Economic Outlook n° 1187 | Special Report | The Reindustrialization of the United States
Focus on… The Southern Draw
▶ The Southern U.S. enjoys significant compensation, productivity and unit labor cost advantages compared to the rest of the country. These advantages caused an influx of foreign auto- makers and are expected to continue. Additionally, exports are providing a boost to southern state eco- nomies while the expansion of the Panama Canal in 2014 is likely to contribute to economic activity in the region. The South has outperformed the U.S. in terms of GDP growth in ten of the past twelve years. And while the U.S., as a whole, had two negative years of growth in 2008 and 2009, the more resilient South actually grew in 2008. More recently, the South grew more than twice as fast as the U.S. in 2011, and expecta- tions are that this outperformance will continue.
▶ Total compensation, which includes wages and benefits, are lowest in the South as shown in Figure 17 below. Total employment in the South has more than dou- bled over the past 50 years with an average growth rate 35% higher than the U.S. as a whole. Much of this job growth relative to the rest of the country can be attributed to the South’s lower labor costs, which in turn are due to its slower transition from an agricul- tural economy and to the lesser role of organized labor.
16. Real GDP Growth
-4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6%
▶ Productivity and unit labor cost statistics are not available by state or region, but proxies can be estimated using other data. The result of our analysis (see Table E below) show that four of the top six states in terms of producti- vity are Southern: Louisiana, Texas, North Carolina and New Mexico. When it comes to unit labor costs, five of the top eight are Southern.
▶ The Auto industry One sector that has benefitted from this reindustria- lization wave is the auto industry, as summarized in Table 6 below. It is noteworthy that the list is com- prised only of foreign automakers and none of the U.S. “Big Three” of Chrysler, Ford, and General Motors. Expansion of the Big Three into the South has been hampered by labor unions which have vehemently opposed moving production to “right-to-work” states in the South . By contrast, foreign automakers have taken advantage of this situation and moved production to the U.S. South where they could avoid elevated union wages and high legacy costs. Their lower costs, in turn, make the total cost of manufac- turing cars in the South lower than manufacturing overseas and shipping to the U.S. In addition to the Big Three, the U.S. auto industry now has a second concentration in the seven Southern states of Ala- bama, Georgia, Kentucky, Mississippi, South Carolina, ◾◾◾
Note: The South includes Alabama, Arizona, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia. Source: BEA
0 United States Northeast West Midwest South
Note: The sum of individual items may not equal totals due to rounding. Source : BLS