Alabamians tepid on economy

Mobile Register
12/08/02
Sam Hodges

Of late, many headlines about the U.S. economy have not been announcing good news.  The stock market has climbed somewhat in the last few months, but the Dow Jones industrial average remains about 1,500 points below where it was last December.  On Friday, the federal government reported that November's unemployment rate was 6 percent -- the highest since 1994.

That same day, the Bush administration said two top members of its economic team, Treasury Secretary Paul O'Neill and economic adviser Larry Lindsey, were stepping down amid criticism of their performance by some business leaders and members of Congress.

Continuing concerns about terrorism, and about the cost of the possible war against Iraq, have added to uncertainty about where the U.S. economy is headed.

"People react negatively to the economy based on all kinds of media reporting," said Semoon Chang, professor of economics at the University of South Alabama.

More than half of Alabamians expect the state economy will be about the same or worse over the next year, the new survey showed.  Thirty-five percent of those responding predicted better times.

Chang said he believes both the national and state economies have begun a slow recovery.  Though unemployment in Alabama has remained at about 5.7 percent over the last year, Chang pointed to improved retail sales and state tax collections during the past few months.

But he also noted that sales tax collections in Mobile have lagged.  The Mobile area unemployment rate for October was 6.3 percent -- more than a half point above the state rate.

Mobile depends to an unusual degree on manufacturing jobs, and manufacturing has been a particular struggling part of the U.S. economy, due to increased global competition, Chang said.

But he noted that major local construction projects -- including the Retirement Systems of Alabama building downtown -- will soon be under way, and should give the area economy a lift by the middle of 2003.
 
State of the U.S. & Local Economy

Center for Business and Economic Research
10/28/02
Semoon Chang

    Harvey Rosenblum is vice president and director of research at the U.S. Federal Reserve Bank of Dallas. He is also the immediate past president of the National Association of Business Economists. Lately, he has spent some time with Alan Greenspan to brief the chairman of the Fed’s board of directors regarding the status of the U.S. economy. On October 8, Rosenblum made a keynote presentation during the annual meetings of the Association for Business and Economic Research held at the Monte Carlo hotel in Las Vegas. This is the summary of his assessment of the current U.S. economy.

     The latest recession of the U.S. economy officially began in March 2001. Although an official announcement is yet to be made, the recession most likely ended in November with recovery starting in December 2001. The concern lately relates to the unusually weak recovery.  The growth rate of the U.S. economy during the first year of the current recovery is projected at
2.5 to 3 percent in comparison to the historical average of 6 percent. Rosenblum jokingly cited the guitar string theory by Milton Friedman according to which a weak recession leads to a weak recovery.

     Inventory corrections ran its course with low manufacturing and wholesale inventories.  Retail inventories are also low but slightly up lately. This is a good news, but the problem is a weak demand. Capital goods shipments and new orders are low, and retail sales show steady growth with consumer spending projected to increase at an annual rate of 3 to 3.5 percent. The
current recovery is a rare one in that the recovery is not accompanied by job increases.

    Although many are concerned about a double dip recession, Rosenblum does not feel that the weak U.S. economy is headed for a second recession any time soon. Retailers and wholesalers are maintaining low inventories, possibly for fear of a war in Iraq that may keep consumers out of stores and keep them at home watching the war on television.

     One concern of the falling stock prices is the wealth effect. Falling stock prices lower the net worth of household assets, making consumers feel poorer and reduce their spending. The lowered consumer spending may further weaken the economy, possibly leading to a double dip recession. Rosenblum notes that the ratio of household net worth to GDP was very high before
the 2001 recession and fell to 4% during the latest recession which, however, is still above the 3.5 percent historical average. Rosenblum claims that the wealth effect has been inoperable since 1995. If this assessment is accurate, the adverse impact of falling stock prices on the economy would not be as bad as some analysts may worry.

     Rosenblum is concerned about the financial market. The junk bond or high-yield corporate debt markets are paying a big spread over low-risk Treasury notes and bonds, “signaling trouble,” he said. Bond analysis firms rate the bonds of weak businesses as junk or below investment grade, because these businesses are considered more likely to fail than large, blue chip companies. When the economy is weak, marginal companies are generally more likely to encounter financial problems. So the yields on their bonds increase relative to government bonds.

     Although about 40 percent of the U.S. communities are burdened with an over-priced housing market, Rosenblum does not believe that there will be a housing market bubble about to burst. In 1995, there were few communities that had an overpriced housing market. It is highly likely that housing prices in many U.S. communities may not rise at least in the short run.

     Rosenblum spent a considerable amount of time commenting on the possibility of a deflation in the U.S. economy. Rosenblum states that the U.S. economy is winning its 50-year war with inflation but now needs to guard against deflation. “The economy seems to be as close to price stability as any time in the last 50 years,” and “Price stability may require boosting inflation rather than containing it,” said Rosenblum.

     The nation hasn’t yet achieved a complete price stability. But economists will know the battle is over when 30-year mortgage loan rates drop to around 4.5 percent and the Fed starts to adjust interest rates by one-eighth of a percentage point rather than one-quarter, he said. “If we do morph into disinflation, the (Federal Reserve Board’s) ability to do anything about it is extremely limited,” he said. The Fed may be unable to reduce already low short-term rates much more, which is one way the central bank stimulates the economy.

     If deflation comes, the federal government may have to increase spending to spur the economy, but political leaders could become so partisan and contentious that Congress may fail to take any action to boost a weakening economy. If Democrats and Republicans lack a solid majority in Congress, “you could end up in a political stalemate into which the economy continues
to sink into more deflation because nobody is doing anything about it,” he said.

     My readings of Rosenblum’s presentation are that the U.S. economy recovered from the 2001 recession in December last year, but began slowing down in July this year; that the economy is not likely to return to another recession soon but the growth will not be robust; that there is no indication of a strong recovery any time soon; and that the near future of the U.S. as well as the world economy is clouded because of the possibility of an impending war in Iraq, potential financial shocks in Japan and Brazil, and continuing threat from terrorism against the civilized nations.

     Finally, the local economy is behaving as expected. Like the national economy, the local recession also ended late last year but is very sluggish. Mobile is one of the areas in which houses are overpriced in relation to household income, but not enough to cause a bubble about to burst. Mobile County sales tax revenues from October last year (excluding sales made during September 2001) to August this year increased by 1.3 percent, clearly corroborating the sluggish growth hypothesis. The City of Mobile’s sales tax revenues during the same period increased by 2.8 percent but include revenues from the new two percent tax on out-of-county sales. The city’s problem in falling revenues is caused as much by the Schillinger effect as by its heavy dependence on business licenses that also vary with economic fluctuations. [schang@jaguar1.usouthal.edu]

Riley challenges governor's record on adding jobs
New Siegelman ad takes credit for creating 68,000 jobs since taking  office in 1999

Mobile Register
08/24/02
Bill Barrow

When Democratic Gov. Don Siegelman isn't promising to generate more money for public schools, he's touting his economic development record and claiming credit for 68,000 new jobs in Alabama since he took office in January 1999.

But federal Bureau of Labor Statistics show that about 30,000 fewer Alabamians have work now than when Siegelman's term began, a point his election rival, U.S. Rep. Bob Riley of Ashland, hastened to point out Friday in response to Siegelman's latest television advertisement.

On balance, University of South Alabama economist Semoon Chang said the back-and-forth is likely a case of two politicians highlighting the numbers that work to their advantage:  for Siegelman, the number of new jobs; for Riley, the number that has been lost.

"The actual number of jobs that are directly under the influence of the governor is extremely limited," Chang said.  "The number fluctuates far more based on the national economy than on any decisions that are made in Montgomery."

Chang said federal economic policy - such as the North American Free Trade Agreement or NAFTA - have a stronger bearing on Alabama's job market than the daily activities of the governor.

Andrews seized on that philosophy, as well, saying, "Governor Siegelman has done everything he can to create jobs to replace those that Congressman Riley has cut because of NAFTA."

Congress approved NAFTA, pushed by the first Bush administration and eventually enacted under President Clinton, in 1993.  Riley did not assume a congressional seat until 1997.

A Register review of Riley's congressional voting record showed that the congressman frequently broke with his party, seen generally as supporting free trade, to cast more protectionist, trade-restricting votes until recently.  Last month, he cast a vote in favor of expanding President Bush's authority to negotiate trade agreements with other countries.

The national unemployment rate in June was 5.9 percent following a steady climb since the rate bottomed out at just below 4 percent during the third quarter of 2000.  Alabama's unemployment rate for June, the latest month for which federal figures are available, checked in at 5.4 percent, below the national average.

In January of 1999, when Siegelman took office, both the national unemployment rate and Alabama's rate registered 4.3 percent.

All of these figures are adjusted to account for seasonal changes in the size of the nation's work force.

Chang said that voters should be wary of using any national or statewide unemployment statistic to choose a candidate.  The better measure, he added, is the big picture, which he argued has improved under Siegelman.

"An important factor is having a governor project a positive image to outside business, and Governor Siegelman has done that," Chang said.  "Of course, there is nothing to say that Representative Riley could not have done the same thing had he been governor.  We just don't know."

Even Siegelman's recent habit of blasting big business for paying slight tax bills - a populist theme the governor has trumpeted since mid-year cuts to the education budget in 2001 - doesn't sully the state's image, Chang said.

"That's a separate issue," he explained.  "It is certainly not unreasonable to look at what corporations pay here compared with what corporations must pay in other states."
 

Storm's grip on S. Dade still powerful

The Miami Herald
August 20, 2002

ABOUT THIS REPORT
This story was produced by Herald reporters Martin Merzer, Elinor J. Brecher, Daniel de Vise, William Yardley, Tim Henderson and Gregg Fields, with the assistance of Florida International University's International Hurricane Center and Institute for Public Opinion Research.

The believers defy the notion -- refined considerably here in the Fresh-Start State -- that when trouble arises, you get out of the way, jump ship, depart to start fresh elsewhere.

Fred Moore, Arturo Lopez, Kimberly Pile-Demps and others like them lived in South Miami-Dade when Hurricane Andrew remapped the region. And they live there still, though dashed dreams and grinding reality have left the area still trying to find its economic footing.

They stayed because home is home, that is all.

And they learned to adapt, because in the decade since Andrew, the hurricane served as a constant undercurrent. It shaped the evolution of the place and the opportunities and obstacles its people confronted.

''This was my life,'' said Moore, a longtime salesman for Five Brothers Produce, a packing house in Florida City that specializes in packing and shipping South Miami-Dade's abundant green bean crop. ``All we thought about was rebuilding, getting back in the shape to go.''

But the challenges were enormous, virtually unprecedented.

Semoon Chang, an economist at the University of South Alabama who has extensively studied the economics of catastrophes, said South Miami-Dade's struggles still run counter to the norm.

`A SPECIAL CASE'

''Areas hit by disasters typically experience an economic boom,'' Chang said, because insurance and government money pours in. ``Hurricane Andrew is a special case because the damage was so massive.''

Explanation May Bring Support for RSA Project

Mobile Register
06/09/02
Semoon Chang

Editor's note:  Semoon Chang, director of the University of South Alabama's Center for Business and Economic Research, writes an occasional column for the Register.

I teach evening classes, because I enjoy teaching mature and motivated students. When another snag on the RSA Tower project appeared about ten days ago in the form of the RSA taking over the Battle House hotel renovation that effectively allows the exemption of the ad valorem tax on the renovated property, a controversy as well as a lively debate swept our
community with many expressing an opinion of opposing the project. The city council will have to pass a resolution approving the change for the entire project to move on toward a groundbreaking before this month is over.

Without any more explanation beyond what was reported in the Mobile Register, I took a poll of my students in my undergraduate and graduate classes. The vote was 5 to 1 against approving the project. I then explained potential benefits and costs of the project to the local community, and took a poll of the same students after the explanation. The vote was unanimously in favor of supporting the change as well as the project.

Aren’t you curious of what my explanation was?

First of all, the ad valorem tax that will be exempted with the approval of the change is rather small possibly slightly more than $100,000 per year because the building is classified as a historical building. The amount of revenues from the city’s six percent lodging tax and five percent tax on sales of food and beverages form the proposed 228 rooms easily exceeds $250,000
per year even at a conservative assumption of 45 to 50 percent occupancy rates.

Secondly, Mobile County will be earning $100,000 or more annually from the two percent county lodging tax and one percent sales tax on sales of food and beverages at the hotel when completed, although the county contributes little, if any, toward the project. The state will be making more than $100,000 per year from its four percent lodging tax and four percent sales tax
from the hotel.

Thirdly, construction expenditures of the entire project will make many local suppliers of construction materials happy if not rich. How much out of the entire $162 million will be spent locally depends on how ready local suppliers are in supplying the needed material. My guess is that approximately 75 percent, or $120 million, of the total amount would be spent locally for
procurement. This construction phase alone will generate one-time tax revenues of $950,226 for the City of Mobile, $242,814 for Mobile County, and $2,968,091 for the state. Note that the types of building material that will be purchased during the construction stage are so numerous that it would be silly to list them here.

Fourthly, the projected number of new jobs from managing the office tower and the hotel is 211. This represents an added employment impact to the existing job market. Assuming that each of the 211 employees earns only $17,778, this new employment will generate, annually, tax revenues of $101,328 for the City of Mobile, $57,887 for Mobile County, and $288,786 for the state.

Importantly, these impact estimates do not include many other positive impacts such as (a) expenditures by hotel guests outside the hotel; (b) impact of new tenants of the Tower office space on new jobs, wages, business expenditures, and all taxes including ad valorem taxes on furniture and equipment; and (c) impact of new tourists and visitors attracted by the tower as well as the added lodging facility.

Most importantly, the impact estimates shown in the above do not include what I believe to be the most important impact, that is, the impact of the RSA Tower on the progressive image of the area that will lead to future business growth and industrial recruiting. This benefit cannot be measured and thus I did not estimate these benefits even if I admit that these are the most
important benefits of the entire project. Within a short number of years upon construction of the Tower complex, I expect numerous positive changes to occur in the downtown area in terms of the composition of retail and service industries.

I also realize that there are two groups of industries that may be affected adversely in the short run: owners of existing downtown hotels and owners of existing downtown lease properties.

Because of the relatively small number of rooms (228) and because of the more upscale nature of the RSA hotel, the amount of new business that the RSA Tower will generate when completed is expected to more than offset any adverse impact that the new hotel may have on existing downtown hotels. In the I-65 beltline in west Mobile, for instance, many new hotels were
added in recent years with almost no impact on the average occupancy rate. Unlike west Mobile in which new hotels were not accompanied by new businesses, the renovated Battle House hotel as well as other existing downtown hotels will be supported by new businesses that the RSA Tower is expected to generate.

 I do anticipate an adverse impact on existing downtown lease properties in the short run, because some tenants will be moving to the new Tower. Some current tenants will be moving because of the Tower, while others will be moving regardless of the Tower. The important point is that the RSA Tower cannot survive with local tenants alone. It has to attract large tenants from outside to make the project work. This is where the market power of the RSA and Dr. Bronner’s group will play an important role by becoming key partners in our efforts to attract new businesses and by raising the tide that will lift all of us in Mobile.

As a matter of fact, vacant rental space is widely spread throughout the city well beyond downtown. The vacant space has been created over ten years for a number of reasons: excessive competition between Delchamps and Food World, construction of the Government Plaza, new FBI and Mobile Register buildings, and significantly developments in the Schillinger Road area such as new Wal-Mart and other large stores. With or without the RSA Tower, the space glut problem will not go away until and unless the local economy grows and the structure of sales tax and business licenses is reformed.

Returning to my students, I did point out that one group of local businesses might be singled out to suffer in the short run and took another poll as to whether the local community should consider giving any consideration of limited tax concessions to the two group for a limited number of years. The idea was rejected unanimously by the students who stressed the importance
of competition in the market system as well as potential complications relating to possible similar requests from other groups in the future.

Keep in mind that the risk that Mobile is taking in the project is small in comparison to the risk that the RSA is taking in undertaking the project. I understand why some people are upset over the latest twist. I also understand why RSA wants to make the change before finalizing the contract in view of the significant increase in cost estimates. Reality is not like a western movie in which the right and the wrong are clearly separated. Real issues are more complicated than that and require a comparison of total benefits and total costs. As a Mobilian, I would cast my vote to support the project believing that: if RSA has that much confidence in Mobile’s future, why shouldn’t I? [schang@jaguar1.usouthal.edu]

A New Paradigm For Mobile's Future

Mobile Register
04/28/02
Semoon Chang

The April 5 issue of the Mobile Register reports that Baldwin County may no longer be a part of the Mobile metro area as defined by the U.S. Census Bureau.

The April issue of the monthly Business Alabama contains an advertisement by Montgomery boasting that Montgomery is the second largest city in the state.

The state of the city/county publication, prepared for an April 10 luncheon in Mobile, indicates that between 1990 and 2000 the Mobile County population increased by 5.6 percent, significantly below the 10.1 percent statewide increase during the same period.

What is going on?

Readers may be surprised to learn that from 1990 to 2000, the Mobile County population increased by 21,200 but the number of jobs in the county increased by no less than 35,897.

When jobs increase by 35,897, population should have increased by at least 50,000, not by 21,200.

The Mobile economy did grow significantly during the past decade, but tens of thousands of employees who benefited from the new jobs settled in Baldwin County.

It makes little, if any, sense to take Baldwin County out of the Mobile metro area when the major reason for the rapid growth in Baldwin County has been the growth in Mobile County.

With the groundbreaking of the RSA Tower scheduled only about a month away, isn't this a good time to re-assess our future potential and develop strategies outside the traditional paradigm?

Perhaps, the most important strategy may well have to be the formulation of a metro government much the same as Jacksonville and Nashville with the objective of completing the formation in 2020.

Likely benefits of the metro government include overall lower tax rates based on economies of scale, and reduction of a waste of resources in debating such issues as annexation, police jurisdiction and what have you.

Remember that we do have a number of highly successful metro activities in existence for many years.  These include Mobile County public schools, Circuit Court of Mobile County, Sheriff's office civil service, art and cultural activities, historic attractions and all kinds of social services.

These services do not know, nor discriminate against, any boundaries of cities within the county.  I am not naive enough to believe that simply because an idea is good, it will garner support.  At least to lower resistance to change, we can target the changing date toward formation of the metro government for year 2020 or even later.

If such an idea is still not acceptable, the least we need to do at this time is to establish a meaningful metro planning office (MPO) with full authorities.  Let me illustrate some ideas that can be processed through an MPO.

First of all, the sales tax rate has to be lowered at least in the city toward one low rate in the entire county.  Higher sales tax rates in the city have driven many businesses out of the city and, sometimes, out of the county.  No one in the county gains when we lose businesses.  The sales tax rate can be lowered in exchange for the elimination of selected exemptions.

Secondly, transportation projects should be developed within the framework of a long-range planning of the metro area.  The rapid growth in Baldwin County would not have happened without the completion of Interstate 10 across Mobile Bay.

The proposal of a limited-access highway connecting I-65 and I-10 near the Mobile Regional Airport merits a serious consideration and support.  The exact location of the connector, however, needs to be selected within the long range framework of a metro development because the new connector will lead to new businesses, new residential developments and possibly new towns along the connector, while causing some existing businesses in the I-65 beltline to be closed.  Has anyone figured out these impacts as well as impacts on the rest of the community for each of the proposed locations of the connector?

Thirdly, intelligent land-use plans should be developed with full authority for zoning as well as minimal architectural requirements.  Developments along Schillinger Road look increasingly uglier to me, as developments progress without a master plan.  Why is it so difficult, for instance, to organize a group of local architects and ask them to develop minimal quality standards of new and large buildings.

Every time I travel, I pay special attention to the shape of large buildings such as Wal-Mart.  The architectural design of Wal-Marts appears different depending on local requirements.  One Wal-Mart I saw in California had a Spanish style.  I did not even realize it was a Wal-Mart until I looked again.

It is almost irresponsible to allow developments in west Mobile that are totally dictated by individual developers rather than by a master plan that should make the area look better and better as more development progresses.

I am not sure who should lead this movement.  It is important for one of the public sector, educational and civic groups to take charge and act as bellwether leader so that we do not disappoint the spirit and promise of the new RSA Tower.

Strong support likely a key factor

Mobile Register
04/07/02
Semoon Chang

When Gov. Don Siegelman flew to Seoul sometime in October to meet Hyundai officials, he had a chance to read my article in The Korea Times, which is one of the two leading English newspapers in Korea.

When Siegelman came to Mobile for a tour of the area's exporting firms, he asked me to write an "objective" article promoting Alabama in the Korean newspaper.  I did and was told by the editor of the Korean newspaper that Hyundai officials acknowledged reading my article.

Monday's decision by Hyundai Motor to locate its $1 billion plant at Hope Hull thus has a personal ring to it.  Undoubtedly, the decision is excellent news to Alabama, which lost thousands of jobs in paper, chemical and textile industries during 2001.

Siegelman and officials at the Alabama Development Office deserve all the credit for attracting Hyundai against tough opponents from Georgia, Mississippi, Ohio, Kentucky, Virginia, and Tennessee.  Thanks to these officials, the Auto Alley of I-65 now extends from Ohio, Kentucky and Tennessee all the way to Alabama with its Mercedes-Benz (1994), Honda (2001), and now Hyundai (2002) plants.

About two months ago, a Japanese trade representative told me that Hyundai would choose Mississippi.  About a month ago, a source within the Korean community in Los Angeles felt that Ohio would be a winner.  The last rumor that I heard on April 1 from my Korean source was that Alabama would be the choice.

One critical factor in Hyundai Motor's final decision may well have been how strong was the support for the project by state leaders as well as residents.  On March 21, Alabama legislators passed an incentive package worth up to $118.5 million for Hyundai Motor, which was quickly signed by Gov. Siegelman.  What is important is not that the incentive package passed, but that the package passed with a vote of 95-0 in the House and 24-0 in the Senate.  Alabama legislators made a strong statement in support of the project.  Unanimous support for anything is rare in American politics.

Although, near the end of negotiation, Kentucky brought an incentive package that was at least as large as Alabama's, Kentucky's package was yet to be approved by the Kentucky Legislature.  This may well have been a big uncertainty that Hyundai officials may not have wanted to gamble on.  Further, unlike Alabama officials who did an excellent job in securing options to the land, Kentucky was still having a problem with at least one owner who demanded almost $100,000 per acre for the rural land that probably commanded a fraction of the asking price prior to the Hyundai announcement.

Hyundai Motors is one of several companies that comprise the Hyundai Group.  Other Hyundai companies of worldwide reputation include Hyundai Shipping, Hyundai Engineering and Construction, and Hyundai Asan, with specializes in tourism with North Korea.  Hyundai and Samsung are the two largest conglomerates in Korea, with business dealings all over the world.

Hyundai's Hope Hull plant will produce 300,000 cars beginning in 2005.  The models to be produced will include the next generation of Sonata that is developed under the project name of NF.  During 2001, Hyundai exported 346,000 cars to the U.S. market, and Kia, which is Hyundai's sister company, shipped 224,000 cars of its own to the U.S. market, for a total of 570,000 cars.  The two companies plan to export 624,000 cars to the U.S. market this year.

Barring an unexpected turn in the U.S. automobile market, the impact of the new Hyundai plant on Alabama is expected to be very substantial.  The impact should include an expansion of automotive parts suppliers' network, with did not exist until Mercedes-Benz arrived in 1994, a local supply of non-auto parts that may turn out to be almost as large in expenditures as direct wages paid to 2,000 or so employees, associated tax revenues, and participation in many community events.

Impact is also likely to be felt in the Mobile area.  First of all, the distance between Mobile and Hope Hull is short enough for suppliers in Mobile to contact Hyundai and Alabama officials for opportunities to participate in the company's procurement.

The Mobile Area Chamber of Commerce plans to assist local suppliers.  Secondly, the Alabama State Docks may be given a golden opportunity to begin auto-related businesses.  These businesses may include an import/export terminal, processing, and shipment of parts.

The existing regular shipping schedule from Mobile to Inchon, Korea, the projected expansion of container business, and the availability of the old Navy port, may well provide a key to the door that the port needs for its auto business.  Finally, the natural beauty and golfing and fishing opportunities in south Alabama likely are attractive to many employees of the new plant, improving the area's already resurgent tourism business.

Most importantly, Mercedes-Benz, Honda, and Hyundai plants should have convinced many potential investors that Alabama now has a critical mass of progressive leadership at all levels of government that has been sorely needed to overcome the historical perception of being a racist state that had long been a trademark of Alabama to outside investors.

Hyundai could tap State Docks for exports

Birmingham News
04/03/02
CHARLES R. McCAULEY
News staff writer

Chang Se-moon, a University of South Alabama economics professor, said the port of Mobile is in a good position to grab Hyundai business. "As they look to export to expanding markets in South America and Central America, Mobile will be the best equipped for them," he said.

Chang, who contributes articles to The Korea Times in Seoul, wrote in a Dec. 6 report: "There is a regular shipping schedule from Mobile to Inchon. If Hyundai has any plans to invade the South and Central American markets in the future, it cannot find a better port location to start from than the Port of Alabama in Mobile.

"This is because ships have to navigate about 100 miles off a narrow freshwater ship channel before they reach the Port of New Orleans, the nearest competitor to the Mobile port, from Gulf waters."

Alabama automakers Mercedes-Benz and Honda aren't using the port, Lyons said. But with Hyundai entering Alabama's automaking industry, the state is approaching the critical mass needed to make the shipping system work.

"The system has to do with the ships that come in with enough frequency and enough capacity to go to the right places, and Hyundai added in to what else is happening around the state with the Mercedes expansion, Honda, Toyota and even the Nissan plant that Alabama didn't get may be a future user of our port if we add that into the mix." Staff writer Michael Tomberlin contributed to this report.
 

Alabama's Port City
Surprise! Chemicals, aerospace bolster Mobile's economy too

Birmingham Business Journal
March 29, 2002
By Gilbert Nicholson
Staff

Think of Mobile's economy and the Alabama State Docks comes to mind. But there's more to the financial base of the state's only port city, such as the chemical and aerospace industries.

Meanwhile, a top economic development official thinks Mobile should aggressively pursue developing more commerce with Birmingham.

"We should do a more intentional job of working with Birmingham to make good things happen in Alabama," says Jim Apple, vice president for economic development at the Mobile Area Chamber of Commerce.

Toilet tissue and such

Just north of the State Docks on the Mobile River is Kimberly-Clark, the international consumer products company.

The 200-acre plant, owned for decades by Scott Paper, employs 845 who make Scott and Kleenex brand toilet tissue and paper towels for commercial and industrial accounts, says plant manager Paul Altermatt.

Last fall, Illinois-based IPSCO Steel opened a $425 million mini-mill in Mobile, billed as the company's newest world-class in-line plate facility.

"Manufacturing brings most of the money in from the outside," says Semoon Chang, director of the Center for Business and Economic Research at the University of South Alabama.

Mobile's own 280 Corridor

Mobile has its share of the high-tech industry, attracting interest from around the country. A good example is Oregon-based Mentor Graphics, a $600 million software company that recently bought Mobile's Accelerated Technology, a maker of operating software for embedded computer systems.

Mentor plans to invest $21 million to increase the 150-person work force by 10 percent a year in the next five years, according to published reports.

Like most cities its size, Mobile's largest employers are government-related. The city's largest is the Mobile County School System with 7,791 workers. The University of South Alabama has 4,800, which includes a major teaching hospital, USA Medical Center, according to the Mobile chamber's Web site.

Meanwhile, the city has its own version of Birmingham's bustling U.S. Highway 280 retail corridor.

"We have Schillinger Road," says the University of South Alabama's Chang. "All the large retail stores are being built along Schillinger. It's growing very well."

Downsides

Mobile's dependence on manufacturing and processing cuts both ways. In 2001, the area lost 2,500 manufacturing jobs, Chang says. "One problem with Mobile is we don't have a banking headquarters," he adds. "They're all located in Birmingham."
 

Tug-of-war for Hyundai facility
Bidding war includes tax breaks, training funds

The Cincinnati Enquirer
March 22, 2002
By Patrick Crowley

Kentucky and Alabama are still in the hunt for Hyundai because foreign automakers have thrived in those states, said economics professor Semoon Chang of the University of South Alabama.

Dr. Chang, a native of Korea, is head of the university's Center for Business and Economic Research. He also is the author of several books and articles on international businesses and the Gulf Coast economy.

“Mercedes-Benz has performed better than expected. So has Toyota,” said Dr. Chang of automakers that already have plants in Alabama and Kentucky. “That has surely weighed heavily on the Hyundai people.”

Mr. Chang called the land disputes “a headache, not a deal killer.” Kentucky will not let the project go over one parcel of property, he said.

But when it comes to handicapping which state finally will win the Hyundai sweepstakes, Mr. Chang is betting on Alabama — he says it's “hotter” when it comes to attracting foreign auto plants.

“When it's all said and done, this is going to be a pure business decision,” Mr. Chang said. “The company is making a huge investment. They look at everything, but it comes down to where can they make the most money.

“That's what will drive the final decision.”

Southeastern salaries
Alabama's growth rate, however, lags behind both regional and national numbers

Mobile Register
02/10/02
By ANGIE DROBNIC and MIKE PERRY
Business Reporters

Annual pay for the Southeast states averaged $31,939 in 2000, a 5.1 percent increase over 1999, according to the U. S. Bureau of Labor Statistics.

Alabama's growth rate -- 3.4 percent -- was well below the national and regional averages but certainly not the worst. Indiana, Louisiana, Mississippi, Alaska, Hawaii and Maine all reported less growth.

The numbers do not surprise Semoon Chang, an economist for the University of South Alabama's Center for Business and Economic Research. In fact, Chang sees reason for optimism.

Over the past 25 years, Chang said Friday, Alabama has actually moved up as other states lagged.

"The state stalled when George Wallace was governor. But the state's been progressing ever since then," he said, citing developments such as Huntsville's Marshall Space Center and the University of Alabama-Birmingham Medical School, where research activities rank in the top 10 nationally. "What's hurt us is that we've lost so many manufacturing jobs in the past 12 months, in Mobile County alone," Chang said. "That's going to hurt our wage levels. But I do think it's a short-term impact because the economy is getting out of recession, and it's more diversified than before,"

The average Alabama wage in 2000 was $29,037, which ranks the state 32nd among the 50 states, ahead of such states as Arkansas, Idaho, Iowa, Louisiana, Mississippi, Nebraska, Oklahoma, Utah and Vermont.

Analyzing wage averages is a complex subject, said Jim Apple, vice president of Mobile Area Chamber of Commerce and an economic developer. For instance, he said, Alabama's cost of living is less than the national average.

In fact, Apple said, "from an economic development perspective, lower wages can sometimes be a competitive advantage in recruiting new businesses and in keeping new business alive. By the same token lower wages represent a challenge for families in the area."

For Mobile area workers to achieve a higher standard of living by having higher wages is a desirable goal. But from a business perspective, those wages must be matched by an increase in productivity and performance."

One reason for Chang's optimism is that Alabama's average wage is -- in the long term -- growing as a percentage of the U.S. average wage.

"The Alabama average has always been between 79 and 80 percent of the national average," he said. The just-released figures place the average income for Alabamians at 82 percent of the national average, which is the "upper end of the past trend, if you look at it optimistically. It looks good to me, because it's over 80 percent"

Mobile -- Back on its Feet by April 2002
Area Economic Forecast is Good

Mobile Area Chamber of Commerce, The Business View
01/02/2002

If Semoon Chang's predictions are on target, Mobile could help lead the national economic recovery.  Chang expects the local economy to pick up in April, several months ahead of what national economists are estimating for the U.S. as a whole.

What will drive the local economic boost are a number of public and private projects already underway says Semoon Chang PhD, director of the Center for Business and Economic Research at the University of South Alabama.

Projects include the construction of the RSA Tower and Battle House renovation, estimated to inject $132 million into the area; Tricentennial activities expected to draw crowds between 111,000-226,000 who will spend between $59 -$134 million; State Docks improvements funded through Amendment One that approved $300 million over a five year period; and the new school tax that will provide for additional school construction and renovations.

Chang also says the federal tax cut, lower interest rates and a number of other initiatives along the waterfront and downtown will help ease Mobile over the recession.

"The low interest rates combined with an extreme inventory makes it a fantastic time for buyers," says Jeff Newman, executive vice president for the Mobile Area Association of Realtors.  There was a 22 percent increase last November over November 2000 sales.  "Rates are the catalyst driving the (housing) markets, keeping it as strong as it is."  Sales had been slightly down through August, then jumped 7 percent in September.

It only takes two consecutive quarters of reduced growth for an economy to be labeled recessionary.  "Before September 11 we were in a mild recession and have since slipped into a general recession.  But I believe we will be out of it by early second quarter in 2002."

Over the last 100 years, the U.S. economy averaged an annual 3 percent increase in the real Gross Domestic Product.  Third quarter of 2001, the national economy hung on to a 3.5 percent GDP, but dropped to 1.5 percent in the fourth quarter.

While he's not predicting a gang-buster increase, Chang expects 2002 will ring in a 3.5 percent increase and says war preparation, tax cuts and low interest rates will drive the nation's recovery.

Locally, tax receipts continued to slow through 2001, however, Chang expects Christmas spending to be close to the 2000 season total.  He's unsure whether that's a sign consumer confidence is steady or the deals are just too good to pass up.

Local business growth will also have a hand in recovery efforts.  A number of companies continue to flourish such as shipbuilding and construction.  "Match those increases with investments in capital and employees at Degussa, Shell and FCA, for example, and Mobile will remain tough through this economic challenge," says Jim Apple, the Chamber's vice president of economic development.

Chang continues to be concerned by what he calls the "Schillinger Road effect," the shift from city retain sales to county super stores such as Wal-Mart, Lowes, Home Depot, K-Mart and soon Super Target.  This commercial meca is costing the City of Mobile more than $200 million a year in sales tax."

"It will continue to be an important issue because if they incorporate, the city will lose a large amount of revenue forcing it to make even more adjustments," says Chang.  "There are really a number of reasons that a West Mobile incorporation would hurt Mobile.  Certain federal programs are only available to large cities and if we incorporate, it's possible the new city may be competing for the same business opportunities - a waste of local resources.