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Thank you for watching this program.

As we head into the holiday season, will our holiday cheer turn us away from everyday business and economic concerns?

But, what are those things, that may keep us engaged?

Welcome again to the most widely watched, and the longest running program on Carolina business policy and public affairs, seen every week, across the Carolinas for more than three decades.

In this upcoming holiday break, is it going to be the last pause that we have before the, and I'll call it this, the frenetic presidential election year politics?

And how does the economy really unfold in the near term, meaning 2024?

We will unpack some of these questions for our region, and later on, the Chief Executive Officer of US Brick, Mikee Johnson, joins us again.

(pensive music) - [Narrator] Major funding also by: Blue Cross Blue Shield of South Carolina, an independent licensee of the Blue Cross and Blue Shield Association.

And Martin Marietta, a leading provider of natural resource-based building materials, providing the foundation on which our communities improve and grow.

(upbeat music) - On this edition of Carolina Business Review, Dr. Michael Walden, from NC State University, Antjuan Seawright of Blueprint Strategy, and special guest, Mikee Johnson, CEO of US Brick.

(upbeat music continues) - Happy holidays, merry Christmas.

Can I say merry Christmas, to you two?

Is that all right today?

- Yeah, absolutely.

- It's safe here.

This is a safe space.

(Michael laughing) - This is the holiday space, yes.

- Thank you.

Michael, nice to see you again, it's been a while.

Always nice to have you on Antjuan.

- Thank you.

- But Mike, you get the first pitch.

So, Mike, there was a, a few weeks ago, I know we were talking about this prior to the taping, and WeWork, the coworking space, that was highly touted during the pandemic, and stock was flying, it was, you know, a lot of speculation around it.

Ended up filing for bankruptcy protection a few weeks ago now, and some went around that announcement, and this stuck with me and I want to ask you this question.

Said that this WeWork bankruptcy filing is really more of a proxy for, and it was called, the crisis in vacancy in office space.

Is this a crisis, or is this a new norm of some sort?

- I think I would call it, maybe not as strong as a crisis, but it's a problem.

And I think this problem would've manifested itself regardless of the state of the economy, because of the remote work effort.

30% of workers are now working remote.

And we still have construction going on.

You walk around where I live in Raleigh, cranes everywhere, same in Charlotte.

So there's still supply coming online.

But now we have the added issue of a slowing economy.

And I think all indicators are pointing to a slow economy.

That doesn't necessarily mean recession, but it means demand for office space will hit a snag there.

So yeah, I think that in terms of sectors that may be adversely impacted next year, especially the first half of next year, clearly, commercial real estate is one of them.

- Yeah, it's commercial- Go ahead Antjuan.

- To a different, a slowing economy, is a unique term, because when I think about all the normal economic measures of how we measure economic success, all pointers indicate that the economy is booming.

Now, there are sectors in the economy that have shifted, and I think the pandemic was the start of that.

And we're starting to see the tectonic plates moved around a good bit, in terms of what's priority and what's not, and how people are conducting business in the US, but overall, the economic outlook looks very good.

I think, for not just now, but for years to come when you think about what we have to do in order to stay globally competitive, both in the Carolinas, but around the country, as it relates to the workspace, look, we should have previewed this, that somehow or another traditional going into an office would change, when you think about the jobs of today.

And I think that may change.

However, what has happened before, can happen again.

And so we may be in a short term stay, but it could go back to the point where people are going back into offices, and maybe companies will think about incentivizing, doing in-person workspace.

- So let's zoom out from the office space for a second and let's go back to something you said.

Could this be, and this is not my term, and I know you've heard this, Michael, could this be a rolling recession?

Could this be not a typical recession, but felt in specific sectors at different times?

- Well, let me clear what I meant by slowdown.

Slowdown, in my terminology, doesn't mean the economy is contracting.

Contracting means a recession.

We are still growing.

All the indicators indicate employment's going up, consumer spending's going up, but it's going up at a slower pace.

And that's exactly what the Federal Reserve wanted to have happen.

- That's right.

- In order to moderate inflation.

Now the question is, could that turn into a contraction next year?

My concern is, or my forecast is, the Federal Reserve is not going to cut interest rates soon.

I don't think they're going up, but they're not gonna cut.

As inflation goes down, and Chris, you know this, the real interest rate rises, meaning it's more expensive for people to borrow.

That, I think, will put an additional stress on the economy and slow it down even more.

Is that gonna be a bonafide recession?

I don't think necessarily, but I think first two quarters of next year are going to be much slower than they've been.

And then I think we'll hit a rebound in the second half of the year, when the fed begins to cut interest rates.

- Let me layer over the top of this.

That next year is a presidential election year, which is, obviously straight in front of all of us.

In presidential election years, it tends to be good for the economy, good for the capital markets.

I think we know that in general.

Antjuan is, does this, do the presidential election year politic, compound, whatever could happen the economy, does it make it harder?

Is it gonna be clear?

Now it's gonna be a great economy, we're gonna have a good year and we may not get along on politics, but it's gonna be a good year.

- It could.

That's making the assumption that most people going to the polls will vote on the economy.

What we've seen in the past several elections, post the 2020 elections, that the economy has not been the number one indicator, or the number one driver, for people showing up to the polls in many battleground places.

But I think slow growth, a slow and steady pace, always wins the race.

And what we've seen and what we've heard, from both the really, really smart people, and the people at my level, is that the economy was growing too fast, and people were worried about this overheating.

Now we're starting to see this new norm, this steady flow, and I think that's good.

The one thing about the US economy, it's always had the ability to take a licking and keep on ticking.

So where we see slowness, I think we'll see steadiness, and I think that's good for the consumer, but it's also good for potential new opportunities that will come about as a result of the 2020 US elections.

- Go ahead.

- I don't try to read the mind of people in terms of voting, that's not my area.

But I do think that people's, what it's gonna come down to is people's perspective and how long that perspective is.

I got into a little debate with a guy named Alan Blinder in the Wall Street Journal, he's a professor at Princeton.

And, talking about, well, the economy looks so good, why are people upset?

And the polls do show they're upset about the economy.

It's because they remember what their standard of living was, in 2019, compared to today.

And even though inflation is abating, in terms of the purchasing power of the average person's earnings, it's still down, from what it was in 2019.

So that I think, is what has to recover, for people to feel really, really good about the economy.

- I certainly agree.

Look, I'm frustrated too, because we're having to pay more for stuff that we once enjoyed at lesser price.

However, the thing about the economy, this economy in particular, is a lot of the benefits, from the 2020 election, from a legislative standpoint, a lot of people cannot feel them just yet.

So the short term benefits, are not felt as hard as the long-term benefits of this.

So people, it naturally brings frustration.

So when people say the economy's not doing well, the indicators say we are, but people feeling them in their everyday lives, in their everyday outlook, it's a disconnect.

And I think once the long-term benefits kick in, and it may be post the 2024 election, then people will say, "Oh, now things are getting better."

- I don't wanna lead you with this question, Dr. Walden, but it feels like this time there's going to be a longer tail on the inflationary effect.

That, while inflation has abated, the prices still have advanced by eight, nine, 10% in some cases.

- Well I think the inflation rate for CPI is up about 17%, cumulatively since 2021.

- Mm hmm, cumulatively.

- Now the last reading, in fact we had a reading yesterday, there's an obscure inflation number called the PCE deflator, that economists like, came in and year over year we're only at 3%.

So the inflation situation is getting better.

But my point is, people's perspective I think is longer, than what's happened in the last month.

And the question for, if I can just nudge into politics a little bit, I think the question for predicting how the economy is going to read for the voter in the fall of 2024 depends upon how long people's perspective is.

I actually think the economy will be improving in the second half of 2024.

- Good.

- The question for politicians, and candidates is: Will that improvement overwhelm what people remember over the last three years?

- And the real question would be for voters, are you better off than you were four years ago?

- Isn't that always a question though?

- Or two years ago?

That's always the economic question, when it comes to, are you better off or do you see yourself feeling a little more comfortable, having a little more breathing room, as we say down south, about the economy?

(Chris chuckling) - Let's keep the momentum of this going with our guest.

Before we do that, coming up next week on this program, manufacturing is pretty big in the Carolinas there's no doubt about that, and a major manufacturer, that you may have never heard of, unless you're in the manufacturing business, is a company called Domtar.

Headquartered in Fort Mill, South Carolina, the new CEO will be our guest.

His name is Steve Henry, and he joins us next week on this program.

And also, since we are talking about the economy, a couple programs we always like to do but always seem to be well watched are, a two-parter, the economic review of 2023 in this case, and then the economic forecast of next year.

It's two part, it's four resident economists, that like to mix it up, and I think you'll enjoy that program as well.

Our guest is well-known longtime South Carolinian, as is the company he leads.

US Brick, headquartered in Charleston, is exactly as it's name states: Manufacturing bricks and pavers, for commercial and residential construction.

Joining us now, is the chief executive officer of one of the largest brick companies in the nation, US Brick.

Chief Executive Officer, Mikee Johnson.

Mikee, welcome back.

- Hey Chris, how are you?

Good to be here.

- So you're sitting off set listening to this thing going on, this conversation about the economy.

Mikee, your business is obviously cyclical, it's obviously interest rate sensitive, it's obviously closely tied to construction.

When do you think you run outta room here, given this tremendous growth that we had?

- Yeah, so, you know, first of all I think about, you know, we talk about what the, what politicians can do, and this, you know, the everyday person goes to work every day and they just try to make their products and get their job done and they go home.

And, I think they get, we get hung up in that 'cause we hear about it all the time.

But, you know, they just want, they want things to be as expected and be predictable.

And, so like, that's what I tell my folks.

They go, why are you in this business?

And I love the fact that we make things and we make things in South Carolina.

So, when I tell 'em, I say, look, there's certain things we control and things we don't.

I certainly don't control what the Federal Reserve decides to do next week, and I don't care if you make bricks, or lumber, or telephone poles, or all the things that are related to housing.

Housing is still a huge component of GDP.

It's 15 to 18% of GDP.

This country needs it to be vibrant.

And then I think about, specifically to, you know, what we're gonna see with this economic runway.

People are piling into the South.

It's every day I'm in one of our showrooms, just yesterday I had a lady who'd moved from St. Louis, they were getting out of the Midwest, wanted to move to the South.

So, you know, to the dialogue between Michael and Antjuan, you know, I do think that we might see some economic slowdown nationally, but the southeastern United States, particularly the Carolinas, it feels like people are fighting to get in here every day.

We have a significant housing supply shortage.

Actually I would suggest nationally, but certainly in our region.

I think I see about, the September number I believe was 3.4 months of supply.

A high is maybe five seven, or five eight, a low might have been one six.

So there still is housing demand nationally.

So I think that runway is good, and that's a big piece of GDP, which will help.

Infrastructure's obviously another huge piece of, you know, keeping people employed and making things move around this country.

And, if you drive anywhere around the South, we're not lacking for orange cones or Jersey barricades so.

(Chris chuckling) You know, I think there's a lot of runway and I'm not, you know, you talk about the signals, I'm not scared where the economy's going.

And sometimes as business leaders we just, we want things to stay the same so we know the rules, and we just operate inside the rules and let politics be what they will.

- Michael, question?

- Labor.

Tell me about your situation with labor.

Do you, are there enough people out there that wanna work in your business?

Is there a shortage?

And then long run, do you foresee your industry shifting more to machinery and technology to replace people?

- Yeah, so it's a great question, and it also has a regional bent to it.

You know, some towns are manufacturing towns.

Interestingly, Columbia's not as thought of as much of a manufacturing town.

So, you and I were talking before, we have a facility there.

So, we struggle, like we have 50, around 50 team members in our Columbia location, and we struggle to kind of keep all of our jobs filled in the manufacturing front.

If you go to our locations in Indianapolis, west Tennessee, and you know, just south of Birmingham, we don't really struggle for the same labor pool.

I mean, our team members generally stay, they stay with us.

And what I've also found, being in the forest products industry and the brick industry, sometimes people tend to stay, and like sometimes you're like, at 70 it's time to retire from being in this space, (Chris chuckling) you know, so sometimes we do benefit from people staying in our manufacturing facilities a long time.

I've had that luxury in both spaces, but I think everybody is kind of feeling some pressure somewhere.

And you take, specifically, you just take, in the Carolinas, in Columbia we have Scout electric vehicles about to set up shop, in Columbia.

I think it's 4,000 or 5,000 jobs I don't remember the exact number.

I'm not sure where they're gonna find those people in Columbia.

They're gonna have to work.

And so, you know, as kind of a, an indigenous manufacturer that's been there a long time, of course I get excited when we see economic development in South Carolina, but I always worry, are they gonna have something better to offer than what we have to offer?

You know, a brand new shiny manufacturing plant can really create some opportunities.

So, we're feeling a little pinch in areas, and certainly in the skill trades, but overall, I think people wanna work and I think there's some dignity and pride in being in a company that makes things, so.

- [Michael]} But do you have the ability to shift more out of labor and the technology?

- For sure, so I think, you know, to y'all's inflation discussion a minute ago and interest rate discussion, I mean, there's a point at which you can make it cheaper with automation than you can with manpower.

And, but you just have to look at, you know, it's a decision every day, a balance.

Do we invest in CapEx, or do we keep, you know, the guys on the line packaging the brick the way we've done it for the last 10 years, or do we automate and have two guys on the line instead of 12 guys on the line?

So, yeah, there definitely becomes that balance of where do you wanna deploy your capital?

And it really becomes a math equation at that point.

But, so yes, it's, I can't imagine there are many industries that don't have robotics or automation as a platform.

I think AI might do the same thing to the back office, right?

It may really radically change that labor front as well.

- Antjuan?

- Nobody retires and moves up north.

(Chris laughing) So we seen this influx, of folks come to the South.

But Mike, how do you stay competitive?

How do you stay competitive from a wage standpoint?

How do you stay competitive with all the technological advances that may pull traditional Antjuan Seawrights out of the workforce and replace that with machinery?

How do you make the type of work you do, and your company does, very successful?

How do you make that attractive, for a youngster who may be trying to find their why and their way?

- It's funny, so, it's a great question.

During covid, we battled with a, we never thought in manufacturing we would compete with the drive-through.

You know, the fast food chains where everybody saw 'em, they were wrapped around the, you know, two times around, and Chick-fil-A was moving 'em through faster than most but, everybody, you know, we were losing manufacturing employees, you know, to the fast food industry, just 'cause they had a demand.

And so, we did see, we saw light, you know, and it really resonated, all the numbers we saw, we saw wages move.

The nice thing about, you know, a closely held, more nimble manufacturing operation, we can move really quickly, you know, government, it takes them a long time to get wages up and to fix.

I don't care if it's a teacher, or a fireman, or all the very essential components of our communities and our systems, as a closely held private business, we move wages.

'Cause I heard a lot of companies say, "We just can't fill seats, we can't get things done."

Well if your business is viable, then you're not gonna let wages, or you know, somebody in the seat stand in your way.

You hate turnover, you hate to retrain, 'cause there's a huge cost to that.

But being, you know, I mean US Brick, we're a large, but we're an independently, closely held company with a very non layered system.

So we move pretty quickly.

So, I don't battle some of the same issues that maybe my larger, publicly traded competitors might fight.

So that's an advantage for us.

- Can I ask one question?

- Yeah, Antjuan.

- Training, right?

That's a big deal, like preparation for jobs, because your jobs, I think, the shapes, the plates are shifting, those are jobs of the future now.

We're making things again in the United States.

So, how do we train the mindset and the worker to be prepared for those jobs, because that's not always a college degree, or MBA, or MHA, or whatever it is?

- A hundred percent.

Look, my oldest, 25 years old, he's in the tech school, in Horry Georgetown, you know, studying in a trade where he can go right into work in the wildlife and forestry management type business.

Because, I think there is a lot of work that actually needs to get done that you don't need, you know, you don't need a political science degree from Furman to do most of the things we do in the brick business.

And so, yeah, and I mean, so I think the, you know, our technical school systems are incredibly powerful, both across both the Carolinas.

You know, I think we're very lucky nobody lives with, further than, what, 30 minutes away from a technical school, I know in South Carolina, I don't know about North Carolina.

So yeah, so I think training, we're lucky as our industries, you can see, are really moving toward having resource.

The Brick Industry Association offers online training, and remote training, so we can deliver training in a way that we couldn't in years past.

So, I think it's essential, and to think that you have to have a four year degree to go out and have a very viable livelihood and career, is probably not quite the same story that it was.

And I feel like I'm starting to hear that too.

- Let me shift to something else, Mikee, and you're in a unique place to understand this, not just because of Cox Industries and you grew up in the South.

But, this past summer, and a lot of people didn't see this, Michael, you probably saw this, but, Bloomberg, and I wanna read this to you because I'm gonna ask you a strategic question about the New South.

"For the first time", and this is a Bloomberg report, "For the first time since the government started tracking it, six southern states: North Carolina, South Carolina, Tennessee, Georgia, Florida, Texas, are contributing more to the nation's GDP than the Northeast."

And then it goes on to say, "The Southeast accounted for more than two thirds of all job growth across the US since early 2020.

Bloomberg called it the $100 billion wealth migration, tilting the US economy center of gravity, south."

Now, that's statistically reported, and if that's true, and I believe it is, does, while we celebrate that and we have the wind at our back, don't we start to now face the same things that drove people away from that kind of growth in the Northeast and other places, to begin with?

And I use things like, as we don't, as places like Charlotte don't wanna become like Atlanta, isn't the success going to make 'em, like Atlanta?

And I don't mean just, in all those places.

Is that a worry for you?

- Sure, I mean, you know, we're headquartered on you know, right in downtown Charleston, and I make the drive from Columbia quite frequently, to our headquarters down there, and all you gotta do is get on I-26, between Columbia and Charleston to know that we're running outta room, and we're running outta places to expand roads.

Roads can only go so far when you're on a peninsula.

And so, yeah, no, I think that we're seeing it everywhere.

You know, having spent a great deal of my early life in Greenville and to see the explosive growth, you know, Greenville was a quiet little town and downtown, (Chris chuckling) up until about 20 years ago, and then it went bananas, right?

And all the manufacturing you see, that's definitely relocating to South Carolina.

We're the tire capital now, the largest exporter of automobiles, and all the secondary and tertiary manufacturers that are supporting all of these different, you know, major high-end manufacturing systems.

You know, I mean, just like Scout I referenced a minute ago, they're gonna, there are a lot of people, it seems like anytime on a, I'm on a plane flying back into Columbia, I hear somebody coming to look for a house in Blythewood.

So, I mean, I think that's a reality is that, it is a good place to live, work, it's hospitable, but there's no question, you know, I was joking with somebody driving back from Charleston last night and I was like, "At least they're working on the roads."

And they go, "Yeah, but they're probably 10 years behind."

My buddy Richard Jackson, CR Jackson would say, "We can't move enough, do enough, move fast enough to make the roads like we need 'em here, - Yeah.

- in South Carolina.

So yeah, I think that's a. Congestion's a problem.

Then you're seeing, you know, here again, you talk about the national housing shortage, think about the regional housing shortage, when these.

I mean, where are 4,000 people gonna relocate to in Blythewood, South Carolina?

That's a big lift in my book.

And, so it's a good problem for us to have, as a new construction focused company, but I definitely think we're having to get, you know, sometimes we play checkers as it relates to how we spend our money, and it really is time for chess, with all these companies coming in.

- [Chris] That's a good way to say it.

We have about two minutes left, Michael.

You have a question?

- It's 20 minutes actually, in North Carolina too.

Better than South Carolina.

- Oh, good, thank you.

- I don't know if you can address these in a short period of time.

Affordable housing you already mentioned, and global warming, two big issues anywhere in the country.

Do those issues hit you, or is this, or do you have to worry about dealing with those?

- Sure, I mean, I, well, you know, affordable housing, you know, depending on where your locations are, we're very fortunate, both in my prior life, and this life, most of our manufacturing places, you know, our employees can live and work, our team members live and work close enough they can get to work.

I do wonder how some of your larger cities that are growing faster, it's almost kind of an odd gentrification that, you know, the guys working, the guys and gals working in our businesses every day in, day out, they can't afford to live close to where they work.

And so I think that's a real problem.

So, I think checking the box on that.

But, then on the environment, look, I mean, I think the standard at which manufacturers are held to, so, I'm not attributing all of our environmental woes on manufacturing, but I know that's where it impacts me the most, is it is not a, we'll do the very least amount possible to help our situation now.

There's a very proactive approach, to integrate, you know, understanding what the laws are under, you know, you don't wait on the surprise visit anymore.

You invite the regulators and inspectors to show you how to improve.

So, might not solve, look, I don't think US Brick's gonna, certainly by any stretch, solve global warming, but, I mean, I think manufacturing and certainly our US based workforce is really focused on that in a proactive approach.

So, I don't know what we saw, but we see it every day in Charleston too, right?

The roads get wetter faster, and doesn't take much rain (Michael chuckling) That's a good to say it.

- to make it drown down there.

- 30 seconds.

Nikki Haley have a chance next year?

- Look, I, she has never lost an election, and her messaging is great, and she is as good as retail politics as anybody I've ever seen or known, and, I hope she works really hard, and runs hard at it, so.

- Saved by, that we're running out of time on the show.

- Amen.

- But thank you, well done.

(Antjuan laughing) Thanks for being on the program, nice to see you.

- Good to see you again.

- Yeah.

- Good to see these guys too.

- I'm sure.

Antjuan, hang around, always good to have you.

Michael, glad to see you too.

Thank you for watching our program.

In case I don't say it, or you don't hear it enough, happy holidays, merry Christmas.

Thank you for supporting this program.

We certainly hope that your family is healthy.

We have a lot to say grace over, and we are grateful that you support this show, and live here.

Until next week, I'm Chris William and we hope your weekend is good.

Goodnight (pensive music) - [Narrator] Gratefully acknowledging support by: Martin Marietta, Blue Cross Blue Shield of South Carolina, Sonoco, High Point University, Colonial Life, and by viewers like you.

Thank you.

For more information, visit Carolina Business Review.org.

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