Ten Strong Southern Economies You May Not Have Noticed

By Mike Randle

1. Alabama

Alabama heads up our new ranking titled "Ten Strong Southern Economies You May Not Have Noticed." Here's what you may not have noticed when it comes to Alabama's economy.

Southern Business & Development named Alabama "State of the Year" in both 2003 and 2004 in its annual SB&D 100 ranking. The two State of the Year designations for Alabama made up the first and second time a small Southern state has won this magazine's most prestigious annual award. In fact, since 1992, Virginia has won State of the Year three times, Texas and Florida twice, and North Carolina, Tennessee and Georgia have earned it one time each.

The difference between those states and Alabama is they are all what we call "destination" states in the South, or states that have populations well above those found in states such as Alabama, Arkansas, Mississippi, Kentucky and South Carolina in the South.

We would like to explain to our readers that the SB&D 100 is no survey. It doesn't ask readers to name the states they think have the best economy going at the time. No, the SB&D 100 ranks states, markets and industry sectors where the rubber meets the road: in job creation and capital investment. In other words, there's nothing arbitrary about our annual SB&D 100 ranking that is published each spring. And there's nothing arbitrary about Alabama's economic growth over the last several years.

We have written for years that the automotive industry is what drives Alabama's economy. But there is so much more to Alabama's economy than the incredible growth from the automotive sector, which is so strong that the state will be the nation's No. 3 producer of automobiles by 2006. It should be noted that no cars, trucks or vans were made in Alabama until 1997.

If there is a more consistently hot state in the South over the last three years than Alabama (and we place major emphasis on consistent), then you're going to have to tell us which state it is. In the last year, Alabama has not only turned numerous automotive deals, but shipbuilding, aerospace, distribution, health care, biotech, financial services, wood products and leisure and hospitality are growing at rapid paces. Even the state's textile industry is holding steady in Alabama.

Alabama's unemployment rate from 1990 to 1995 averaged about 7.2 percent. Between 1996 and 2000, it dropped to about 4.9 percent on average. Was Alabama hurt dramatically like so many other states during this last recession? Well, from 2001 to today, Alabama's unemployment rate averaged about 5.7 percent, or about what the national average was from 2001-2004. Currently Alabama's unemployment rate is 5.2 percent, which is below the national average.

2. Rutherford County, Tenn.

Rutherford County, located southeast of Nashville, is the fastest growing county in Tennessee with a population of over 200,000 people and is one of the 75 fastest growing counties in the U.S. But what few people realize is that Rutherford County is 2nd in the U.S. for new job growth, according to the Federal Bureau of Labor Statistics.

Everybody knows that neighboring Nashville is one of the hottest markets for job growth in the U.S. In fact, Nashville was named the nation's hottest market recently by Expansion Management magazine and was ranked the 7th-strongest market economy in the U.S. by Policom Corp. That being the case, Nashville is not eligible to be ranked in this category, which is citing strong Southern economies that you may not have noticed.

But Rutherford County certainly earns a spot in this Top 10. If Nashville is one of the driving forces in the South's economy, then certainly one can assume that Rutherford County is driving Nashville's economy.

3. Birmingham/Hoover, Ala.

The Birmingham/Hoover MSA is where Southern Business & Development's headquarters is located. But don't think we are homers by naming the market one of the Top 10 strong economies you might not have noticed. To prove we're not homers, in 1998 we ranked Birmingham next to last out of 25 major markets in the South in deals turned over the previous five years.

But 1998 was a long time ago in economic development terms. Today the Birmingham/Hoover MSA happens to enjoy one of the nation's best market economies, not just one of the best in the South. Few realize the economic diversity that is found in this market of 1.1 million. From a strong bioscience sector to the fastest growing automotive industry hub in the U.S., Birmingham is really on an economic upswing that is unparalleled in its history.

In 2004, Policom Corp. ranked Birmingham-Hoover as the sixth strongest metro economy in the U.S., ahead of such well known dynamic markets such as Raleigh, Seattle, Dallas-Fort Worth, Phoenix, Austin and Tampa Bay. In fact, in the South, only Charlotte, Atlanta and the D.C. region were ranked higher than Birmingham-Hoover by Policom.

4. Round Rock, Tex.

I spent three days in 2004 in Round Rock, Tex. and was blown away by its economic base. From high-end metal fabrication to a single, $15 million photomask to be used in semiconductor production to Dell's massive headquarter campus, Round Rock is a market that is as diversified economically as any in the South.

Yet, have you noticed Round Rock as a major economic player in Texas and the South? Probably not, since it adjoins Austin and is part of the Austin-Round Rock MSA. In fact, when you hear or read about Austin's magical economy, you might be misinformed since the speaker or writer may be referring to companies in Round Rock.

Round Rock has been under Austin's thumb for years. It has never received the credit it deserves for creating an economic base that is near or at the top in the South for markets its size. Maybe this little recognition will help Round Rock's identity crisis.

5. Maryland

We cannot think of a time in the last dozen years that Maryland's economy has been better. And we bet you weren't aware that the Free State is home to 220 federal and academic research centers. With the federal government handing out so many Homeland Security contracts and the bio industry expanding in the South like never before, Maryland is positioned quite nicely right now. While the security contracts and the jobs created by them may be temporary, one thing that's not provisory is the bio industry. Maryland's bio industry base is the strongest in the South and last year was a banner year for Maryland in that sector.

It's easy to point to biotech in Maryland as the industry sector that's taking the state forward. But one of the largest general manufacturing deals turned in Maryland in years was announced in 2004 with American Woodmark creating over 500 jobs. In fact, it is estimated that over 35,000 jobs were created in Maryland last year, making 2004 one of the best in memory for the state.

6. McAllen-Edinburgh-Mission, Tex.

The McAllen area remains overshadowed by Texas economic heavyweights such as Dallas-Fort Worth, Houston and Austin. But this market continues to be one of if not the most active mid-markets in the region. In SB&D's 10th anniversary edition, McAllen was named the No. 1 mid-market in the South from in the 10-year period between 1993 and 2002 in terms of corporate deals announced of 200 jobs or more.

Soon, though, McAllen-Edinburgh-Mission, located on the Texas-Mexico border in South Texas, will not be eligible for mid-market honors. Our definition of a mid-market is a metro with no more than 749,999 residents. The McAllen MSA is approaching 700,000 residents and has experienced a 12 percent increase in population just since 2000.

We can't think of a place in the entire South the size of McAllen that continues to offer up a larger labor pool. But that labor availability is not without some limits. The economic development folks in the area have done a great job at putting those folks to work. That can be proven by the large number of deals turned in the area over the years. For example, McAllen-Edinburgh-Mission is a market that saw unemployment rates top 20 percent in 1992, 15 percent in 1998 and 11 percent in 2003. The area's unemployment rate today is around eight percent.

7. Winchester/Frederick County, Va.

We wanted to include a small market in this Top 10 and we found Winchester/Frederick County, Va. to be the strongest candidate and that's a tough call considering there are only about 3,000 small markets in the South. No economic developer wants business and industry prospects to know this, but Winchester and Frederick County's unemployment rate is virtually nonexistent. Sure, technically it's about 2 to 3 percent. But 2 to 3 percent these days' means there are people in Frederick County, Va. who are working that don't want to work!

Even at 2 to 3 percent unemployment, existing and new businesses have invested nearly $200 million and created over 1,000 jobs in the Winchester/Frederick County community over the last three years. Also, in 2004, the FBI announced it will locate a document repository in Frederick County. The facility is expected to employ up to 700 people.

8. West Virginia

In the downturn of the early 1980s, West Virginia's unemployment rate stood at 19.5 percent. It wasn't until 1988 that the Mountain State's unemployment rate dropped below the double-digit level to 9.8 percent in September of that year. Then, in the recession of the early 1990s, it shot back up to nearly 12 percent. But the go-go years of the late 1990s found West Virginia's economy and in 1998 the state's rate of unemployed dropped to 6.5 percent.

In this latest recession, or during the years' 2001 and 2002, a much different story emerged than what occurred in the previous bad times of the early 1980s and 1990s. West Virginia's unemployment rate would not top 6.3 percent. And during the recovery of 2003 and 2004, an even more impressive result began to form compared to neighboring Pennsylvania. During those two years, Pennsylvania saw an average unemployment rate of 5.5 percent, while West Virginia's essentially matched it at 5.6 percent.

There hasn't been a time in the last 40 years that West Virginia could say to prospects that its unemployment rate is essentially the same as neighboring Pennsylvania. But there's more. In the last six months of 2004, Pennsylvania's unemployment rate rose to 5.6 percent. West Virginia's has been dropping to a current rate of 4.9 percent.

New West Virginia Gov. Joe Manchin is excited about taking his state even further economically. "Wherever there is one company looking to grow in West Virginia, I will fight to make that growth a reality," Manchin said. "We have so much to offer business and industry here. For example, Toyota officials have publicly stated our work force outperforms their work force in Japan. That's saying something." Toyota, it should be mentioned, operates an engine plant in West Virginia that has expanded several times.

Can we make West Virginia's economy, one that you may not have noticed, even more impressive? One of its other neighbors, Ohio, has sported a unemployment rate that is currently 5.9 percent, a full point higher than West Virginia's rate. Now, let's be honest, did you realize a higher percentage of available workers in West Virginia are employed than in neighboring Ohio or Pennsylvania?

9. Oklahoma City

We've been using unemployment rates as a barometer of strong economies in the South that you may not have noticed. We're certainly not going to stop with West Virginia. Did you know that Oklahoma City's current unemployment rate is 4.2 percent, almost a point-and-a-half below the national average?

Oklahoma's largest market has invested in itself like few markets in the South in the last decade. It has also invested in a business retention program that has to be one of the most successful in the region.

A billion-dollar redevelopment of the city's central business district has worked beyond expectations. It just goes to show that investing in your community in a big way cannot be labeled a conservative or liberal endeavor. It is either a good or bad idea depending on what you're investing in and how it fits your community. As for Oklahoma City's significant investment, they were right on.

10. Louisville

Not unlike Birmingham and Oklahoma City, the mid-major market of Louisville is riding high. Louisville's economy has outperformed the U.S. in job and income growth in the last decade. Much of the growth is coming from the logistics (UPS' primary U.S. hub is located in Louisville), health, biomedical, financial services, manufacturing and automotive sectors. In fact, if you look closely, Birmingham's (which is profiled in this ranking) and Louisville's economies are very similar. Oh, and by the way. Louisville's current unemployment rate is 4.2 percent, the same as Oklahoma City's rate.