Summer 2008

Hot Markets in a Cold Economy

Recession? What Recession? These Southern Markets are Having Banner Years.

By Michael C. Randle

Like all economic downturns, there are exceptions to the pain. Sure, unemployment has risen in the South and large job-generating deals are down. Plant closures have increased. The South's large financial services sector and its growing automotive industry have taken it on the chin this year, but not nearly as badly as elsewhere in the U.S. Yet, if you look carefully, some markets in the region are having their best year -- maybe ever -- in terms of overall economic development.

Little Rock, Ark.

There is no doubt in our minds which Southern market we would place at the top of this list. We've all been hammered by the stock market this year. Yet, if Little Rock were a stock, I'd buy shares in it. Since 2007, deals in the Little Rock metro (an 11 county region, including the cities of Conway, Hot Springs, North Little Rock, Pine Bluff and others) have surged like never before. Dassault Falcon Jet, Kimberly Clark, ITT Industries and Stanley, Inc. kicked the deal parade off in the Little Rock region a couple of years ago. Then, a slew of even larger deals followed in 2007 and 2008, including projects announced by India-based Welspun Gujarat Stahl Rohren ($100 million investment, 300 jobs), Denmark-based LM Glasfiber ($150 million investment, 1,000 jobs) and California-based Hewlett Packard (1,200 jobs). Recession? Don't tell that to the folks in Little Rock. It doesn't get much better than this.

San Antonio, Tex.

For its economic development performance in calendar year 2007, we named San Antonio "Major Market of the Year." Earlier this year, Forbes.com named San Antonio fifth-best nationwide in job growth, reporting that the Alamo City rung up 15,500 new jobs in 2007. Even though the Toyota pickup truck plant that landed in San Antonio a few years ago will temporarily shut down this fall, that's the only significant negative news we can find in San Antonio during this recession. Otherwise, Microsoft, Accenture, Boeing, Valero, USAA and AT&T keep driving San Antonio's growing economy.

Chattanooga, Tenn.

Landing Volkswagen's assembly plant this summer certainly helped Chattanooga make this list of economies that look to be recession proof. The German automaker will single-handedly transform this Tennessee mid-market's economy. Volkswagen's announcement in July says a lot about the Southern Auto Corridor. Who would have predicted that in one of the worst automotive industry markets in history, that an automaker would take a chance on a new $1 billion assembly plant? I mean, we haven't seen any new projects announced that will sell subprime mortgages of late. Well, comparing VW's new plant to something like that really isn't fair. Look for Volkswagen to flourish in Chattanooga, a city that went green years ago, or before green was cool.

Birmingham, Ala.

Birmingham continues its diversification of its economic base, as it has been doing for 15 years or longer.  The University of Alabama at Birmingham (UAB) has a monstrous positive economic effect on Alabama's largest market. The only negative we can find during this economic downturn are some lost financial services jobs as a result of cut backs at Wachovia and former local bank AmSouth being gobbled up by another Birmingham-based bank, Regions. Otherwise, health care, manufacturing, automotive, corporate headquarters, distribution, financial services and the life sciences contribute almost equally to Birmingham’s recession proof economy.

Houston, Tex.

You name the industry sector and you will find it in Houston. One sector that calls Houston home more so than any other place in the U.S. is the oil and gas business. With the profits being rung up by that sector, you know Houston's economy is soaring. It wasn't always that way. Do you remember the oil bust of the 1980s? Today, however, Houston is the energy capital of North America. Energy, health care, aerospace and technology companies created more than 100,000 new jobs in Houston in 2007 alone. Houston is also home to more Fortune 1000 headquarters than any other Southern market, with 53. And since the economy has turned sour, Houston has tallied some impressive accolades, including Kiplinger naming the city the No. 1 place in the U.S. to live, work and play. Also, this summer saw Forbes.com name Houston the "Best U.S. City to Earn a Living" and according to U.S. Bureau of Labor statistics, Houston had the fastest job growth of any U.S. market from June of '07 to June of this year.

Oklahoma City, Okla.

Here's another market that is benefiting from the oil and gas boom, as Oklahoma City is home to some of the largest energy companies in the world. At a time when home owners across the country are wondering what hit them, Oklahoma, particularly Oklahoma City and Tulsa, the state's two largest markets, are at the top in home value gains in the last year. Aviation and aerospace, biotechnology, business services, health care, transportation and logistics and telecommunications also help contribute to Oklahoma City's recession proof economy.

Huntsville, Ala.

Huntsville is the nation's newest economic development rock star. It is not a big market, but you wouldn't guess that considering the impressive list of projects that have been announced in Huntsville of late. Over the last four years, Huntsville has either won or come in second in our annual "Mid-market of the Year" ranking. Sanmina-SCI, Boeing, Booz Allen Hamilton, Verizon Wireless, SAIC, Westar Aerospace and Raytheon are just a handful of companies that have made significant investments in Huntsville over the last two years. Technology rules in Huntsville, as evidenced by its massive aviation and aerospace sector. And there are few places in the South with more “Secret Squirrel” R&D associated with the defense industry than what’s being done in Huntsville right now.

Mobile, Ala.

It can strongly be argued that Alabama's economy over the last four or five years has been the best performing state economy in the country. Having a third market on this list from Alabama supports that argument. Along with Huntsville, Mobile is another poster child of advanced manufacturing. ST Mobile Aerospace, Austal, SSAB and soon ThyssenKrupp call Mobile home. And if Northrop Grumman and EADS win the Air Force's refueling tanker project (again), then Mobile will be propelled to heights never before seen in its economic development history.

Baton Rouge, La.

In the summer quarter, the Brookings Institute reported that Baton Rouge has the highest job productivity growth rate of any of the 100 largest metro areas in the nation. We certainly support that designation as we named Baton Rouge "Mid-Market of the Year" in 2007. Baton Rouge is another winner in the oil and gas business. It is home to an ExxonMobil refinery that is one of the largest in the world. Petrochemicals, shipbuilding, aerospace and aviation, health care, film production and video gaming are several sectors that lead Baton Rouge's economy. Baton Rouge is also Louisiana's state capital and home to Louisiana State University.

Murfreesboro/Rutherford County, Tenn.

Rutherford County, located in the Nashville metro, is home to the largest Nissan automotive assembly plant in North America. That could be a concern for Rutherford County officials and it is since Nissan offered employee buyouts in the summer quarter at its Smyrna, Tenn., plant. But of all the automakers, Nissan seems to be weathering the automotive crisis better than any other automaker. Sometimes though, we must remind ourselves that Rutherford County is not just a large automotive cluster market. This area, located southeast of Nashville, is a major distribution center and is quickly becoming successful in emerging sectors such as music production, health care, R&D and biotech. And Rutherford County is home to Middle Tennessee State University, Tennessee's largest undergraduate university with 24,000 students.

Augusta/Richmond County, Ga.

Like Little Rock and Mobile, Augusta, Ga. has come out of nowhere in the last two years, landing some outstanding projects that run counter to the notion that we are in a recession. T-Mobile, the NSA, ADP and Teleperformance have accounted recently for over 3,000 new jobs in Augusta. Major facilities operated in Augusta by Procter & Gamble, International Paper, NutraSweet, SOLO Cups, EZGo, Monsanto, Kellogg's and others show exactly how diverse Augusta's economy is right now.