(upbeat guitar rift plays) - [Announcer] This is Carolina Business Review.

Major support provided by: The South Carolina Ports, the state's most significant strategic asset positively influencing economic development, job growth, the environment, and our communities.

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- Few times a year like to convene what we call insiders; those are leaders from across the region who have a different point of view of maybe what is behind the curtain, or what is inside baseball, so to speak.

I am Chris William, and welcome again to the most widely watched and the longest running program on Carolina business, policy, and public affairs seen across the Carolinas for more than 30 years now.

Thanks for supporting it.

We will start to unpack things, like the economy, like inflation, like economic development, and all things in between.

And we start, right now.

(simple low-string music) - [Announcer] 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 plays) On this edition of Carolina Business Review, Christopher Chung, from The Economic Development Partnership of North Carolina, Susie Shannon, of The South Carolina Council on Competitiveness, Donald Thompson, from The Diversity Movement, and Sara Fawcett, of the United Way of the Midlands.

- Well I am personally just thrilled to have all.

Have you all ever been in this studio together?

- [Christopher] Not at the same time - [Donald] First time.

- [Susie and Sara] Not at the same time!

- No, first time for me.

- Any surprises with anyone?

You can tell us.

Anybody surprised by, - Don's taller than I thought he was.

(laughter) - [Chris] More handsome?

- More handsome, definitely.

- I'll take it.

- Well you know what, truly, thank you for coming together.

This is very exciting, and it's not lost on me that you all made the trip to Charlotte to do this, and that's a commitment for the day as well, and I'd like to welcome you all back to some normalcy.

Ah, Don, we'll start with you, and start with, let's start with the economy.

Let's unpack things like jobs, and inflation.

The inflation number, and I know none of you are economic professors, but you do have your finger on the pulse here.

Don, how long do you think this inflation is gonna be felt, and is it going to be more debilitative than maybe we'd think?

- So I think we have a long haul challenge, right?

And any time you're looking at the job loss, any time you're coming out of a pandemic, any time you're looking at fear, uncertainty, and doubt from leadership, all of the sudden, there's no magic pill that's gonna make that go away.

Because when you're having tens of thousands of people lose their job, now all the sudden that filters into the rest of the economy.

So the short answer to me is, we've got to really tighten our belts for the long term, and I'm lookin' at 12-18 months of a little bit of pain, quite frankly.

- Yeah, you think that short?

- I think before we can start to see the other side - [Chris] Yeah, yeah okay.

is what I would describe.

And the specific example I would say is people are looking at budgeting very differently, right?

Whether it's their real estate footprint, whether it's their hiring verse using outside consulting, and kind of 1099's for their business.

So they're making more strategic decisions based on a longer term point of pain that I've seen in a little while.

- Suzie, do you have models here that say longer, more painful, less painful, not as bad?

I mean, what do you think?

- So I think we're gonna see at least in the near term a bit of a tightening up, and that will be painful.

We're already seeing that with some companies throttling their marketing budgets.

Those tend to be the budgets that get socked first.

- [Donald] Mm-hm.

And we're already beginning to see, you know, a little more scrutiny requests for sponsorships for events, things that would typically come out of a marketing budget, so I think they're already beginning to get into a protective hoarding mode.

Because, if there's one thing they know they're gonna have to continue to spend money on and invest in, is their workforce.

Because we're still seeing ramped up hiring, and we're also seeing pay rates go up, quality of life issues, sort of things that are attached to compensation in fringe, that may not directly translate into cash, but, to the employee.

But, it is an expense to the employer.

- Sara, not to say that not a lot of businesses and people are not inflation sensitive, but I've gotta think the non profit industry probably braces for these kind of, - Oh, sure.

- Right?

- Yeah.

- So, what're you seein'?

- So, we actually have been seeing donations and gifts go up to, start to creep up towards pre pandemic levels on the whole.

Now having said that, a lot of organizations, a lot of non profits, are looking at other sources of revenue.

Whether that be having some type of facility that they rent out and actually having that kind of income stream, or just looking at donors differently, doing more analytical research on their donors and what they want, and also looking at more private and public grants.

I mean that's becoming a larger and larger part of all of our budgets and revenue planning.

- Yeah, Chris, what about the pall on economic development around inflation?

- Well, first off, it's great to be back, wonderful to see you, (Chris laughs) it really is nice and like you said, a feeling of normalcy has been restored by having us all in the studio.

The economic development, if you look at our limited view of the world, activity is still very strong, right?

And you've got companies that we're talking to right now that are proposing, still create thousands of new jobs.

You've got a still, a very tight labor market, which of course continues to apply pressure on wages, which is one of those biggest drivers of inflationary trends, and I don't see that letting up any time soon.

I think some of the recent headlines, despite the tech industry slashing a lot of jobs, I think most employers, to Suzie's point, are still investing in attracting and retaining workforce.

They've fought so hard in the past few years to retain workers in a very, very challenging labor market for employers that I don't think they're gonna be very quick to cut them and let them go, lest that they have to ramp back up, and go back to fight for that same talent.

And so I think that in that kind of environment where you're not only- we're still trying to attract a lot of employers that are gonna create a ton of jobs.

We still got all these other employers that have announced thousands, tens of thousands of new jobs that they're creating.

That continuous pressure on employee availability I think is going to be one of those contributing factors to inflation.

- [Chris] Yeah- - But that's a good thing, - Right.

- In the sense that, this recession is not gonna come with those very, very steep job losses, like what we saw with the Great Recession.

So that's good for the average worker who's still probably gonna have some options there that they wouldn't in a much more challenging economic period.

- So when we blow this out, - [Donald] Mm-hm.

- And I, let's just dump it on the table for anyone to jump in on.

Don, are we going to have a recession without a recession in jobs?

- Complex question.

What I'll say to it is - [Chris] What's your gut?

- I'm not sure, but here's the thing that I'm seeing, right?

Is that people and CEOs that I work with in particular are really struggling with that blend of empathy and economics, and so they're thinking through it on a daily basis, right.

If I lay off 2000 people, what does mean to my diversity, equity, inclusion programming?

- [Christopher] Mm-hm.

- [Chris] Mm.

- Right?

If I lay off folks now, what does it look to my community support, and the organizations that I gave to, right?

Can I give 100,000 dollars to an organization when I've cut 500 jobs, right?

So they're trying to balance all of the economic drivers together and it's, quite frankly, it's kind of difficult.

The upshot is that we're still seeing growth in overall markets, right, that leaders are chasing.

And so that long term fuel, right, to Chris, your point, I think is gonna keep some of the employee retention.

- Mm-hm.

- [Donald] Right?

Because people are dealing with current pain, but they're still striving for that three to five year outlook.

- Can they hold on to jobs, though?

Can they be sympathetic?

Will leaders of organizations be sympathetic if the calculus on revenue changes, and all of the sudden you're facing, well, you know, it kind of comes down to A or B; I wanna retain these workers but my revenue's dropping, and I've got, not just shareholders, but maybe private equity owners.

- What I will tell you is, it is a very, very high octane conversation in the boardroom right now.

- [Chris] (laughs) That's a good way to put it.

(Suzie laughs) - I am fortunate in that I work with and council and partner with a lot of different CEOs on a lot of different subjects, and they're wrestling with it.

And so the reason why I said it depends is because it really depends on whether a company has the cash in the bank, the long term stability of the CEO, to plan for the future, or if it's a leader that's under duress for other reasons, and they have to chase the bottom line right now.

- [Chris] Mm-hm.

- And so there is some differences there.

- [Sara] And I still think there's still some PTSD left over from 2021, when we had the Great Resignation.

And it was just a brawl for talent at that point, - [Donald] That's right.

- [Chris] Yeah.

- and so when I think about that, if I were faced with that choice, which I'm not, fortunately, but in general, when you're faced with that choice as a CEO or board, - [Christopher] Mm-hm.

- it's do I want to take that risk of laying off employees, - [Christopher] Mm-hm.

- knowing that this recession, because of lots of factors that we've talked about around the table, probably will not last as long as the Great Recession did.

- [Christopher] Right, yeah.

- And, do I want to take that risk that I then can't hire people back as quickly as I need them?

- [Chris] Mm-hm, yeah.

- And their playbook, because it's unlike the 2008 recession, it's unlike the 90's, it's unlike the 80's.

So I think companies are having to create the playbook as they go, and they're having to adapt to these variable market conditions, - That's right.

- that are really pressuring them right now.

- You know, you bring up a good point, is this whole idea, and I don't wanna, how I get, too spongy about this- - [Donald] Hah, go for it!

- the spiritual- - [Donald] It's your show!

(they laugh) - Yeah, yeah!

Thanks Don!

But the spiritual nature of what you just said, you know, there are 40 year old running companies that have not experienced, really, 2020 wasn't a slow down, it was a flash crash, or a flash recession.

- [Suzie] Mm-hm.

- [Donald] True, mm-hm.

- But there are plenty of people that are mature and running corporations that have never experienced a recession, is that, does that play into this at all?

Talk about a brand new playbook, brand new day.

Anyone?

Or we just don't wanna touch it?

(laughs) - I'll jump in on it.

I think that is true, on its face.

But business leaders in general are really looking for how to create long term growth.

And so they're trying to determine whether or not the short term impact, the short term pain, is gonna limit their ability to compete globally in the future.

And so that continual ebb and flow, I don't think is a direct correlation to experience of a recession, but really, how are you navigating the current jungle, right?

Because that's really all that matters, right.

And a lot of time experience does, but this new paradigm is really important, because when we look past recessions, we knew why they happened, right?

The mortgage crisis was the trigger, right.

This has so many different elements to it that I think the experience actually may hinder because there is a new way that we're thinking about talent, a new way we're thinking about economy, a new way we're thinking about job growth.

- Go ahead, please.

- All right, and those 42 year old CEOs are not only approaching this economy with sort of that lack of maturity and historical precedent, but they're also bringing with them their own generational aspects - [Christopher and Sara] Mm-hm.

- that are gonna give them a little bit of a different perspective.

I think that's why we're seeing a lot more pressure, not just global, but around things like ESG, - [Christopher] Mm-hm.

sustainability, DEI, and not only are these sort of different generational, cross generational CEOs bringing that into the boardroom, - [Donald] That's right.

sometimes they're bringing it, if not voluntarily, kicking and screaming, because their workforce is demanding it.

- [Christopher] Mm-hm, yeah.

I mean we've talked about this before, right?

It's never been easy to be the CEO or leader of any organization, but it's even harder today, because there's just this wealth of complex factors that any CEO - 40 year old, 60 year old, 20 year old - they just have to navigate this new set of acronyms and issues that are really affecting how a company is perceived in their marketplace, by their investors, by their customers, and, of course, by their own employees.

- [Chris] Mm-hm.

- So it's just, it's a very challenging landscape, and I don't see if getting any easier for organizational leaders going forward.

- I don't want this to be a leading question, but something you said Chris, and Suzie, we were talking before the program, the economic development and the capital investment in both states has been epically large, and that's probably an understatement, that economic development in North Carolina had the biggest year ever, South Carolina, not just the biggest year ever, but, I mean you blew it out!

- [Suzie] Times two!

(Donald laughs) - It's, I mean, it's almost scary success.

So, will that kind of success, and this is my turn, decouple the Carolinas from any serious felt recession, that maybe the rest of the country will feel?

As you talked about jobs, are there so many people looking for jobs, there's not going to be a jobless recession, and/or, maybe there won't even be a recession, like a recession is known in other parts of the country, because of these factors we've talked about.

- [Christopher] Well I think nationally, to Sara's point, the predictions have all generally been for a relatively mild recession, and a relatively quick bounce back from whatever that trough looks like this time around.

And then when I think you look at the Carolinas, I can't speak for South Carolina, Sara and Suzie probably can, but North Carolina, most economists would say we're relatively well insulated, partly because we continue to be this beacon for talent.

People keep moving here, which contributes to economic activity, which makes it easier for employers to expand here, because they have that deeper pool of talent.

So we have some really good fundamentals in North Carolina, and presumably as well in South Carolina, that, while it may not insulate us entirely from the effects of a recession, it's gonna be felt a little be less intensely in a state like North Carolina, which is continuing to grow economically and through population.

- [Donald] Mm-hm.

- That's a good position to be in, because again, not every one of the 50 states is sitting in that type of spot.

- [Chris] Yeah.

- In South- excuse me - In South Carolina, you know, historically recruiting those, you know, the big buffalo, it was always build it and they will come, right?

So you build out the infrastructure, you recruit the companies, and then the workers will follow.

Even pre-COVID, you know, we sort of saw that flopped, where the companies where making their primary siding decisions on where the workforce was already located.

- [Donald] Uh-huh.

And even though I feel like we, South Carolina, is quite a bit insulated, as, you know, Chris alluded that North Carolina is as well, because of the robust economic activity.

I mean, it's amazing that not only did we have a record announcement last year, but then we beat our own record within the same quarter.

- [Donald] Yeah, pretty amazing.

- I mean, that's, that's.

- Yeah.

- And you talk about The Redwood Project, down in the low country, - Yes, yes.

- along with the BMW- - Coupled, coupled with the BMW announcement.

And, so, but of course, that is all geared toward one economic industry vertical, right?

Manufacturing.

We still have a number of economic drivers within the state that we need to make sure that also cultivated and nurtured as well.

I think where we're probably gonna see a bit of the pinch, if we kind of had to look on the negative side of it, is that labor force participation.

- [Christopher and Chris] Mm-hm.

- You know, how do we hit all of these things in tandem, whether it's infrastructure development, whether it's economic recruitment, - [Christopher] Mm-hm.

- it's workforce development, - [Christopher and Donald] Yep.

- and, you know, when we've got prime age people, a little bit reticent about- - [Christopher] Yeah.

- jumping into the workforce, or staying in the workforce, particularly, where we have aging populations, and where we have tax structure that encourages, - [Chris] Mm-hm.

net migration of aging population, - [Chris] Okay.

we're gonna feel the pinch, particularly in about five or ten years.

- [Sara] And that's the statistic that I wish we would talk more about.

- Labor force participation, yep.

- Labor force participation.

- Yep, absolutely.

(Sara clears her throat) - Excuse me.

It's great to talk about a low unemployment rate, - Mm-hm.

terrific, it's 3.3, I think?

- 3.6 nationally.

- [Sara] Yeah, and 3 point- and that's the common denominator, right?

- [Donald] Yeah, yeah.

(Suzie laughs) - [Sara] So, - That's a good way to say it, right?

- I wish we could put, and maybe through venues like this we could do it, is put more emphasis on that labor force participation rate, because we've gotta get that up.

- [Chris] Yeah.

- If the growth that both of our states are seeing- - [Chris] But how do you do that?

- [Christopher] So childcare is one of those structurally issues that's keeping, you know, there's a third of the workforce that could be seeking employment that's sitting on the sidelines, to Suzie's point, they're reticent, for some reason, and childcare is coming up.

That's all the sudden become a very, very strong focus for a lot of organizations.

- So that falls in The State House in Columbia, and Jones Street, in Raleigh, where, I'm sorry, The State House in- - [Christopher] Well, there are federal things that could be- so it's- childcare, the issue there is both supply, right, like a lot of people dropped out of that profession during the pandemic, and not as many childcare centers have reopened post pandemic, so that just constrains supply altogether.

And then you go to rural areas, you're lucky if you even have a childcare provider.

In urban areas, the cost is the bigger issue, - [Suzie] Or reliable transportation.

- Yeah, absolutely, so the federal government, - That's right.

- it's the demand is gonna be constant and growing, the supply area is where federal policy, state policy, perhaps even local policy can assist, as well as private sector support, in recognizing that childcare is one of those barriers keeping them from getting employees that they need.

- And when we look at, so, United Way does a Self Sufficiency Standard across the state, - Midlands, or United Way?

- United Way, well, no, - Yes.

- United Way and South Carolina, all of us get together with our state association, we come up with this Self Sufficiency Index, and it looks at based on your family's structure, what does it take, what do you have to earn, in order to be self sufficient, with no government supports.

And the way that, the that we use this data is to say where is the best leverage.

Is it in housing supports, is it in food security?

No, it's in childcare.

The number one- - By large?

- By large.

- [Donald] Mm-hm.

Is that, if we can adjust childcare costs, through public private partnerships, - [Christopher] Mm-hm.

through public policy, that would give you the best bang for your buck in getting someone to be self sufficient.

- Okay, let me ask this, and I don't know if this gets to the point you made, Sara, but, if the states, if North and South Carolina General Assemblies now, seem to be pretty close about Medicaid, accepting Medicaid dollars, does that change some of the job and early pre-K type of help?

I know it's healthcare dollars, but does it free up some other resources within the state budget to do that, do you think?

Do you think that would be helpful?

- I think depends on how it's structured, because if it's going to be Medicaid dollars, we're talking about folk who aren't Medicaid eligible that need that childcare support as well.

You know, you have a lot of folks that fall, I guess it's a gap, - [Chris] Yeah.

- where they don't qualify for most, or any state support, they're making just over the limits in terms of earnings for qualifications, so, those are the people right there that are spending a third or more, - [Donald] On childcare.

- on childcare.

- Yeah.

- And it's both the cost of childcare, but also the availability.

- [Christopher] Mm-hm, yeah.

- [Sara] Yes.

- [Donald] Right?

- [Christopher] Absolutely.

Especially in rural areas of the state.

- Right, and to your point, and now you you throw in, if you're parents, and you have kids that have neuro diversity issues, or different things like that, or actual disabilities.

And so one of the things that I think is critical is we haven't educated the business community in our legislature on the linkage, right, between the impact of childcare and that employee engagement.

- [Chris] Shouldn't they know that by now?

- I think we know things, which is different than things we care about, and things that are above the fold, if I wanna use an old newspaper thing.

And certainly we can know about things, but I think pressure and continual education.

If you think about marketing and it takes twelve times to see something, (Christopher laughs) before somebody clicks on something, right?

- Yeah.

Well, politicians and business leaders aren't different than that, right?

So there has to be a steady drum beat of education and linkage, right, between the goals that they're trying to set.

- And I think folks have heard about these issues, whether that's housing availability and affordability, whether that's childcare availability, but they haven't necessarily drawn that linkage to how it's an economic development issue, and how it effects our economic competitiveness as a state, and the ability of our businesses to attract and retain workforce.

That's the linkage that I think Don is saying that's gotta be a lot stronger.

- And housing's probably coming closer than the childcare and transportation, because you are seeing more emphasis, more support, both at the local regional level in particular on affordable housing.

Because when we start talking about affordable housing, right, so we've moved from the nomenclature from public housing, to affordable housing, to workforce housing.

- [Christopher] Mm-hm - [Chris] Right, yeah.

- So now that we're sort of tilting into that- - That's right - workforce housing nomenclature, I think that's when you're gonna see the rest of that conversation and those beneficial movements.

- So do you think that there will be meaningful movement in what workforce housing looks like?

- I think we're already seeing that at the local level, and of course everything is, you know, - [Chris] Right, yeah.

- mayors rule the world.

(Donald laughs) - Lot of good things happen local, so.

- [Chris] Yeah, that's right.

- That's awesome.

- [Christopher] Mayors think they rule, don't they?

(Donald and Suzie laugh) - And I've never been a mayor.

- Ah, let's zoom out to something else, and I wanna get this in.

We've got about three or four minutes left.

You know, the Carolinas now, the budgets of South Carolina, North Carolina, not just one, or two, but several billion dollars in excess, in surplus.

It's a good thing!

And all of us sittin' second year in a row, at least the second year.

Do the politicos, do those that leave in public policy look pretty smart now for sittin' on that cash.

Do they?

Is my question.

And, will that help us (laughs) (Donald laughs) will that help us in the next two or three years, whatever the economy gets up.

- I mean, certainly being fiscally responsible is sound governance, right?

So that's a good thing.

But, there's also the construct of what are you doing with those dollars, right, to meet the needs of your constituencies, right?

And that comes back to whether it's childcare, whether it's infrastructure, whether it's broadband in rural communities.

If you have the dollars, but then you're not doing anything that's transformational with them, then I don't know if I want to give you an A+ for just having the dollars, would be my opinion on that.

- [Chris] Sara, what do you think?

- Well, I certainly would like to see the, for obvious reasons, in my industry, we like to see more public private partnerships using those excess dollars.

- [Chris] Like, what would that look like?

- I mean, in a childcare initiative.

- [Chris] Okay.

- Or, in affordable housing, or workforce housing, attainable housing, things of that nature.

Because, you know, we've got this, it's gotta be for things because the dollars may not always be there, - [Christopher] Mm-hm.

- and, so it can't be for things that are going to require a long sustainability.

But what are some things that we can get going that can have a sustainability plan?

Whether it's around childcare, or housing, and I do agree with you, Suzie, I think that housing is also the other big issue.

If you are stable in your house, you are going to be stable in your job, stable in your education, I mean that's really the foundation of everything.

- [Donald and Suzie] Mm-hm.

- And let's be real, too, when we talk about the surplus and how we're defining that, you know, the federal appropriations that are, you know, have gone into this, being invested into the states, or currently in the process of flowing into the states, that's also added to, you know, some of those local regional state revenue buckets.

And that's not gonna be around forever.

There is a shelf life on those dollars, and so, I think the aim is, back to the public private, and having a say in how those dollars are invested so we can have maximum impact.

Because, you know, they're probably short run infusions, but how do we get long term meaningful impact out of that.

- We have about a minute left, and Don, you've done a lot of work on this, and I don't wanna let the program go without, - Oh, sure.

- DEI initiatives, are they going to lose momentum if economies get tough?

- So, yes, there is a significant risk of that.

But, those that are highly committed will weather that storm, and be more effective and efficient with those dollars.

Those that are using DEI as a checkbox, it's an easy answer to find some funds around the edges.

So it really is a function of not size of organization, but the commitment level of organization.

- Really, resources don't play into that?

A company with obviously more resources wants to lean into- - Well, if you think about, if I'm going to work and I'm packing my lunch, and money's tight, peanut butter and jelly might be what I'm having.

If money's a little bit better, I might have a turkey sandwich, but I'm still gonna have a sandwich.

And so the focus on DEI doesn't have to change because you have to belt tighten.

I means you have to be more efficient.

But there are companies that are using it as an excuse to do something they really didn't want to do.

- So maybe, not as cultural ED?

- That's exactly right.

Because anytime we want to do something and we're committed to, that's where innovation lives, right?

And you can do things on a low budget very smartly, if you're committed to getting something done.

- Last word, thank you, we're out of time.

Suzie I know wanted, (Suzie laughs) we're gonna keep you all together for next week, but thank you, thank you, thank you.

- Thanks!

So glad to see you guys, I'm glad we're back together.

- [Suzie] Thank you!

- On this program next week, we're gonna almost stay right where we are and talk about something oh, easy.

The loss of trust.

(laughs) I'm not laughing at it, but it will be and interesting dialogue.

We hope you stay with us, and hope you have a good weekend.

Goodnight.

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