Dean Barber

Archive for the ‘Corporate Site Selection and Economic Development’ Category

Idiots Abroad: My Entirely Too Long European Vacation with A Few Business Meetings Thrown In

In Corporate Site Selection and Economic Development on June 18, 2017 at 3:16 pm

A lot can happen in three weeks. And a lot did happen in the three weeks that my wife and I were rumbling, bumbling and stumbling through Europe.

President Donald Trump announced the U.S. would withdraw from the Paris Climate Accord when we were in Paris. In more Trump news, the president announced travel and business restrictions toward Cuba, while fired FBI Director James Comey accused the Trump administration of telling “lies” in testimony before the Senate Intelligence Committee.

A gunman fired at Republican members of Congress as they held a baseball practice, wounding House Majority Whip Steve Scalise and four others. General Electric announced that CEO Jeff Immelt would step down after nearly 16 years on the job, and Amazon said that it would be buying Whole Foods.

Meanwhile, I was getting telephone calls and emails relating to my business/economic development consultancy back home. While I had others working on my behalf while I was gone, I still felt untethered and isolated.

Lucky For Me

Amplifying this feeling was the fact that doing relatively simple things, like driving, buying gas, parking, really making any sort of purchase, could be challenging if not completely perplexing in the countries that we were visiting. Indeed, there were times when I felt like a complete idiot, which lucky for me is “idiot” in French, “idiota” in Spanish, Portuguese and Italian.

Mind you, I have been to Europe many times on business trips. However, those trips were mostly in places where English is more widely spoken, and where there was a buttoned-down itinerary that never left me truly out of my element.

This trip was different. Most of it, not all, was in southern Europe where outside of the confines of our hotel, “bonjour” or “buenos dias” or “bom dia’ or “buongiorno,” followed by “do you understand the words coming out of my mouth?” were met mostly with quizzical looks. (I think one fellow thought I was asking him where I could buy a giraffe.)

We in turn responded with our own dog-like quizzical looks when people would speak to us in French, Spanish, Portuguese and Italian.

Playing the Part

But the language barrier, while real, is really not so bad and could be viewed as a plus. Being an idiot abroad should, if you have any smarts about you, cut down your ego, which in turn should make you more humble and polite. Being a polite if not somewhat clueless tourist can have its perks if you play your cards right.

We played the part of touristes to the hilt in Versailles and Paris and Geneva; turistas in Barcelona and Lisbon (Lisboa); and turisti in Milan (Milano), Florence (Firenze), Venice (Venezia) and Rome (Roma), and were treated quite nicely in all these great cities.

Most if not all date back to the days of the Roman Empire, and all exemplify incredibly beautiful art and architecture, good food, and the wealth and power of the Catholic Church.

I Shall Dream of It

I cannot tell you with certainty how many grand cathedrals I entered (probably a dozen), or how many grandiose paintings and sculptures that I saw of figures from the Bible, saints, popes and martys, sometimes naked or nearly naked, sometimes not.

The one that left the biggest impression on me was St. Bartholomew Flayed (1562) in the Milan Cathedral. It is a gruesomely realistic, sculptured figure of a stoic, skinless young man.

During a tour of the Milan Cathedral in 1867, Mark Twain found the statue by Marco d’Agrate repulsive. “I am very sorry I saw it, because I shall always see it now. I shall dream of it sometimes.”

My Consternation

Also in Milan, I got to see one of the world’s most famous paintings, The Last Supper by Leonardo da Vinci. It sits inside the Convent of Santa Maria delle Grazie. The painting depicts the consternation that occurred among the Twelve Disciples when Jesus announced that one of them would betray him.

After viewing the painting, I experienced a bit of my own consternation when I entered the restroom at the convent. Rather than a toilet, there was a hole in the tiled floor with designated places to put your feet before essentially squatting. I chose not to.

Among the Herd

In Vatican City, which is a separate country within the confines of Rome, we were able to see the Sistine Chapel ceiling, painted by Michelangelo, a cornerstone work of High Renaissance art.

Central to the ceiling painting are nine scenes from the Book of Genesis, which I did not get to fully fathom, because I was stuck in the midst of a tightly bunched, moving herd of tourists that was being shunted in and out of the chapel.

Indeed, in many of the places that we visited, there were entirely too many tourists present. American journalist Russell Baker said, “The worst thing about being a tourist is having other tourists recognize you as a tourist.”

As I did not wear a ball cap, or shorts, or athletic shoes in my travels, I tried not to look the part of a tourist, although I am sure that I mostly failed in that regard.

At times we were able to successfully bust out of the herd, only to be caught up in it again. It was frustrating.

Looking the Part

Businessmen truly look the part in northern Italy, particularly in Milan. They invariably wore wonderfully tailored suits and almost all carried fine leather briefcases.

I had several productive business meetings, and while I was always treated with great reverence and respect, I left the meetings feeling that I was under dressed. I won’t make that mistake again, even if I am on vacation.

One meeting in particular reminded me of the importance of establishing trust and relationships in business and this holds particularly true for European, family-owned companies.

Phase Zero

When I was an economic developer some years back, I noticed that few of my colleagues would help foreign companies set up meetings in the United States. I did just the opposite. I actively set up meetings for them, knowing full well that I could win their favor by doing so and thereby win their business.

Phase Zero is how a knowledgeable businessman in Milan explained it to me. The idea is to be willing to work on behalf of these mostly family-owned companies at no cost before a project even becomes a project.

In short, they are cautious and want to put a toe in the water to see if the U.S. makes sense for them. If you can assist in that process by setting up meetings for them, you will be remembered and stand a better chance of being hired or rewarded in some capacity.

I assured my contact in Milan that I was perfectly comfortable doing Phase Zero work with Italian companies. Indeed, that I had a history of doing such work (within reason) to prove myself to be loyal, competent and trustworthy.

Down Went Barber

I’m convinced that Europe has it all over the U.S. when it comes to healthcare. I speak from experience, as I took a face dive in the lobby of the Hilton Hotel in Paris. I busted a big gash over my right eyebrow, and found myself bleeding like a stuck pig.

The hotel manager was Johnny on the Spot and paramedics were called. They put me in an ambulance and hauled me to a hospital where they sewed me up. I got three stitches and a bill. Total cost, including the ambulance: 90 Euros, about $100.

Had that have happened to me in the U.S., the ambulance ride alone would have been $500. Total cost would likely have been more than a $1,000, maybe $2,000.

I believe healthcare in America remains one of our biggest problems and will remain so as long as the insurance and pharmaceutical industries essentially dictate terms. We could use another Teddy Roosevelt about now.

From Lion to Lamb

With stitches over my eye and a bruised cheek, I arrived in Barcelona looking like I had been in a bar fight, which was fine by me. Better to look like a lion than a lamb.

My brave exterior would soon fall away when my wife rented a scooter for us to travel about the city. Please understand that I have driven thousands upon thousands of miles on motorcycle in the United States, from coast to coast.

But put me on a scooter in five lanes of traffic in a roundabout in Barcelona (actually there were no discernible lanes or rules to go by), which is exactly what happened more times than I would like to remember, and you might have heard me cry out like a little lamb.

But somehow, someway, we survived our three weeks in Europe relatively unscathed. Well, I have one scar. We got home to Dallas late, about midnight. I was out the moment my head hit the pillow and I slept about 10 hours.

The next morning, I couldn’t help but notice that the coffee I was drinking tasted really bad. But it was good to be home.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

Manufacturing is Common Sense

In Corporate Site Selection and Economic Development on May 21, 2017 at 7:42 pm

Our ability to perceive, understand, and judge things that are common to most of us, well, that is common sense. It is central to civilization and probably why we’re still around as a species.

Remember that Common Sense, a pamphlet written by Thomas Paine in 1775–76 advocating independence from Great Britain to people in the Thirteen Colonies, forged a nation and that which became a world superpower.

As Americans, we hold common sense to be a great attribute, that is until we elect a person to public office. Then something very strange happens. That person, who previously exhibited a great abundance of common sense, becomes a politician.

As a result, common sense becomes a casualty, and our trust in our institutions erode. Notwithstanding this erosion of faith, I truly believe in the common sense of the common man. He may not understand immediately, but he eventually discerns the truth. He will get it.

Critical to Our Nation’s Future

Which is why I am heartened by a recent survey that show that an overwhelming majority of Americans see manufacturing as critical to our nation’s future prosperity.

It is only common sense to believe this. But now it is up to our elected officials to shirk off the D or the R from their shirtsleeves, and come together to enact common sense policies to grow manufacturing in this country.

I will offer up some ideas on that front, but first let’s take a look at that recent U.S. public opinion survey by Deloitte and The Manufacturing Institute. Among the findings:

  • 83 percent believe U.S. manufacturing is critical to economic prosperity
  • 81 percent feel it is important to maintaining their standard of living.
  • 81 percent believe trade and export of U.S. manufactured goods benefits the economy
  • 76 percent believe the U.S. needs a more strategic approach to developing its manufacturing base
  • 76 percent believe the U.S. should further invest in the manufacturing industry.
  • 71 percent believe the U.S. should ensure long-term, stable funding for programs that spur innovation and advanced manufacturing.
  •  88 percent expect future manufacturing jobs will require a higher level of technical skill

They Get It

In a nutshell, this survey confirms that most Americans correctly view manufacturing as vital to America’s livelihood and that we as a country should invest more in manufacturing.

They understand that manufacturing jobs will be more high-skill and less manual labor, and they know that manufacturing fuels job creation in this country. (Something that economic developers on the state and local level have long appreciated.)

Having grown up in a manufacturing family (my father was the president of a foundry) and having worked on factory floors, I have special affinity for manufacturing. Most of the companies that I have helped as a corporate site selection consultant have been manufacturers.

They like the fact that I am true believer in manufacturing and that the location of a future plant, to which I will help in finding, is critical to its long-term operational success. Factoring costs, which includes the good, the bad and the ugly, is the essence of corporate site selection process.

The Smart Factory Needs Smart People

One critical factor in finding that optimal location for a future plant, which should not be shock to anyone, especially economic developers, is the technical talent within an existing local (commuting distance) labor pool.

As I have written many times, we are in but the early stages of a digital industrial revolution. The “smart factory” of the future, employing digital technologies such as the internet-of-things, big data analytics, artificial intelligence and advanced robotics, will require smart people.

By the end of 2022, manufacturers expect that 21 percent of their plants will be smart factories, according to a new report by Capgemini’s Digital Transformation Institute. Sectors, such as aerospace and defense, industrial manufacturing and automotive, where people are working alongside intelligent machines, are expected to be the leaders of this transition.

To suggest that the shift to smart factories will transform the labor market in this country is an understatement. Companies see automation as a means to remove inefficiencies and low-skill jobs. In short, those manning the smart factory of the future must have digital skills.

Conversely, it also means that there will be more employment opportunities for highly skilled workers in automation, analytics and cybersecurity.

Some Companies Step Up

U.S. manufacturing job openings are quickly outpacing qualified candidates, resulting in a widening skills gap across the industry. Between 2015 and 2016 an average of two unemployed manufacturing workers existed for each open position, according to the U.S. Labor Department.

Some companies, seeing a way to lower costs and accelerate innovation, are stepping up to the plate by training their existing employees to use cutting-edge digital technologies. Capgemini found in its study that more than half (54 percent) of respondents are providing digital skills training to their employees and 44 percent are investing in digital talent acquisition to bridge the skill gap.

GE, which invests more than $1 billion in employee development each year, announced in March a “Brilliant Learning” curriculum that will include immersion boot camps on advanced manufacturing, additive and other digital technologies.

“Today, manufacturing is driven by productivity – and when combined with the merging of hardware and software, the need for a highly skilled labor force is becoming integral to the success and modernization of our industry,” said Philippe Cochet, GE’s Chief Productivity Officer in a prepared statement.

“At a time when the creation and retention of U.S. jobs in America’s manufacturing cities is more important than ever, GE is helping to secure these jobs through the execution of ‘Brilliant Learning,’ and we hope it becomes a model for the industry.”

Meeting the Needs of People and Companies

A 2016 Pew Research Center survey, “The State of American Jobs,” found that 87 percent of workers believe it will be essential for them to get training and develop new job skills throughout their work life in order to keep up with changes in the workplace. Again, the common man showing a lot of common sense.

A central question about the future is whether formal and informal learning structures will evolve to meet the needs of people who want to work and “stay current” and companies who want skilled workers.

Pew Research Center and Elon’s Imagining the Internet Center surveyed technologists, scholars, practitioners, strategic thinkers and education leaders in the summer of 2016 on the future of workplace training.

Seventy percent of the 1,408 respondents said successful programs would emerge to teach new skills at the scale that is necessary to help workers keep abreast of tech changes. But 30 percent said “no,” that they do not believe adaptation in teaching environments will be sufficient to teach new skills at the scale needed to keep up with changes in technology.

Some Communities Will, Others Won’t

As one who does economic development consulting for communities in addition to corporate site selection, I see a spotty record. Some communities will make a valiant effort to offer and keep up with what is essentially vocational training that begins in elementary schools and lasts a lifetime.

It is these communities that are preparing for a smart factory future by preparing their people with needed digital skills.

Sadly, I come across some communities that are not even thinking about this, much less doing anything about it. Now guess which communities are going to do well in the future with manufacturing and which ones aren’t.

It’s only common sense. I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

A Ho-Hum Opinion of Cars May Be Part of the Problem

In Corporate Site Selection and Economic Development on May 14, 2017 at 9:59 am

If you were to believe much of what you hear and read about this seemingly monolithic group called millennials, you might wonder if they are not an alien bunch from outer space.

Indeed, marketers and consultants have determined there is much money to be made if they can convince us that millennials have special wants and needs and cracking the code is critical if we are going to reach them

While I acknowledge there are some generational differences in how we all see the world, I suspect that much of what we are being told about millennials, which is shorthand for young Americans, is a crock.

Never mind there is no consensus on what a millennial is. Some say millennials are anyone born between 1980 and 1995 while others say it is between 1982 and 2000.

Don’t Put Them in Box

More to the point, we seem obsessed with generational labels and stereotypes.

“There’s about 80 million millennials right now and some of those millennials are CEOs in Silicon Valley, and some of them are illegal immigrants in the Midwest who are waitressing somewhere,” said Jessica Kriegel, author of Unfairly Labeled: How Your Workplace Can Benefit from Ditching Generational Stereotypes in an interview with USA Today.

“You really can’t put them all in a box. And what we do is, we put them all in a box, and that box is really based on a middle-income, white, American person and then we just say that’s the only kind of millennial that exists right now.”

We have been told ad nauseam that millennials would prefer not to own and will thereby drastically shape our future consumer society. And while there may be a kernel of truth to that, the bigger aspect is that digital technologies are changing how and what we buy via online transactions, and tech savviness has much more to do with socio-economic status than age.

They Actually Do Own

Fifty-three percent of millennials actually do own homes and overall, 88 percent of millennials who don’t hope to one day, according to a survey conducted by Qualtrics, a Provo, Utah-based survey software firm, and venture capital firm Accel Partners (a Qualtrics investor).

Nearly 80 percent of millennials own cars and 75 percent of millennials who don’t own a car aspire to own one, the Accel + Qualtrics Millennial Study 2017 found.

In last week’s blog, A Rocky Road Ahead for the Auto Industry, I wrote about how some industry analysts believe auto sales have peaked and are set to trend downward. Without trying to put them into a box, young people’s attitudes toward cars might be partly responsible.

A Softening of Drivers Licenses

One major truth facing the industry is the fact that a lower proportion of young people have drivers licenses today compared to their counterparts in the 1980s.

In a 2016 report examining changes in driver licensure in the U.S. from 1983 to 2014, researchers at the University of Michigan found a continuous decrease in the percentage of those under age 45 with a license.

About 87 percent of 19-year-olds in 1983 had their licenses, but more than 30 years later, that percentage had dropped to 69 percent. Even the proportion of Americans ages 45-69 with driver’s licenses have declined overall since 2008, following a 25-year rise.

Delayed Buyers

One could surmise from this study that millennials could bring about a historic collapse in auto sales because they will reject vehicle ownership entirely in favor of car-sharing, on-demand services and, in a few years, shared autonomous vehicles.

In fact, the share of the new-car market jumped to 28 percent for those between 21 and 38 percent in 2015, according to the J.D. Power Information Network, which defines millennials as those between 21 and 38.

That’s a big improvement from 2010, when millennials — who make up around 30 percent of the population — bought just 17 percent of new cars. That had auto executives wondering aloud if the trend would be permanent.

Still, it is probably true that many millennials simply cannot afford to buy a new car, because they are under employed and/or saddled with tons of college debt. They will either resort to buying a used car or hold off on car ownership entirely.

This is particularly true in large cities where housing prices are high, public transportation and Uber or Lyft are available and where just parking a car can be a major expense.

Even if and when these young, carless urbanites become middle-aged and move to the suburbs, thereby requiring their need for a car, the fact that they have postponed buying a car poses a problem for the auto industry. It likely means they will buy fewer cars during their lifetime.

The Utilitarian Aspect

I grew up in the generation of the “muscle car,” exclusively Detroit-powered V-8s known for creating a little havoc on the streets. The closest I got to one was a 1968 Pontiac Firebird 328. It was red with a white convertible top.

My next vehicle would be a 1969 Volkswagen bus. Even though they were vastly different vehicles, both the Firebird and the VW bus represented freedom of sorts for a dumb kid venturing out into the world.

Many of today’s young people view cars less as a status symbol and more like a utilitarian thing, like a pipe wrench. A survey last year by NerdWallet reported that while 75 percent of millennials who own a car plan to buy another within the next five years, 43 percent said owning a car is a hassle.

In short, car ownership appears not have the appeal or fascination with many young people today as it did with my generation. In a recent trip to Austin, I was struck by how many bicycles were parked outside of neighborhood bars and restaurants.  Made total sense to me now.

But again, it is lazy thinking to lump all young people into the millennial box with the belief that they think one way. A young man growing up in rural Oklahoma will likely see the world somewhat differently from a kid growing up in Boston.

For the kid in Oklahoma, that first set of wheels may indeed represent freedom, whereas the kid in Boston or Austin may be thinking, “I’ll get one if and when I have to.”

Carless in Seattle

Census data show that from 2010 to 2015, the percentage of Seattle households that own a vehicle declined, according to a report last week by The Seattle Times.

During that five-year span, car ownership among the city’s young , those younger than 35, had declined by about 3 percentage points. The data suggests that young newcomers to the city are, more often than not, choosing to forgo owning a car.

It’s a combination of economics and priorities.  As Seattle housing costs rise, cars are one expense that many young city dwellers are willing to sacrifice, Mark Hallenbeck, director of the Washington State Transportation Center at the University of Washington, told the newspaper.

“If you get away from the high set of fixed expenses that go with owning a car — monthly payments, parking, insurance — you can pay for the apartment … ,” he said. “You can go out to bars to meet your friends, and you can get around everywhere you need to go.”

Aside from the fact that many young people, particularly those living in large cities, have a rather ho-hum opinion of cars, there are likely other factors contributing to a cooling of car sales.

Too Many Cars on the Road

Deutsche Bank said in a recent report that the combination of rising interest rates and a slide in used-vehicle prices, make for a potentially not-so-good scenario for the auto industry.

Today’s cars are much more durable than in the past and fewer are being taken off the road. Scrappage has declined to about 11 million a year from about 13 million to 14 million a decade ago. Total vehicles in the U.S. have increased to 270 million, from 249 million at the end of 2012.

“This has led us to question whether the U.S. is broadly oversupplied, and whether trend demand in the 17 million range is fundamentally supported,” the Deutsche Bank analysts wrote. “If it is not, the oversupply should be self-correcting — the U.S. market will experience declining used-vehicle prices, pressuring new vehicle sales.”

Faced with the shifting consumer tastes of some (not all) millennials, an oversupply of cars on the road, and declining used-car prices, it would appear the auto industry faces some major headwinds that could result in softening sales and industry layoffs.

But this has long been a cyclical industry, with ups and downs. It should weather the storm much better than it did during the Great Recession.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

A Rocky Road Ahead for the Auto Industry

In Corporate Site Selection and Economic Development on May 7, 2017 at 10:12 am

Spring has sprung and ostensibly, things are looking not so bad for the U.S. economy.

The Labor Department on Friday said employers added 211,000 jobs in April, the 79th straight month of job gains, and the unemployment rate is down to 4.4 percent, its lowest since May 2007.

Wages are up (the average hourly earnings rose by 2.5 percent from the previous year to $26.19), and we are enjoying low inflation, low interest rates and low fuel prices at the pump.

With all these things going for it, why would the automotive industry be nervous? After all, U.S. consumers bought a record number of new cars and trucks in 2016. While a repeat performance in 2017 might be a tall order, there’s no reason to be overly concerned, right?

Well, maybe there is. After seven years of steady growth — including three consecutive years of record sales — some industry observers believe auto sales have peaked and are set to trend downward.

Sales Are Off

In April, sales of cars and light trucks were off 4.7 percent from the year before, a decline of 70,000 vehicles. That marks the fourth straight month, every month this calendar year, in which sales have declined on a year-over-year basis.

It is the longest stretch of declines since 2009, when the industry was embroiled in bankruptcies. So far in 2017, sales are off 2.4 percent, or by 133,000 vehicles, with the top six automakers in the U.S. market all reporting declines from their April sales a year ago.

Ford car and light truck deliveries fell 7.1 percent last month, while GM’s dropped 5.8 percent and Toyota’s decreased 4.4 percent. All three companies reported slumping sales for passenger cars including the Ford Fusion, Chevrolet Malibu and Toyota Prius sedans.

Most analysts have predicted that auto sales will suffer a small decline this year — to about 17.2 million vehicles from the record of 17.5 million sold last year.  Mark Wakefield, managing director and head of the automotive practice at AlixPartners, is forecasting auto sales to decline to 16.6 million vehicles in 2018, and 15.2 million in 2019.

“People are starting to see that this is not necessarily a plateau,” Wakefield told Bloomberg. “It’s a meaningful reduction, and they’re starting to make plans around that.”

Layoffs Have Begun

In response to softening sales, Ford Motor Co. announced last week that it would cut production of its medium-duty F-650 and F-750 model trucks, and temporarily lay off 130 workers at the Ohio Assembly Plant in Avon, Ohio.

According to The Wall Street Journal, the layoffs will likely last until Ford launches the latest version of its F-Series in September.

Ford temporarily shut down five plants in late 2016, and Chief Financial Officer Bob Shanks told automotive analysts in March during a conference call “Don’t be surprised” to see further temporary reductions in the months ahead.

Also, last week, General Motors Co. said it would shut down its Lordstown, Ohio, plant in July for two weeks, on top of a two-week shutdown previously announced for June.

GM will lay off as many as 1,100 workers at its Lansing Delta Township Assembly plant in Michigan when it cuts the plant’s third shift this month. About 700 of the workers are expected to be rehired by the end of the year. Three other G.M. plants are eliminating shifts, moves that will idle more than 3,000 other workers.

Said GM Chief Financial Officer Chuck Stevens in a conference call last week: “We are very focused on acting like we are in a downturn.”

Fiat Chrysler is laying off 3,200 employees at its Toledo Assembly Complex in Ohio, as it shifts Jeep Cherokee production to a plant in Illinois and prepares the Toledo plant make an all-new Jeep Wrangler. The laid off workers are expected to return, but the callbacks will not begin until the year’s fourth quarter. Another 550 jobs are being permanently eliminated from suppliers.

Bloating Inventories

When sales don’t materialize as expected, however, inventory can and usually will pile up. At the end of April, GM reported that it had 935,758 vehicles in inventory—which is 100 days’ worth of selling activity at the current rate. A year ago, the company had 618,000 vehicles in inventory, representing only 71 days of selling activity.

Ford had about 72 days’ worth of selling activity in inventory in April (about the same as it did in April 2016). The industry considers 60 days ideal.

When inventory builds up when sales are declining, dealers and automakers will often resort to cutting prices, providing more incentives, pushing credit on easier terms. Such short-term measures to boost sales will dampen profits.

Of course, any cuts in auto production in the U.S. are counter to the wishes of President Trump, who has been pushing carmakers to make more cars here and import fewer from other countries.

The Big Kahuna

U.S. manufacturing and auto manufacturing jobs have yet to reach their pre-recession levels, but the auto industry has seen steady improvement. Since 2009, when it bottomed out at just over 600,000 jobs, the auto sector has been above 900,000 jobs for the past two years and at 946,300 in April, according to Labor Department.

In short, the auto industry is still a very big deal to this country, and particularly to certain communities where it is the source of better paying jobs. When I was an economic developer in Alabama and Indiana, the automotive industry was the Big Kahuna in my book and I studied it relentlessly.

There is an old saying in the industry that when the economy catches a cold, the auto industry gets pneumonia. That is particularly true for communities where the automotive industry is a big employer.

Michigan’s Remarkable Turnaround

You would think, and you would be partly correct, that Michigan would be particularly vulnerable. Back in 2009, the unemployment rate rose to 14 percent. (It was 5.1 percent in March.) But the recovery in manufacturing jobs from 2009 to 2016 has been nothing short of remarkable.

From 2009 to 2016, manufacturing jobs in Michigan rose by nearly 32 percent compared with just over 4 percent nationally. Nearly one of every three new jobs in the state during that eight-year span was in manufacturing.

Now I know what you are thinking. You’re thinking that so goes the auto industry, so goes Michigan. And while there is some truth to that, what I find most compelling is the fact that most of the new manufacturing jobs were NOT in the auto sector.

Remember that I said that manufacturing jobs accounted for about 32 percent of the total jobs growth in Michigan from 2009 to 2016, compared to 4 percent nationally. Incredibly, non-transportation manufacturing jobs added 18.5 percent.

What this suggests is that when there is another downturn in the economy, and there always another downturn on the horizon, Michigan may fare somewhat better than it has in the past. Mind you, automotive remains hugely important, but there are a host of manufacturers there making non-automotive products in medical device, aerospace, and others.

In neighboring Indiana, the automotive manufacturing sector is a $15.8 billion industry that employs more than 100,000 people. Automotive manufacturing is the second-largest manufacturing sector in Indiana, behind only chemical production. Automotive jobs have seen a 40 percent increase since 2009.

Some Parting Thoughts

As a site selection consultant for companies and an economic development consultant for communities, one of the things I like most about the multi-state Great Lakes Region is its deep bench in manufacturing talent, at least in comparison to much of the country.

That does not mean there are not shortages of talent. The tool & die industry, making the molds for which auto components are made, is facing an acute shortage of experienced and qualified workers, according to a recent recent report by the Center of Automotive Research.

That is but one headwind facing the automotive industry. There are others, which I hope to further touch on in next week’s blog.

In the meantime, I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com

Our Big Fat Retail Meltdown

In Corporate Site Selection and Economic Development on April 23, 2017 at 9:08 am

About four miles from my home, demolition has begun on the very big Valley View Mall in North Dallas. And I think my wife and I are partly responsible in that we never went there.

But not a week goes by that we don’t receive multiple packages delivered to our doorstep via Amazon. Indeed, I think of my wife as the Amazon Queen, and I am her vassal.

Speick Natural Soap Bar 3.5 Ounces (Pack of 3) arrived on Friday. This German product “LEAVES YOU FEELING INVIGORATED AND REFRESHED, making it an ideal addition to your morning shower routine.” Boy howdy, I can’t wait.

Also on Friday, Bebe Stores, which models itself as a purveyor of “unique, sophisticated and timelessly sexy” clothing for women, said it plans to close its remaining 168 stores in the United States and Canada by the end of May, according to a regulatory filing.

The Latest Casualties

Bebe is the latest brick-and-mortar casualty in what some observers are starting to call a “retail apocalypse.”

Payless ShoeSource, hhgregg, The Limited, RadioShack, BCBG, Wet Seal, Gormans, Eastern Outfitters, and Gander Mountain are among the retailers that have filed for bankruptcy so far this year, and most are closing hundreds of stores as a result.

Retailers that once ruled the shopping mall roost, like Macy’s, JCPenney and Sears, while staying in business for now, are closing hundreds of stores and cutting thousands of jobs.

More than 3,500 stores are expected to close over the next several months.

The Great Disrupter

Amazon, the behemoth of online retail, is the big winner of this retail meltdown. It has been systematically dismantling retail and thereby reinventing it. In doing so, Amazon is becoming a primary shopping search engine for consumers, with 55 percent of searches beginning on the site.

That in turn could lead to continued growth in the company’s ad business, which NYU Stern School of Business professor Scott Galloway told CNBC would “put them in the league of Facebook and Google.”

“Amazon is becoming all of retail,” said Galloway, making it “the most disruptive company in the largest economy in the world.” Eventually, people will only shop at Amazon, he said.

Something’s Happening Here

Now that might be an overstatement by the good professor. I happen to believe there will always be a place for stores. But what is clear is that something very big and structural is happening to retail.

Overall retail spending is not appreciably down, so why the demise of storefronts? There are multiple trends happening, all of which are changing the face of American shopping.

The rise of e-commerce is certainly one reason, but so, too, is the oversaturation of retail space in the U.S. (there’s just way too much built out retail space), and a restaurant renaissance, which is where young people want to spend their money. I will briefly touch on all three.

Online Buying

Easy return policies have made online shopping cheap, easy, and risk-free for the Amazon Queen in my home. And this is particularly true when it comes to her purchases of apparel, which is now the largest e-commerce category.

What’s more, mobile shopping is getting easier because of apps and mobile wallets. Since 2010, mobile commerce has grown from 2 percent of digital spending to 20 percent.

People used to make several trips to a store before buying an expensive item like a couch. Now they sit on the couch to make their purchases.

Too Much Retail Space

In a conference call with analysts last month, Urban Outfitters Chief Executive Officer Richard Hayne said there are simply too many stores.

“The U.S. market is oversaturated with retail space and far too much of that space is occupied by stores selling apparel,” he said. “Retail square feet per capita in the United States is more than six times that of Europe or Japan. And this doesn’t count digital commerce.”

Too much square footage was added in the 1990s and early 2000s, with thousands of stores opening, he said.

“This created a bubble, and like housing, that bubble has now burst,” he said. “We are seeing the results: Doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”

There are about 1,200 malls in U.S. today. Some analysts say that number will shrink to 900 a decade from now. Mall visits declined 50 percent between 2010 and 2013, according to Cushman and Wakefield, and the numbers keep falling.

Less Stuff, More Meals Out

In our zeal to downsize and simplify, my wife and I recently gave a local auction house a lot of furniture and 48 boxes of books to be sold. Even if she is the Amazon Queen, we don’t buy nearly as much stuff as we used to. Materialism is not high on our agenda.

But we do like to eat out, and we do enjoy travel.

We are not so unique in that regard. Consumers have shifted their spending away from clothes (it has declined 20 percent since 2000) toward travel and dining out.

Travel is booming. Despite treating its customers like livestock, U.S. airlines last year set a record, with 823 million passengers. But the rise of restaurants has been even more dramatic.

Since 2005, sales at “food services and drinking places” have grown twice as fast as all other retail spending. With more options, shoppers are eating out at restaurants and bars, ordering in on their phones or snagging groceries at convenience stores.

In 2016, for the first time ever, Americans spent more money in restaurants and bars than at grocery stores.

In essence, what these all these trends show is that our behavior as shoppers is fundamentally changing. Some retailers, particularly those with large fleets of brick-and-mortar stores, will not be able to adapt and survive in the new retail environment.

A Slow-Rolling Crisis

Since October, about 89,000 workers in general merchandise stores have lost their jobs, which is more than the number of people employed in the entire US coal industry, The New York Times reported.

The effects of these job losses will hit some local economies hard, according to Mark Cohen, the director of retail studies at Columbia Business School.

“This is creating a slow-rolling crisis,” Cohen told Business Insider. “The people that work in retail stores will lose their jobs, then spend less money in retail stores because they are no longer employed. That creates a cascade of economic challenges.”

Like coal miners, retail workers don’t typically have a set of skills that’s easily transferable to another industry, according to Cohen.

The retail industry typically pays low wages and employs about one out of every 10 American workers. It provides employment to people in every age bracket, as well as those who are relatively low-skilled.

The Economic Development Angle

I have run across many communities that have an economic development retail strategy. I don’t necessarily fault that, especially when it comes to creating a vibrancy on Main Street downtown. You want that. You don’t want a boarded up Main Street.

But when you place too much emphasis on retail, and this is particularly true in the suburban areas, you might be setting yourself up for a fall. Better to think mixed use.

I know of suburban communities here in the Dallas-Fort Worth Metroplex that see retail to the exclusion of everything else as The Golden Goose to funding local government via sales tax dollars. With the structural changes now taking place, they may want to rethink that.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.

For Business Development, Think Customer and Process

In Corporate Site Selection and Economic Development on April 16, 2017 at 12:06 pm

The well-known phrase “first, do no harm” is actually not in the Hippocratic Oath historically taken by physicians, but the purpose and the meaning certainly is.

Based on the fiasco created by United Airlines this past week with the literal beating of a passenger that it wanted to “re-accommodate,” I think most businesses, big and small, should consider taking an oath to putting their customers first.

Jeff Bezos, CEO and founder of Amazon, credits his company’s focus on customer service for its success. The e-commerce giant’s shares hit an all-time high this month and are up nearly 50 percent over the past year alone.

In his latest annual shareholder letter released last week, Bezos wrote:

“There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.

“Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.”

A company’s desire to delight customers can truly differentiate it from the competition.

First, Do Not Annoy (Or Offend)

Economic development organizations, those entities charged with  sparking economic change and vitality in communities via capital investment and job creation, should be obsessed with customer service. And that goes for serving existing businesses, entrepreneurial startups, or in the recruitment of new companies to their respective communities.

It is in that latter category that I have been the recipient of some ham-fisted attempts at business development by economic development organizations. To put it bluntly, they have annoyed me with nonsensical emails that they should never have been sent to me.

Email, while incredibly important, is already an annoying necessity by virtue of the fact that every day I must wade through it to delete those messages that have absolute zero bearing on my business or what I do. And that is after employing spam filters.

Mind you, most emails that I get from economic development organizations are good and informative and worth keeping. And for that, I am appreciative.

But I continue to get emails from EDOs inviting me to one-day events that should have only been sent to community stakeholders and not to a consultant (me) 1,000 miles away. (The exception is if you are paying me to speak at your event, to which I may spend several days in your community.)

Inappropriate Emails

Last week alone, I got at least a half dozen of wholly inappropriate emails from EDOs. One was a survey for business owners in a town in Minnesota. Being that I’m in Dallas, there was no reason to junk up my email with that.

Then I got another one for a one-day event in Michigan, in which it was obvious that it was not directed to me per se, but sent en masse to virtually anyone with a pulse. Delete.

I got three emails, two from ED groups in Florida and another from one in Louisiana, all of which addressed me as if I were some muckety muck in an aerospace company. They asked to meet with me at the upcoming MRO Americas trade show in Orlando about moving my company to their respective communities.

And the crazy part is that I actually know two of the economic developers who sent me this nonsense. I responded to their off-the-mark emails with, “Really?”

Crazier still, I am not even registered to attend this particular trade show.

Talk About Crazy

True story. When I was an economic developer some years back, I attended a big manufacturing trade show in Chicago. I recall that it was a pretty productive event, and that I had some good meetings with companies.

A couple of weeks later, I got a phone call from a sales rep with a company that manufactures conveyer belts. I kid you not, the sales rep asked about my interest in buying industrial conveyer belts from his company.

My response was something like this: “Do you have any idea who you are calling? Had you simply looked up my organization’s name on the internet, you would immediately see that I work for an economic development organization. We don’t buy industrial belts.”

Having been in their shoes, I try to cut most sales people a break and be respectful, but that particular phone call was beyond stupid.

Business Development 101

Before you make that call or send that email, it’s always best to know who you are communicating with. Have at least a basic knowledge of who that person is, what they do, who they work for, and what that company or organization does.

In short, a little due diligence can go a long way. Folks, this is basic blocking and tackling, which I see too many companies and economic development organizations failing to do.

It has me wondering, “What were they thinking?” More often than not, they weren’t.

For business development to be effective, and I am talking essentially about sales, it should be process-driven. But here is the key — the process needs to be smart and right. It cannot be unthinking.

As Bezos wrote to shareholders last week, “It’s not that rare to hear a junior leader defend a bad outcome with something like, ‘Well, we followed the process. A more experienced leader will use it as an opportunity to investigate and improve the process.”

To my economic development friends who send me junk emails, I would say this is opportunity to learn and improve your process. If you even have one.

A Teaching Moment

My purpose is not to pick on or embarrass anyone. For that reason, I have named no names. My purpose is simply to impart some things that I have learned, often through making my own embarrassing errors.

Of the three economic developers who sent me recruiting emails last week, one blamed it on his IT department, while another didn’t respond at all to my “Really?” comeback. The third apologized, saying he would remove me from all future outgoing emails, which is NOT the right solution.

The fact is that I DO want to stay apprised of what is happening in communities when it is relevant to me as a site selection/economic development consultant. But his response is actually a common one, to which I wrote two years ago in a blog entitled Sort That Database and Everything Will Be Gravy.

In a series of back and forth emails, which prompted that particular blog, I was trying to explain to an economic developer in Kansas that it should not be too hard to differentiate email communications between internal and external stakeholders.

Soon thereafter, I got an email from her boss, as she must have shared our conversation with him: “Thank you for your constructive feedback. Thanks to you, we have now started a ‘site selection consultant’ list which we will target for when we have project announcements.”

Bingo. They got it. They understood that the right solution was to sort their database of contacts in order to ensure that the right messages were going out to the right people.

Executing on the Right Process

The nuts and bolts of business development, which I can teach to economic development organizations, is an exercise in effective outreach. It entails putting in the time and hard work.

It means a never-ending mining of sources, ideally decision-makers and those who can influence decisions. (See Seek and Ye Shall Find: Connecting in a Connected World)

It means crafting an effective message aimed at a specific customer group. It more often than not means adding humanity, developing relationships and trust. In short, it means being smart, diligent and executing on the right process. (See A Rocky Road to Travel: Making Business Development Work)

The process should never be one-size-fits all. Mistakes invariably will happen, but if you recognize and correct your bad decisions and keep your customers’ needs foremost in your mind, good things will happen. The process becomes the solution.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.

Get Off My Lawn is Not the Best Message

In Corporate Site Selection and Economic Development on April 2, 2017 at 10:21 am

My friend, Andy Levine, president of Development Counsellors International, got me thinking when I read an article that he wrote for Forbes entitled, “Is Brand America Tanking?”

Levine points to U.S. News and World Report’s 2017 “Best Countries Ranking,” showing that the United States slipped from #4 in the previous ranking to #7 in the current report. The report is based on a survey of 21,362 people from 36 countries, who rank countries on 65 attributes ranging from “most business friendly” to “best to visit” to “richest traditions.”

My first thought was to hell with this. I don’t care what these people say or think. Keep in mind that I am an older guy.

Human Resources Manager during a job interview: What is your biggest weakness?

Old Man: Honesty.

Human Resources Manager: I don’t think honesty is a weakness.

Old Man: I don’t give a s**t what you think.

And that’s why a lot of old men don’t get hired.

But being that I want to get hired as an open-minded (if not honest) consultant, I grudgingly posed the question to myself, sort of: Should we care what the rest of the world thinks of us, meaning the U.S.?

Almost regretfully, I came to the conclusion that, yes, we should care, especially if we want to lead and influence events in the world to our benefit.

The Top Choice

To that end, it is very much in our interest that the U.S. remains the No. 1 recipient of foreign direct investment, which has a big economic impact on many communities, large and small, in this country.

European and Asian countries, as well as our two neighbors to the north and south, have demonstrated for a long time now their faith in the U.S. economy through high levels of FDI.

And while the U.S. remains the top choice for international investment, its share of worldwide investment has dropped to 21 percent in 2014 from 39 percent in 2000 because of increased competition from other countries, according to a 2016 report by the Organization for International Investment.

World’s Largest Consumer Market

Whether the U.S. retains its status as the world’s most attractive investment location depends largely on world macroeconomics and how we behave. When I say “we,” I’m referring to policies of the federal government. More on that later.

Most countries want to attract foreign investment, but the U.S. has a distinct advantage by having the world’s largest consumer market with a GDP of $18 trillion and 325 million people.

FDI into the U.S. in 2015 totaled a record $348 billion, led by the United Kingdom, Japan, and Germany, according to the U.S. Commerce Department. Some more factoids:

  • Majority-owned U.S. affiliates of foreign entities produced $360 billion in goods exports in 2013.
  • Majority-owned U.S. affiliates of foreign entities employed 6.1 million U.S. workers in 2013, up from 5.8 million in 2011. These firms generally provide compensation at higher levels than the U.S. average, at nearly $80,000 per U.S. employee in 2013, as compared to average earnings of $60,000 for workers in the economy as a whole.
  •  “Greenfield” investment expenditures by foreigners totaled $16.6 billion in 2014, with expenditures on establishing new businesses totaling $13.8 billion and expenditures on expanding existing businesses totaling $2.8 billion.
  • In 2014, foreign investors spent $224.7 billion acquiring U.S. companies; therefore, total first-year expenditures by foreign entities (acquisitions plus expansions plus establishment of new businesses) were $241.3 billion.

China Watch

According to the consulting firm Baker McKenzie, Chinese investments in the U.S. rose by almost 200 percent from 2015 to 2016 to $45.6 billion.

The main recipients of Chinese investment in 2016 were real estate and hospitality ($17.4 billion); transport, utilities and infrastructure ($6.0 billion); consumer products and services ($5.7 billion); and entertainment ($4.8 billion).

Together these accounted for nearly 70 percent of Chinese investment in the region. California received the most Chinese capital, with more than $16 billion in 2016.

But a slowdown in Chinese investment in the U.S. in 2017 could be in the works, according to Baker McKenzie, largely because of the political uncertainties posed by the Trump administration regarding trade.

A Great Revival?

President Donald Trump on Friday directed his administration to review U.S. trade deficits and clamp down on countries that abuse trade rules in two executive orders he said would start a new chapter for U.S. workers and businesses.

“Today I’m signing two executive orders that send this message loud and clear, and that set the stage for a great revival of American manufacturing,” Trump said in the Oval Office. “We’re going to get these bad trade deals straightened out.”

My guess is the president’s remarks, while they will play just fine in Akron and Birmingham, creates distinct nervousness in capital cities around the world. Will that necessarily come back to bite us?

Heck, I don’t know. (Take note this is the second week in a row that you have seen a consultant, this consultant, say he doesn’t know. That should be a record.)

Not Open for Business?

But it is clear the president has much of the world wondering about the U.S. role in the world, as he is parting greatly from past administrations on matters of trade, immigration, and defense.

These policy changes and America first rhetoric has created a growing perception that the U.S. is less welcoming to foreigners, according to the World Travel and Tourism Council. Some of this is based on President Trump’s revised executive order banning citizens from six Muslim-majority nations from traveling to the United States.

“The travel ban is not having a material impact yet. But we are seeing the unintended consequences of this now because the message has gone around the world that the U.S. is not open for business,” the WTTC’s President David Scowsill told Reuters.

Precipitous declines in airline bookings followed the Jan. 27 and March 6 travel ban announcements, and hotels reported less traffic in February.

An Unwelcome Mat?

Tourism Economics of Wayne, Pa., estimates that about 4.3 million fewer international travelers will visit the U.S. this year because of the bans, creating a revenue loss of $7.4 billion. Another 6.3 million visitors and $10.8 billion that they would have spent will be lost in 2018, it said.

“The U.S. has put an unwelcome mat at our front door,” Henry Harteveldt, president of Atmosphere Research Group, told USA Today.

Enhanced vetting procedures for all foreign visitors could further discourage not only foreign tourists but people coming to the U.S. for business and school.

Discouraging Students?

Nearly 600 colleges and universities wrote Feb. 3 to Homeland Security Secretary John Kelly to express concerns about discouraging international students, a major revenue source for universities.

About 1 million international students spend $32 billion a year in the U.S., according to the American Council on Education. And while only about 15,000 students are affected by the travel ban, critics contend that the Trump administration policies are having a chilling effect on foreign students coming to the U.S.

“Anecdotal evidence shows that many schools are seeing declines in international applications for the coming year, and other countries are seeing increases,” Terry Hartle, a senior vice president for the American Council on Education, told USA Today.

Many Silicon Valley companies, including Apple, Microsoft, Google, Facebook, Twitter, Yelp and Netflix, contend in lawsuits against the government that Trump’s travel ban would make it more difficult to “attract talent, business and investment to the United States.”

No Hard Evidence But …

I have really offered no evidence that Trump administration policies will in fact discourage FDI in this country, or will discourage foreign tourists from coming here, or from foreign students studying here.

But there are a litany of voices, industry voices, saying that these things might actually happen. If their warnings are correct, this could have meaningful economic impact on companies, institutions of higher learning, and communities as a whole and not in a good way.

Let’s Keep the Mat Out and the Light On

I have never liked or cared for this notion of “brand.” Maybe for corn flakes and deodorant. Rather, what matters to me, is reputation, sometimes deserved, sometimes not, of a place, of a person, of a company and its products or services.

I truly hope that our reputation as a country does not suffer because of poorly thought out, “Get Off My Lawn” policies that are perceived to be unwelcoming to foreign people. That’s not what America is or has been about.

Security and trade are important to the American people, as they should be. Indeed, there is convincing evidence, which I wrote about in an earlier blog, that enacted trade policies with China did in fact destroy U.S. manufacturing jobs, more so than even automation (although that train is clearly out of the station.)

But that doesn’t mean we shut ourselves off and snub the rest of the world. That’s not who we are. The welcome mat needs to stay on the front porch and the light needs to stay on.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.

The Next Big Blue Collar Job

In Corporate Site Selection and Economic Development on March 26, 2017 at 12:13 am

Economic developers are people whose jobs are to essentially stir things up and make things happen. Those “things” pertain to economic activity and growth, either on a state, regional or local level.

They are all too often obsessed with job creation as that is how they are typically judged, hired and fired. And while that is not a completely fair and accurate barometer, most of them realize that’s just the way it is.

I used to be an economic developer before becoming a consultant. Today, my clients fall into two camps – companies and communities. I help companies find optimal locations from which to operate (an art and a science to itself called site selection). I also help communities essentially find themselves, in order to create a better environment for job and wealth creation.

Economic developers tend to look at consultants like me, not only as sources for corporate investment projects that could land in their communities, which makes some sense, but also as all-knowing gurus concerning everything about the economy.

And we (the consultants) often opine as if we are these all-knowing gurus, and I am as guilty of that as the next person.  But the truth is we are the canaries in the coal mine. Some of us may having a somewhat better sense on how the economy is faring, but few of us are trained economists.

A Worthwhile Traveling Road Show

I tell you all this because Consultant Connect, a worthwhile traveling road show that connects economic developers to site selection consultants, rolled into Dallas last week, and being that I was in town, I attended.

These are almost always good events. I get to make new acquaintances and reaffirm old ones. I get to hear other consultants give their views, which more-often-than not, are pretty accurate and informative.

During the initial round-table discussion, (which was actually a square-table discussion), I offered that business confidence and consumer confidence are at multi-year highs, in part because of  President Trump’s pro-business agenda in lowering corporate taxes, deregulating industry, and enacting a big infrastructure spending program.

But will these things actually happen? Well, I really don’t know, and I said as much. Now how often do you hear a consultant say that?

The way I see it, when a Republican House, which had previously voted to repeal the Affordable Care Act more than 60 times, cannot agree on a repeal and replacement plan backed by the White House and House Speaker Paul Ryan, R-Wis., then you have to wonder.

Trump and Ryan say they will now turn their attention to the first major re-write of the tax code in more than 30 years. But they will have to do it without the momentum of victory on health care.

Just as important, the loss on health care will deprive Republicans of $1 trillion in tax cuts.

The stock market’s spurt of 10 percent since Election Day is due partly to the Trump agenda and an expanding global economy. That underlying pro-growth optimism remains for now, but if tax reform fails, that could change in a hurry.

I know what I don’t know. Predicting how the Trump Agenda will fare is something that I will let others do. It’s important to the economy and the fruits that may or may not come as a result. I just don’t know how this worm is going to turn.

But Here’s What I Do Know (Or At Least Suspect)

As anyone who follows this blog knows, I have written quite a bit about the digitization of manufacturing. It is happening, albeit I think we are still in the early stages of a new digital machine age that will both destroy jobs and create jobs.

In my blog of Feb. 12 entitled The Jobs Will Change and So Will We, I mentioned that McKinsey Global Institute stated in a recent report that companies on average are less than 40 percent digitized, including everything from deployments of digital tools in their supply chains to customer-facing products and services, meaning there’s a long ways to go.

Code.org, a non-profit that promotes computer science,  reports there are currently more than 500,000 open computing jobs, in every industry sector in the United States, from manufacturing to banking, from agriculture to healthcare, but only about 50,000 computer science graduates are becoming available every year.

Coding is Key

I suggested at Consultant Connect that the next big blue-collar job very well might be coding. In simple terms, coders write the instructions that tell computers what to do in programming languages that include SQL, Java, JavaScript, C# and Python.

The good news is that you don’t have to go to a four-year college to learn coding. Not only are more employers making code learning more accessible, but more and more schools are now introducing coding, even down the elementary school level.

An entire “coding bootcamp” industry has emerged out of a need for a more efficient and effective way of preparing people for the huge number of unfilled jobs in tech, which traditional higher education programs haven’t been able to address.

This level of education and exposure to coding won’t necessarily give these future coders all the knowledge to create complex AI algorithms, but it will be enough to qualify them for well-paying, reliable jobs in most IT departments.

A Shop Class for Coding

In short, coding has and will become more of a vocational skill, and as such it can and should be taught in vocational classes in high schools and community colleges.

When I was a kid, I took shop class in middle school, where I learned some basic wood-working and carpentry skills. (I think it was mandatory.) To the same end, why not a shop class for computer programming, a skill that will only grow in demand.

The national average salary for IT jobs is double the national average for all jobs: $81,000 annually.

Roughly half of the jobs in the top income quartile — those paying $57,000 or more per year — are in occupations that commonly require applicants to have at least some computer coding knowledge, according to an analysis of 26 million U.S. online job postings released in 2016 by job market analytics firm Burning Glass and Oracle Academy.

Demystifying Coding

It’s now a matter of demystifying coding as a profession that only gifted kids who go to a four-year university are capable of learning. Once people see that coding is a vocational skill that they, too, can learn, well, that will open doors to employment in a digital machine age.

Bit Source, a software development company in Eastern Kentucky,  has been hiring former coal miners, yes, you read that right, to do coding.

“We didn’t think that was that big of a jump,” Co-owner Rusty Justice said of the miners in the interview with the Lexington Herald Leader. “Daggone, these are high-tech workers that just get dirty.”

Justice describes himself on the Bit Source website as an  “unapologetic hillbilly,” who “loves Jesus, his family, baseball, and all things Appalachia.” Daggone, I would love the meet this man.

About four months ago, IBM Chief Executive Officer Ginni Rometty said her company plans to hire about 25,000 people in the U.S. and invest $1 billion over the next four years. Ms. Rometty said many technology jobs don’t require an advanced degree and she encouraged government investment in vocational education and training.

“We are hiring because the nature of work is evolving,” Rometty wrote in an Op-Ed in USA Today. “What matters most is that these employees – with jobs such as cloud computing technicians and services delivery specialists – have relevant skills, often obtained through vocational training.”

Coding and IT jobs can be, really should be the next big blue-collar jobs. But that will only happen if we as a nation get off our duff and offer the vocational training.

Keep On Pushing

As you can probably tell, I am not always so shy about giving my opinion. And while sometimes I may get it wrong or only half-right, I don’t believe I am wrong in stating that there is not enough emphasis today on vocational education. This is an area where we have just fallen down as a country.

I frequently come across community colleges that offer few vocational courses in any given place. I have especially seen this in rural communities where I have done economic development consulting. The vocational offerings are often slim to none, which puts a community at a huge disadvantage.

And I continue to meet local economic developers who confide in me that they do not have the kind of deep professional working relationships they would like to have with the presidents of their community colleges. (Plant managers have told me the same.)

To them I say, “You got to bridge that gap. You got to keep on pushing. Don’t give up. Workforce development is key.”

A Safe Bet

Of course, there is always the tendency in vocational education and planning of any sort of “fighting the last war” — pursuing a strategy that has been successful in the past but is no longer as relevant in the present or the future.

Knowing all the jobs in the future will be impossible, but it’s probably a safe bet that most will be based on digital technologies, which means coding is a good foundation.

One day, computer programming as we know it may become a vocation that is not in demand, one of peripheral importance. But until then, the demands of the job marketplace should be faithfully followed by educators, economic developers, policymakers, parents, and students, really everyone.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.

Trump’s “National Rebuilding”: How Do We Pay for It?

In Corporate Site Selection and Economic Development on March 12, 2017 at 10:45 am

Infrastructure underpins our everyday lives and the economy of the United States.

It goes well beyond roads and bridges, which we commonly think of, but includes drinking water and sewer service, the delivery of electricity, as well as railroads, transit systems, ports and broadband.

Since 1998, the American Society of Civil Engineers has been chronicling the decline of infrastructure category by category. Every four years it publishes a report card to the nation, and the latest assessment, which came out last week, assigned a grade of “D+” to U.S. infrastructure.

This should come as no great surprise as crumbling infrastructure has been making headlines for decades now. And since 1998, the U.S. has yet to score better than a D-plus.

This year’s score matches the country’s 2013 performance, whereas the cost of getting the country’s infrastructure up to speed have only gone up.

A Timely Report

What may make this latest report significant is its timeliness. It comes at the early stages of a new administration in which a president is using his bully pulpit to advocate in favor of a “national rebuilding.”

In his victory speech on election night, President-elect Donald Trump pledged to rebuild “highways, bridges, tunnels, airports, schools, hospitals” to make U.S. infrastructure “second to none.”

In his first address to Congress last month, President Trump invoked Dwight D. Eisenhower in his call for $1 trillion infrastructure spending.

“Another Republican President, Dwight D. Eisenhower, initiated the last truly great national infrastructure program — the building of the interstate highway system. The time has come for a new program of national rebuilding,” he said.

We have few details as of yet on the current administration’s initiative to steer as much as $1 trillion in public and private funds to U.S. infrastructure over the coming years. If it actually happens, it would likely mean a huge sustaining jumpstart to the economy, which last year grew by only by a tepid 1.6 percent.

As many economic developers and business professionals know, infrastructure spending not only creates direct and indirect jobs, but it also amplifies a community’s (and thereby our nation’s) ability to compete in a global economy. In short, we would be in a race with a newer and faster car.

The Bugaboo

But will Trump’s infrastructure plan actually happen? I’m no Washington insider, so I cannot predict with great confidence. The good news is that virtually everyone agrees the nation’s aging infrastructure is in need of fixing.

“President Trump is on to something when he calls for a national rebuilding,” ASCE President Norma Jean Mattei said in presenting the study. “But Congress and the American people have to pay for it.”

And therein lies the bugaboo. There is no agreement within Congress as of yet on how to pay for it, either by raising taxes, turning to private investment, or simply borrowing more money.

ASCE is advocating that the federal gas tax be raised by 25 cents and indexed to inflation. The ASCE notes that the current tax of 18.4 cents per gallon hasn’t been raised since 1993 and so hasn’t kept up with inflation and growing needs.

A Once-In-A-Generation Opportunity

Larry Summers, former Treasury Secretary under Bill Clinton, says the money to pay for an increase in infrastructure spending should be borrowed.

“A moment of unprecedentedly low interest rates should be a moment of unprecedentedly high investment,” Summers told CBS News. “And it’s a tragic irony that it’s a moment of unprecedentedly low investment.”

During the presidential campaign, then candidate Trump floated the idea of issuing billions of dollars in tax credits to private companies to take on these projects themselves. But in his speech before a joint session of Congress, he appeared to back off of that plan, calling for a $1 trillion infrastructure package financed through “both public and private capital.”

Officials with the U.S. Chamber of Commerce and the American Association of State Highway and Transportation Officials testified before the Senate Subcommittee on Transportation last week that there must be more public investment and that existing funding mechanisms to get dollars to states should be used.

“The needs are great, and the resources are limited,’’ said Ed Mortimer, the chamber’s executive director for transportation infrastructure. “This is a once-in-a-generation opportunity to modernize America’s infrastructure.’’

Speed the Process

The administration convened a meeting on March 2 with 15 cabinet members and agency leaders to discuss funding, projects, and possible changes in policy, regulations and statutes to speed the process.

President Trump met last week in the White House with business leaders, including billionaire Elon Musk, to discuss ways to encourage public-private partnerships. From that meeting, The Wall Street Journal reported that Trump is considering a plan that would require states to begin infrastructure projects within 90 days of receiving federal funding.

The president’s plan would pressure states to streamline their local permitting process, emphasize renovation of roads and highways over the construction of new ones and prioritize projects that are ready to quickly begin construction, according to the Journalreport.

“We’re not going to give the money to states unless they can prove that they can be ready, willing and able to start the project,” Trump said during a private meeting with aides and business executives, according to the newspaper.

“We don’t want to give them money if they’re all tied up for seven years with state bureaucracy,” he added.

The National Governors Association provided the White House with a list of 428 priority projects from 49 states and territories on Feb. 8 that it had solicited from the states.

Slow Going for Our Northern Neighbor

Assuming the administration will push forward with an infrastructure plan, there’s probably some things that Trump can learn from our northern neighbor.

Prime Minister Justin Trudeau’s plan to stimulate the Canadian economy and boost long-term growth with an infrastructure spending program has been slow to say the least. Some 17 months after his election win, Trudeau’s government has completed only eight of the 1,274 roads, bridges, and other projects it has approved.

“The hardest lesson to learn from Canada’s experience with infrastructure spending so far is just how long it takes for ‘shovel-ready’ projects to actually break ground,” Frances Donald, senior economist at Manulife Asset Management in Toronto told Bloomberg.

Also during last week’s meeting, Trump asked for more details about Musk’s Hyperloop project that would use small vehicles to transport people and goods through low-pressure tubes at high speeds, the White House said. The president also expressed interest in both new high-speed railroads and auctioning the broadcast spectrum to wireless carriers.

Despite the Tweets

Despite the president’s loose-cannon tweets, often factually wrong and revealing an unflattering side, measures of business and consumer confidence are soaring.

The Consumer Confidence Index is at a 15-year high and in early March, while Gallup’s U.S. Economic Confidence Index, a measure of how Americans rate current economic conditions, rose to the highest level in its nine-year history.  Jobless claims just hit the lowest level in 44 years.

Clearly, a Trump bump is happening, due in part to expectations of a more business-friendly environment under the current administration, which has proposed or endorsed the cutting of corporate taxes, a lessoning of regulations, and infrastructure spending.

Of course, expectations are one thing. Getting things done are another. I’ll be waiting just like you to see if words becomes actions.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.

Did Trade Kill U.S. Manufacturing Jobs?

In Corporate Site Selection and Economic Development on March 6, 2017 at 12:03 am

Economists have long asserted that free trade with other countries helps everybody, and for decades, politicians in both the Democratic and Republican parties have pretty much toed that line.

But Donald Trump and Bernie Sanders did not. Both predicated much of their presidential campaign rhetoric on the belief that “free trade” was in fact a raw deal for most working-class Americans.

It was a message that resonated with millions and seemed to have caught both parties off guard.

The basic precept for trade, ongoing well before this country became a country, is not that complicated. There are things made in other countries that we want to buy, and there are things made here in the United States that people in other countries want to buy.

But the facts and figures concerning trade and the state of U.S. manufacturing is where it becomes thorny. Divergent views are often based on the ideological predispositions of those interpreting the facts, which should come as no surprise.

I got a kick out of those who were predicting a few years ago a manufacturing “renaissance” for the U.S. powered by technological advances and lower production costs relative to our trading partners. Yes, there have been instances of reshoring, but just as much offshoring has also been occurring.

This much we do know — trade touches everyone’s lives, whether they know it or not. Consumers benefit with lower prices, and a greater variety of goods. Certain companies benefit by realizing greater profits, while highly-educated workers in this country benefit by being more in demand.

A Disruptive Force

Much of the debate over U.S. manufacturing concerns whether the massive and historic manufacturing job losses in the 2000s were because of trade or automation. Most defenders of free trade put the onus of job loss on automation.

But more and more, economists are now starting to realize, albeit slower than many production workers in factories, that trade can be disruptive force to an economy. That aspect was addressed on Friday by Commerce Secretary Wilbur Ross soon after being confirmed.

“We’ll be aggressive on trade because we know that deals that have been made historically have resulted in the great loss of manufacturing jobs, a great amount of closed manufacturing businesses,” the billionaire venture capitalist told CNBC. “We don’t want that to continue.”

A report  last month from the Information Technology and Innovation Foundation (ITIF) found that despite the prevailing narrative that automation was the main culprit behind the loss of more than 5 million manufacturing jobs from 2000 to 2010, trade pressure and faltering U.S. competitiveness were in fact responsible for more than half of those job losses.

The China Effect

Will Kimball and Robert Scott with the Economic Policy Institute estimated in a 2014 report that 55 percent of manufacturing job losses between 2001 and 2013, 2.4 million, were due to the rising trade deficit with China.  ITIF has estimated that 67 percent of the manufacturing jobs that disappeared in the 2000s have been due to trade, which includes the China effect.

That coincides closely with the findings of a 2013 paper by David H. Autor, an economist with the Massachusetts Institute of Technology (MIT), who found that Chinese import competition accounted for 55 percent of the loss of U.S. manufacturing jobs between 2000 and 2007.

To be sure, the automation of manufacturing processes contributed to the job losses, but with China displacing the U.S. as the largest manufacturing nation in 2010 and becoming the world’s dominant export power, U.S. manufacturing workers were hit more quickly.

Winners and Losers

“Trade almost necessarily grows the size of the economic pie, but it also changes the size of different slices. It’s quite possible for trade to increase the size of the pie by a few percent, and yet shrink some slices by 20 to 30 percent,” Autor said in an interview with The Washington Post last month.

“Because we’re a high-skill nation, when we trade with the rest of the world, we increase our production of skill-intensive products. So trade tends to increase the earnings of highly educated and skilled workers, and decrease the earnings and employment opportunities for less educated and less skilled workers.”

The fact that there are winners and losers from trade may make imminent sense, although U.S. policymakers have historically seemed to turn a blind eye.

Like a Bomb

In reality, we have seen in most visible and gut-wrenching terms that trade can dramatically reduce the livelihoods of a subset of people.

“One reason is that manufacturing is geographically concentrated, so when a sector starts to go into decline, everyone in a region loses their job simultaneously, just like what happened with coal mining,” said Autor. “It’s like a small bomb going off in your downtown.”

And while we know that the digitization of manufacturing is now underway, requiring a higher level of skills from workers, we also know that manufacturing historically has been a sort of refuge, offering high-paid work for millions of relatively less-educated workers. They earn more per hour and are generally not going to find equally good jobs.

The Missing Men

During this current disruptive period as the labor market has become more skill intensive, women have been more adaptive than men.

“No one spends a lot of time shedding tears about the loss of all those great clerical jobs, but it is the case that clerical jobs have dramatically contracted. Women have moved on and up,” Autor said.

“Whereas for men in manufacturing, there has not been nearly as strong of an educational response. When men are displaced from manufacturing, they tend to move into lower paid jobs, or just move out of the labor market. So they really are losing something they’re not going to replace in any short-term way.”

I touched on this phenomenon in a past blog entitled The Missing Men.  Consider that more than a fifth of American men — about 20 million — between 20 and 65 had no paid work last year.

Autor and a growing number of economists are now concluding that the shock of China’s entry into global manufacturing was unprecedented in the disruption it created for U.S. communities. It created much more hardship than anyone could have predicted.

Things We Can Do

So what is the answer? Putting the genie back in the bottle and expecting to get back a lot of labor-intensive manufacturing is highly unlikely, because relative to the much of the world, the U.S. remains a high-wage country.

Still, U.S. manufacturing costs are lower than in Germany, Japan, and the United Kingdom, and are almost on par with Korea. That said, U.S. companies pay among the highest effective corporate taxes in the industrialized world. That can be fixed as I advocated in my past blog, The Big Business Story to Come.

And the U.S. can aggressively enforce existing trade agreements and negotiate new ones. We can and should turn to the World Trade Organization when other countries engage in dumping, flooding the market with their products and bankrupting their competitors.

The ITIF recommends the Trump administration needs to expand, not eliminate, funding for programs like the Manufacturing Extension Partnership program at the National Institute of Standards and Technology, the Manufacturing USA program, the newly enacted Manufacturing Universities program, the Ex-Im Bank, and skills-training programs for manufacturing workers.

While manufacturing may never be the mass employer it once was, it remains incredibly important to our country because so many of our great ideas come from making new products. As such, much of our wealth is drawn from innovation rooted in manufacturing. May it remain so.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com or at 972-890-3733.