Will New and Expanded Intensify in 2006?

by Pete Julius

Since 2000, new and expanded facility activity has plummeted. This downward spiral has made it extremely difficult for communities to recruit and retain businesses. During this recession, most economic development organizations also witnessed a huge decline in their annual budgets. Simultaneous with these budget decreases, pressure mounted to be more successful with less resources. Globalization has also had a devastating effect on a lot of communities with its demand for higher skilled employees; many communities have been left with an available labor force that possesses unusable skills. The chart below illustrates the dramatic decline in new expanded announcements from 1999-2005.

Source: Conway Data Scoreboard & Whittaker Associates, Inc.

It must be noted that the 2005 numbers are for January – November 2005. All companies within this chart have at least $5 million in sales and a minimum of 25 employees. It is anticipated that the remaining number of new and expanded announcements in December will not be significant enough to actually cause an increase over last year. However, it is possible that the number of expanded facility announcements could actually increase for the first time since 1999 and 2000. An increase in expanded facilities, as well as an increase in new announcements, could provide some momentum for 2006, provided that our healthy economy stays strong. However, the increase will not be significant. This country will continue to lose jobs to overseas’ competition. The jobs that will stay in the U.S. will require higher skills because the work that will continue to go overseas will be commodity and routine-based jobs. We developed a table to gain more insight into which particular industries have been the most active.

The table contains new facility and expanded facility announcements from 1999 to 2005. The table includes industries that announced a minimum of 100 new and expanded facility projects. Each company also contains the same minimum-size companies as those in the chart above. The industries are separated by their three-digit NAICS codes. Even though this table is helpful, it would be much useful if the industries were broken out by more than 3-digit NAICS codes. Nonetheless, it does shed some light on new and expanded activity over the past 7 years.

Source: Conway Data Scoreboard & Whittaker Associates, Inc.