will grow a meager 2 percent or less this year, down from 2.2 percent in 2012. The unemployment rate will remain a high, probably not dropping below 7 percent.

The sad part is the economy might be growing at a 3 percent annual rate were it not for the haziness surrounding the budget standoff  in Washingon, which proves that there are times for clowns and there are not times for clowns.

And yet there have been positive signs. Corporations have cut costs and have amassed a near-record $1.7 trillion in cash. Home sales and prices have been rising consistently, along with construction. Hiring gains have been modest but steady. Auto sales in 2012 were the best in five years. Compared to the rest of the world, we just might be the least dirty shirt in a bag of dirty laundry.

Hello China

At least that is how China might see us. In spite of our politicians frequently engaging in China-bashing, Chinese investment in the US will likely break another record in 2013, according to research firm Rhodium Group. That’s after a record year in 2012 with deals worth more than $6.5 billion, a 12 percent increase from the previous record of $5.8 billion in 2010. The number reflects direct investment in the U.S. marketplace and does not include the estimated $2 Trillion in U.S. Treasuries held by the Chinese government. 

From the first three quarters of 2007 to the first three quarters of 2012, Middle East investment in the US is down 86 percent, Canada down 75 percent, and Europe down 49 percent, according to the Bureau of Economic Analysis.

But China was up 321 percent in the same time period. The truth is that Chinese companies, many of which are partly owned and/or controlled by the government, see something they like about the US economy that others don’t. 

Chinese majority-owned businesses in the US now employ 29,000 people, up from fewer than 10,000 five years ago.

As a site selection consultant, I would very much welcome the idea of assisting a Chinese company to find the right and best location for a future manufacturing plant in the US. And I suspect virtually all of the communities that would be considered would also welcome such capital investment with open arms. Actually, that would be a prerequisite for a community to be in the running. 

So if there are any Chinese business people out there reading this blog, please know that I can help your company find the best and most productive location for your future operations in the US. I am your man. 

Modest Growth for Manufacturing

US manufacturing appears to be recovering slowly from a slump last fall. Manufacturers added 25,000 jobs in December, the most in nine months. Factories had cut jobs in three of the four months through November, according to government data.

Another encouraging sign: Americans are expected to buy more cars in 2013, which will boost manufacturing output. Auto sales will likely rise nearly 7 percent in 2013 over last year to 15.3 million, according to the Polk research firm. Sales likely reached 14.5 million last year, the best since 2007. In 2009, sales were just 10.4 million, the fewest in more than 30 years.

Again, so much rides upon on an undependable Congress. If the politicians can raise the federal borrowing limit without a fight that damages confidence, companies might boost spending on computers, industrial machinery and other equipment in the second half of 2013, economists say, which would be a shot in the arm for our manufacturing sector.

I will be writing more about US manufacturing as I have a passion for it, but most economists believe we will grow our manufacturing sector by 150,00 to 200,000 jobs in the coming year. That’s not bad, but a far cry from the 6 million manufacturing jobs lost during the first decade of the 21st century.

Housing Keeps Improving

Economists are nearly unanimous that the housing market will keep improving in 2013, which can only boost consumer confidence

Sales of new homes in November reached their highest annual pace in 2½ years. They were 15 percent higher than a year earlier. And October marked a fifth straight month of year-over-year price increases in the 20 major cities covered by the Standard & Poor’s/Case-Shiller national home price index.

Five years after a housing bust left a glut of homes in many areas, suddenly we don’t have enough houses. Only 149,000 new homes were for sale at the end of November, only slightly above the 143,000 in August, the lowest total on records dating to 1963. And the supply of previously occupied homes for sale is at an 11-year low.

Low mortgage rates have helped spur demand. The average rate on the U.S. 30-year fixed mortgage is 3.35 percent, barely above the 3.31 percent reached in November, the lowest on records dating to 1971. A housing recovery boosts construction jobs and encourages more spending on furniture and appliances, which in turn boost manufacturing.

But sadly, I keep circling back to Washington for cues as policymakers can do much to encourage or discourage consumer confidence. The fiscal cliff delivered a tax hike for 80 percent of working Americans with the end of a two-year Social Security tax cut. The tax is rising back up to 6.2 percent from 4.2 percent. The increase will cost someone making $50,000 about $1,000 a year and a household with two high-paid workers up to $4,500.

It’s clear that I have only scratched the surface on what might develop in 2013 and I do apologize for that. I have no future as a futurist. But I do write about the here and now and where we appear to be going. I’ll see you down the road.

Dean Barber is the principal of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com Please visit our website at www.barberadvisors.com