Tracking the Chinese economy, the Greek debt crisis, and the Fed’s decision on interest rates

by Rob Camoin 11. August 2015 14:25

I always find summer to be the busiest time of the year for me, so instead of trying to select a book I'm not likely to complete by Labor Day, I've decided to commit myself to reading The Wall Street Journal daily, which is probably twice more frequently than usual. This summer I'm going to focus on the events unfolding in the China and Greece economies, as well as the Federal Reserve's impending rate increase anticipated for the fall.

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The Rainforest: The Secret to Building the Next Silicon Valley

by Jim Damicis 11. August 2015 14:24

Authors: Victor W. Hwang & Greg Horowitt

 

My summer reading has included The Rainforest: The Secret to Building the Next Silicon Valley. This book was recommended to me by Rick Smyre, President of Communities of the Future, and was well worth the read. Much talk occurs in economic development around the goals of growing and attracting innovative entrepreneurs and companies. Many communities and regions have strategies within their economic development plans related to these goals. These strategies often focus attracting and leveraging the physical components typically seen in innovation-based economies such as research institutions, PhD workers, technology businesses, labs and incubators, and digital infrastructure. But as the authors point out, while these assets are important, growing and sustaining innovative regions is less about their mere presence and more about the nature of culture, networks, and communications within the region. The authors refer to this as “the recipe for economic production” that gives life to the ingredients.

 

I particularly liked this book because of its fit with the work being done by the Creative Molecular Economy Network of the Communities of the Future regarding the economic transformation and the future economy. Both stress the importance of new ways of thinking and communicating to grow regional economies, the importance of self-organizing networks, and a pervasive culture to adapt and act. I highly recommend this book to economic and community development professionals not only as a guide for strategies to support entrepreneurs and grow innovative companies but also to gain a deeper understanding around what is driving the future economy and how to build innovative regions.

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Featured Indicator: Small, medium, or large - which businesses are driving growth in your community?

by Alexandra Tranmer 10. August 2015 15:09

Last month's indicator looked at business dynamism—the process by which firms enter, exit, expand, or contract, while creating new jobs, and destroying or relocating others.1 My colleague Bryant noted that overall business dynamism has steadily declined in all fifty states and nearly all U.S. metropolitan areas. This is a worrying economic trend that displays possible signs of difficulty for entrepreneurs attempting to start new businesses in the United States. To continue the discussion on business dynamism, I wanted to investigate locally, how New York State, the Albany-Schenectady-Troy MSA, and Saratoga County all fared when compared to the United States in terms of the percent change in establishments by size between 2003 and 2013. The Albany-Schenectady-Troy MSA consists of Saratoga, Schenectady, Schoharie, Albany and Rensselaer counties. Here’s a map from my June newsletter article that shows the counties.2

The following graph shows the percent change in number of establishments by size between 2003 and 2013. The size categories are subdivided into the five business stages based on employment size:

 

  • Self-employed – 1 employee
  • Stage 1 – 2 to 9 employees
  • Stage 2 – 10 to 99 employees
  • Stage 3 – 100 to 499 employees
  • Stage 4 – 500 or more employees

The number of self-employed businesses increased by 10% in Saratoga County, which was on par with the changes in New York State and the rest of the county, which both experienced an 8% increase. However, the Albany MSA as a whole only saw an increase of 1% in sole-proprietorships. The Albany MSA did outperform New York State in the growth of establishments with 2-9 employees by 8%. Saratoga County saw 10% more growth than the MSA in the same category. Yet, New York State, the MSA and Saratoga County all underperformed compared to the United States, as Stage 1 businesses increased nearly 50% nationally between 2003 and 2013. Saratoga County stands out among Stage 2 establishments, increasing by 14%, which is 6% higher than the MSA or the United States. The number of Stage 3 businesses jumped by nearly a quarter in the last decade in the Albany MSA, which is more than double the increase than the next largest gain, 9% by New York State. Across all four geographies, the Albany MSA was the only location that did not lose a percentage of its establishments with 500 employees or more; instead it gained 8%. Saratoga County lost the greatest percentage of Stage 4 business, -14%. Nationally, the number of Stage 4 business decreased by 8%.

 

According to these statistics, small businesses performed much better than larger companies over the last decade in New York State, Saratoga County and the United States. Small business growth can be used as one gauge of the economy’s overall health. The Small Business Association (SBA) reports that small business indicators are improving. First, rising incomes for sole proprietors, combined with low levels of bankruptcies for the same group, mean that self-employed businesses are not only making enough revenue to keep their business afloat, but they are now making a profit, which means they can purchase consumer goods and contribute back to the economy.3 Similarly, Dun & Bradstreet’s August 2015 U.S. Economic Health Track reported that after three months of decline, their small business health index increased by 2.1 points. They reported declines in payment and credit card delinquency, as well as an increase in credit card use, showing more confidence and stabilization of small businesses.4



These upticks in the small business economy are vital to New York State, as the Small Business Administration reports, there are just over 2 million small business in NY. To further break it down, there are:

  • 445,853 small businesses with employees

  • 1.6 million small businesses without employees

  • 3.8 million workers employed by small businesses

  • According to Statistics of U.S. Businesses, New York's small business employed over half of the state's private workforce, or 3.9 million, in 2012

Overall, we can see that businesses with 2-9 employees were the most successful across all geographies in the ten year period, while Stage 4 businesses, those with 500 or more employees, fared the worst. While the small business growth is an encouraging sign for the economy, the loss of major companies in towns and cities have major ramifications, not just for employment but for consumer confidence and community morale.

 

The data for the graph was collected from Youreconomy.org. The site compiles longitudinal establishment-level data that allows anyone, from an economic developer to a small business owner, to see the changes in the economy based on the size of business, openings, closings, sales, and jobs. YE uses the National Establishment Times Series (NETS) database, which supplies the establishment-level data for over 56 million companies from 1990 through 2013 providing detailed information about jobs, sales, and establishments. The interface is quite easy to use and easy to understand for those who might not be the most data savvy. I recommend playing around a bit with the timeframe and region to get a better understanding of what the data is telling you, and how it compares to other regions.

 

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The Journey Home

by Michael N'dolo 10. August 2015 15:07

Author: Radhanath Swami

 

Anyone who has been following my blog articles over the last few years will note that “Culture” is at the heart of many of the topics that interest me. We looked at The GlobalFoundries Workforce Paradox as an almost anthropological study into a largely cultural dynamic superseding otherwise purely economic interests. Other blog posts have covered the need for a major shift in primary and secondary education away from the industrial age and into the age of creativity. In my economic development strategic planning work, I find that 90% of the job is convincing people to make decisions within the framework of their value system, making sure to expand that cultural backdrop so it includes the relevant economic perspectives.

 

So, with that introduction, my current reading is a bit unusual – The Journey Home by Radhanath Swami. The author was born Richard Slavin and he made an incredible physical and metaphysical journey in the early 1970’s from America through Europe, Turkey, the Middle East and on into all parts of India, while also moving from a typical youth from the suburbs of Chicago to becoming a renowned spiritual guide in the yogic traditions. It is fascinating to hear of his adaptability and cultural transformation and serves as an inspiration for us all in terms of the power of the mind to overcome cultural inertia. And, it’s a really great read to boot!

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New York State Funding Cycle Underway

by Alyson Slack 10. August 2015 15:07

At the end of July, communities and businesses throughout New York submitted their annual applications for a broad range of state funding programs. State agencies will now begin reviewing those proposals to evaluate how to allocate $530 million for everything from downtown and waterfront revitalization to factory expansions, infrastructure improvements, arts programming, and workforce training. The state’s ten Regional Economic Development Councils (REDCs) will also review them and make funding recommendations based on projects’ alignment with local opportunities and plans.

 

But upstate headlines are dominated by the race to earn one of the three $500 million awards under what is being called the Upstate Revitalization Initiative (URI). The Capital Region, Central New York, Finger Lakes, Mid-Hudson, Mohawk Valley, North Country, and Southern Tier are eligible to compete for this unprecedented sum of economic development funds made possible by settlements the state reached with banks in the wake of the foreclosure crisis. After a tussle this spring with some legislators and some other advocates of spending the money directly on infrastructure and other needs, the Cuomo administration was able to preserve its vision of applying these funds in a dramatic extension of his region-based, competition-driven economic development model. You can read the competition guidelines here.

 

The ten Councils are also busy writing their annual progress reports to the governor, which double as plans for the coming year and are the basis on which the administration awards an additional tranche of economic development dollars. Of the seven regions that do not receive a URI award, three will be designated as “top performers” and receive another $45 million in Empire State Development capital grants and Excelsior tax credits; and the remaining four will receive $30 million in Empire State Development capital grants and Excelsior tax credits. This is the fifth year of the competition, which was inaugurated in 2011 with the creation of the Councils. A new and important feature of this year’s REDC competition is the requirement to develop Regional Economic Cluster Plans: Regions are consulting with the state to identify a strong or emerging industry cluster on which to focus their job creation and investment strategies.

 

Here’s the timeline for all of these moving parts:

  • July 31: Consolidated Funding Applications were submitted

  • September 21: Regional Economic Development Councils submit annual progress reports

  • October 5: Seven eligible Regional Economic Development Councils submit Upstate Revitalization Initiative plans

  • Fall: Awards announced for the annual REDC competition (including CFAs) and for the Upstate Revitalization Initiative

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Can Economic Growth Continue Forever? Of Course!

by Tom Dworetsky 10. August 2015 15:06

Author: Tim Hartford

Organization: Freakonomics

 

This short article by economist Tim Harford appeared on the Freakonomics blog last year and deals with the economic growth debate—can the economy continue to grow exponentially without depleting the world’s resources? He argues that it’s important to separate economic growth from population growth or growth in energy consumption, i.e., economic growth can happen without the other two. This is a quick read that will get you thinking about the implications of the ever-expanding global economy.

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Help Wanted: Projections of Jobs and Education Requirements Through 2018

by Ian Flatt 10. August 2015 15:05

Authors: Anthony P. Carnevale, Nicole Smith, Jeff Strohl

Organization: Georgetown University – Center on Education and the Workforce

 

For economic and workforce professionals interested in understanding how the growing demand for skilled workers could impact their region’s economy, I would recommend this report prepared by Georgetown University’s Center on Education and the Workforce entitled “Help Wanted: Projections of Jobs and Education Requirements through 2018.” The report was released in June 2010, so it is already a few years old, however, many of the principles of the report and primary trends analyzed continue to provide insights into the labor requirements of today’s economy.

 

This report offers in-depth analysis of how the level of one’s education affects lifetime earnings, employability, and the ability to earn a middle-class wages; the changes in the demand for skilled workers across the economy; and how educational requirements are changing in specific occupational groups and industries. 

 

The report begins by making the case that a postsecondary education is essential to the quality of life of workers in today’s economy. The fortunes of workers without advanced education have changed dramatically over the past decades. As an example, in 1970, 60% of individuals who completed high school but did not receive further education were in the middle-income class (defined as the middle 4 deciles of household income) while just 22% were in the lower income class (the lowest three deciles of household income). By 2007, only 45% of high school graduates were in the middle-income class, while 35% were in the lower income class. This means that today, it is 1.5 times more likely that someone with only a high school level of education will be in the lower income class than it was in 1970.

 

The report then shifts into an analysis of the increasing demand of workers with postsecondary education. The report projects that 63% of openings due to new and replacement demand created in the coming years will require either a Bachelor’s degree or higher or an Associate’s degree. This projection is based on the research and analysis of the authors and is actually much higher than the Bureau of Labor Statistics own projections. However, the authors believe that even their projections underestimate the pace at which demand for workers with postsecondary education will grow.

 

After an assessment of the demand for workers with postsecondary education across the economy, the report offers a detailed analysis of specific occupational groups and industry clusters. 9 occupational categories and 12 industry groups undergo this in-depth analysis – with specific projections of job growth by level of education and a summary of the trends within each group that are driving these changes.

 

So, how can economic and workforce developers use the information provided in this report? The analysis provided can help inform discussions with local employers. Are they seeing similar trends? Do the projections offered in the report hold true for their business? How are they preparing for new technology and an increasingly skill-based workforce? The analysis of this report, combined with the insights of local employers, can form the basis for developing a plan to address the growing demand for workers with postsecondary education in your community.

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The Local Economy Solution

by Dan Stevens 10. August 2015 15:03

Author: Michael H Shuman

 

The Local Economy Solution is a 2015 book by Michael H. Shuman that emphasizes the need to look within rather than going fishing for economic development. Shuman recognizes the value in the way the economic development field is evolving to focus more on growing local businesses and supporting entrepreneurs rather than giving up the farm through heavy incentives to attract a large employer to a community. In his latest work he makes a strong case for why economic developers should be honed in on locally owned businesses with one of the key points being that much more money “leaks” out of the economy when business ownership isn’t local whereas locally owned businesses are more inclined to spend and invest that money in the region.

 

Why Read?

What’s most interesting about this work are the examples he gives of what he refers to as “pollinator businesses.” These are businesses that support the development of other businesses through activities such as training local entrepreneurs, getting local businesses to work together, and encouraging local purchasing. The 28 “pollinators” described are sure to spark ideas on how economic development professionals, community leaders, business owners, and enthusiastic residents can help grow their economy by cultivating what they already have.

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Disrupting Development with Digital Technologies: A Series of Short Essays

by Christa Franzi 10. August 2015 15:02

Organization: The Brookings Institute

 

Do you Venmo? Tried Google Wallet? This is an ongoing debate in our office. I'm always game to try any new app/technology EVEN if it involves handing over some personal financial information. Most of my co-workers are—understandably—a little more hesitant. Being able to use my phone to text my portion of our lunch bill is a fun way for us tech-geeks to show off, but it's far from life changing. However, for people in developing countries isolated from global financial markets, gaining access to digital payments can be transformative. I find the potential implications of the emerging new digital economy fascinating; particularly when considering the impact on regions that are currently disconnected from global markets. So this summer I’ve been making my way through a series of short essays commissioned by Brookings exploring this topic.

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Older, Smaller, Better: Measuring How the Character of a Building and Blocks Influence Urban Vitality

by Bryant Dixon 10. August 2015 15:00

Organization: Preservation Green Lab

 

It’s not often, if ever, we hear someone say that “older” and “smaller” are “better.” But in the Preservation Green Lab report, Older, Smaller, Better: Measuring how the character of buildings and blocks influence urban vitality, we can see just how older, smaller buildings across the U.S. are making large impacts on local economies and distinctive livable communities.  This report showcases the valuable and vital role that older, smaller buildings play in the development of economically robust and socially vibrant cities.

 

In its research, Older, Smaller, Better examines three major American cities; Seattle, San Francisco, and Washington, D.C., and uses its findings to support the importance of older, smaller buildings and their necessary roles in our economy and neighborhoods in reference to Jane Jacobs’ 1961 book, The Death and Life of Great American Cities. The report states:

 

 “This Preservation Green Lab report provides the most complete empirical validation to date of Jacobs' long-respected, but largely untested hypothesis: That neighborhoods containing a mix of older, smaller buildings of diverse age support greater levels of positive economic and social activity than areas dominated by newer, larger buildings. These findings support the idea that retaining blocks of older, smaller, mixed-vintage buildings can help cities achieve sustainable development goals and foster great neighborhoods.”

 

In many of the report’s key findings, we get a chance to see just how vital these older, mixed-aged and mixed-use buildings are to the neighborhoods and urban centers they serve, both economically and aesthetically. They not only create a distinctive identity for the areas in which they are located, but provide a critical space for local businesses and entrepreneurial start-up ventures, and create more jobs per commercial square foot than their new, larger counterparts.

 

So if you are looking for an interesting read, and have an interest in historic preservation, neighborhood business districts, or anything related to local economic development, this is something you may want to add to your reading list. It may give you a new perspective on an old building.  You can access Older, Smaller, Better, and its data by clicking on the link below.

 

Link to report and data.

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About Camoin Associates

Camoin Associates is a professional service firm that utilizes its understanding of the public and private sector investment process to assist businesses and developers in capitalizing on funding, financing and tax programs established to encourage private investment. We also specialize in advising economic development organizations and municipalities in creating strategies, policies and programs that support investment and job creation.   [Click Here for More]