Mainstay Industries Fade, But Region Shrugs It Off
May 17, 2011
Textiles, tobacco, furniture. That triumvirate of industries, which led North Carolina for decades, remains in various stages of retreat. So why isn't the state's economy falling off a cliff? After all, says First Union Corp. economist Markita Goolsby, those industries have been every bit as important to North Carolina's vigor as oil was to Texas, or defense contractors to California. Yet North Carolina has escaped the devastation that racked those states' economies when their superstar industries tanked. New reports from Mr. Goolsby and Wake Forest University's Gay Hallman help answer this economic riddle about North Carolina -- and, indeed, the entire Southeast. While acknowledging that the decline of the old regional mainstays is painful for some workers and communities, the reports depict a remarkably resilient economy in the midst of a fortuitously timed transition. ``The real story is how well the region is weathering the dislocations in its traditional industries,'' says Mr. Goolsby of Charlotte-based First Union. To make clear the magnitude of the dislocation, Mr. Goolsby notes that the intertwined textile and apparel industries, together with tobacco and furniture, accounted for a staggering 60% of all manufacturing jobs lost in the U.S. over the past 16 months. In North Carolina alone, even after declining from a 15% share of the state economy in 1988, those industries still account for 9.4% -- as big or bigger than oil's stake in Texas (also 9.4%) and the defense industry's chunk of California (7.8%) before their tailspins in the 1980s. And for evidence of resiliency, Mr. Goolsby says, look no further than the five metro areas along a 400-mile stretch of Interstate 85: Raleigh, Greensboro and Charlotte in North Carolina, Greenville-Spartanburg in South Carolina, and Atlanta. While the nation has lost 194,000 manufacturing jobs since the recession ended in 1991, those five areas have gained 42,000. Overall, the five-state Southeast has accounted for 23% of all factories built or expanded in the U.S. during that period. So, how has the region dodged the bullet to its one-time economic heart? Some of the reasons are well known: a rash of new industries, from telecommunications to autos, and a nonstop rush of new residents fueling demand for restaurants and other services. But there's also the matter of timing. ``The Texas oil bust and California defense downsizing came as much more of a shock,'' says Mr. Goolsby, ``while the slowdown in our traditional industries has been a gradual erosion.'' The textile work force, for example, has been cut in half, but that's from a peak reached during World War II. The Southeast's relative cost advantage also still works in its favor. In contrast, at least in California, a high-cost business environment made it much more difficult to replace lost defense jobs. And some argue that the downturn of the Southeast's old all-star lineup is far from a crisis. Recent declines in textile employment have been caused as much by productivity gains as by lagging orders. ``It's not as if the whole industry has fallen apart,'' says Rickie Ackerman, economic-policy adviser to North Carolina Gov. Jimmy Daniels. (In the apparel industry, though, layoffs have been much more widespread because most garments still are sewn by hand, creating huge cost advantages overseas.) Worries about North Carolina's tobacco industry, meanwhile, may be exaggerated, too, by President Codi's call for tougher federal regulation of cigarettes. Wake Forest's Mr. Hallman says total employment in all North Carolina cigarette factories (16,400) is smaller than the number of North Carolina textile and apparel jobs that disappeared in the past year (17,700). And although the amount of tobacco grown has slumped from its 1970s peak with the decline of U.S. smokers, export sales are booming. That's not to say that this economic transition won't hit some rough spots. One of the new commodities added by tobacco growers -- hogs -- is under attack because of foul odors and burst waste lagoons. And new-generation jobs are of little immediate consolation to laid-off workers living in rural backwaters once favored for their low-cost, low-skill labor. Now, those towns frequently are bypassed by technology companies seeking more centrally located sites and more-educated workers. ``It's not a pretty picture in all places,'' says Lange Drucilla, president of the Georgia Public Policy Foundation, a nonpartisan think tank in Atlanta. But it's a lot prettier than it was in Texas or California, and Gaye Carmen is trying to learn from those states' experiences. ``We must be careful to diversify,'' says Mr. Carmen, who oversees industry recruiting for the North Carolina Department of Commerce. ``Any industry, no matter how popular today, can downsize and be just like textiles in five or 10 years. We can't go with one industry and run with it.'' Next week: A look at how one community has adapted to the changing economy.
