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The end of May is here, and for all you grandparents and parents out there, that means we have officially made it through one of the busiest months of the year.

Today, we have the pleasure of hearing from North Carolina's new Secretary of Commerce, Lee Lilly.

What does the uncertain environment of 2025 mean for economic development in the state, and are changes in the labor market on the horizon?

We're about to find out.

The conversation starts now.

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On this edition of Carolina Business Review, an executive profile featuring Lee Lilley, North Carolina's secretary of Commerce.

(upbeat rock music) Hey Lee, welcome to the show.

First time here, right?

First time here.

Thank you.

Welcome, welcome.

And congratulations on the new role.

Now that you've been in the job for a few months, I'm just curious where what is your number one priority?

Where are you moving forward?

Well, first, it's an honor to have the job and to be appointed by governor Josh Stein and confirmed by the state Senate.

And we've got a lot going on in North Carolina.

And I tell people I have the very best job in state government because most of the time my job is to go out there and sell a great product, which is our state and our people.

But the first priority for me in the job, what's been the first priority for Governor Stein might surprise people for the Department of Commerce, and that's been Hurricane Helene recovery in western North Carolina.

And I know the viewers of this program know it well, but it's by far the most devastating natural disaster that we've ever had in the state of North Carolina.

We lost more than 100 North Carolinians to the storm, and it's a $60 billion storm.

And so the Department of Commerce has got a number of different initiatives that we've engaged on to help with recovery.

But the largest of these is that Governor Stein, in his first day in office, created a new division within the department, a division of community revitalization, which is responsible for administering the large federal grant that we receive from Housing and Urban Development for primarily housing recovery.

So one thing that's a little bit unknown about hurricane or natural disaster recovery is that funds for housing really come at the end, because it's the expectation of the federal government that all the other funds are expended first, insurance funds, nonprofit, whatever you make.

Really interesting.

And really the funds of last resort is this appropriated funds.

It's not automatic that come to the state in this case, a $1.4 billion grant to focus on housing recovery, primarily single family homeowners and really those that are most at risk and have the least amount of resources to help themselves to recover.

So we'll be focused on relatively low to moderate income families, those with disabilities, those who are maybe elderly.

And we will launch this program later this summer.

And that's really been job one out of the gate is focusing on recovery.

Yeah.

So that's really interesting.

So the first question I have to follow up on that is I've spent a I spend a lot of time in western North Carolina myself, and I was there right after the hurricane and saw some of the destruction myself.

And as you mentioned, just absolutely unreal.

Is that enough money?

It's not.

So $60 billion storm, if you look at all in between federal and state public resources, what's come to the state?

It's around I want to say 15 billion.

And it's not anticipated that public resources will cover all of the need.

But we know that's well, well short of what we need.

And Governor Stein has made additional asks of the federal government.

I think an additional 14 or $15 billion of them, of which an additional 3 or 4 billion would go into this housing recovery program.

Again, there are other sources.

There's private rights.

There's a host of different ways that people can receive help.

But these public resources are totally necessary.

And it's not just housing, it's roads, water and sewer.

All of the network utilities and, infrastructure that we need to help the region recover.

And one thing, if I could just say.

Yeah, absolutely.

It is business recovery is been a real challenge out there because, it is an area that is so dependent upon travel and tourism.

Right.

The storm hit at the peak of their season, right there as we were going into fall.

And it takes a long time for them to recover.

So the General Assembly is appropriated to the department, another one of our programs, a small business infrastructure program where we have $55 million that we will put on the street to local governments to help them repair their downtown.

Fix sidewalks, fix facades, fix water and sewer or anything that we can help on the public side, that would make it easier for a tourist to get to a business and spend money in that community.

But what we don't have is any programing that goes directly to small businesses like we had in Covid 19.

Yeah.

So I wanted to ask about your role during Covid 19, because I know you played a really important role in the state's programs around around the pandemic.

And so I'm wondering what lessons you learned during that period of time that you're going to apply or that you're currently applying to this new role because there are some similarities there in terms of the shock?

Absolutely.

I'd say the number one we lesson we learned, and I'm just saying this on the business side, is there is no replacement for cash.

There is no replacement for making sure that there is cash in the system when essentially the business is frozen.

And in the case of many of these communities where they had no water, sewer, electric, and then they had this long extended period where they couldn't get consumers into their community.

They're essentially frozen.

And so what you need in that environment is cash.

And there's only a handful of resources that will provide this now.

There are some great, non-profits up there, Mountain Biz Works, which have been working with businesses throughout the community.

They run a small business loan program.

The governor has worked with Dogwood Health and the Duke Endowment to do a small business grant program, of which we've given out grants to 2100 businesses, $55 million worth of grants.

But it's not enough.

Right.

And I met with business owners.

I was there last week in Madison County, met a business owner who had flood insurance.

But the insurance carrier is not paying out on the claim.

And this individual's got to make a really tough choice.

Do I continue trying to keep this enterprise alive when I have $600,000 in repairs, that I'm not covered right now on insurance to do?

Or is there another path for me where I just call it quits?

And what we want and what we think is important for recovery?

The lessons that we've learned is that urgency, speed really matters.

The quicker you get capital into the system, the quicker it's going to recover.

And then there's no shortage of getting things back to normal.

When it comes to recovery, the things that you're used to living in your own home, going to the place that you like to shop, or going to the place where you like to have dinner or lunch.

And having those businesses open is essential to really the psychological response of recovery.

And that was an important thing that we learned in Covid.

So urgency getting cash into the system.

These are the things that you have to do.

And I think that's really the way that Governor Cooper and now Governor Stein have approached the recovery for Hurricane Helene.

Yeah, really, really interesting.

Do you feel like is there concern in those areas that the longer you mentioned urgency, the longer we go, the more time there is that they just kind of people don't think about it as much.

Oh, yeah.

That always happens.

I mean, you you look at sort of the curve of what happens with the disaster.

There's this real flood of interest and investment that thrives immediately after the storm because it's on your screen and it's on your Facebook page, and it's everywhere you go.

You can see the impact of the storm.

Time goes on, right?

Other things fill the gap in your imagination.

And frankly, people don't notice.

We are not going to lose that focus at the administration level.

And we've got some tools to help other people remember that western North Carolina is open, and that's one message I would want to give to everybody who's watching this program.

Western North Carolina is open now.

Go, go enjoy it.

There are wonderful things to do right now.

Not everything's open.

Open all the way, but most things are open and you can go enjoy it.

And so we've got a marketing campaign that's going out both within our region and internationally, trying to remind consumers you should come to western North Carolina and spend your money.

But yeah, there's a there's a challenging piece of this from a public policy standpoint where there is this little lull after a while of interest, we aim to keep that moving.

And because it's the governor's top priority, he's going to have another round of asks from the General Assembly for help in recovery coming, just next week.

That's excellent.

So let's talk a little bit about the 2025 economic conditions.

So there, the economic Policy uncertainty index is the highest it's ever been.

How is this impacting economic development right now in North Carolina?

I'd say it's a mixed bag.

So far.

So we started the year and economic development for the state with what we thought was a very rich pipeline of new projects, expansion and new investment into the state that we recording.

A lot of capital that had sat on the sidelines for the election, was waiting to see the outcome and then invest and deploy.

And we continue to be an incredibly attractive place for those investments.

Then comes all the changes at the federal level and in conversations with companies that we're working with, I had one described to me as like, well, to your point about the Economic Uncertainty Index, it's like driving in the fog.

Yes.

We were we were cruising along, the fog descended, and now we've slowed down and we may have to pull over to the side of the road and the blinkers on, and that it makes it harder for us to do our job as the economic development engine of the state of North Carolina.

That's it.

We continue to get some great projects into the state.

The governor announced earlier this week and investment into Wake County.

It was Genentech, which is the biotech firm that invented biotechnology about 50 years ago, and they'll be investing $700 million, creating 420 jobs, paying about $120,000 a year in southern Wake County, so that they have confidence enough to do that.

They believe their marketplace is going to be there.

And these are usually long term investments because it's it's manufacturing predominantly that we continue to see, in our economic development portfolio.

So what about foreign direct investment?

Have you had there been changes like this?

I think the driving through fog is an excellent analogy.

But is that impacting domestic decisions different than the foreign direct investment decisions or is it impacting everybody?

Well, the governor and I spent the early part of this week in Washington, DC at select USA, which is the largest conference for foreign direct investment that we hold in the United States.

It's hosted by the US Department of Commerce.

So we had the opportunity over two days to meet with about a dozen different companies from around the world who have either existing investments in state of North Carolina or are looking to invest in the state in North Carolina.

And I would say that their perspective aligns pretty neatly with those of our domestic companies, which is the same sense of uncertainty.

They have projects, they see a marketplace, whether it's a domestic marketplace or really a global marketplace where, they know that they could invest in additional manufacturing and scaling for whatever product that they want to produce here.

What they don't know is when they pencil out trade policy, when it's out tax policy, what does it really look like?

And just how much can they afford to invest in North Carolina.

So they have to make some tough decisions without all of the information?

That's always true.

But I think they've had less information than ever before.

Absolutely.

So, as you look at 2025 and then moving forward, I know North Carolina has been one of the fastest growing states in the country for years and years now.

At this point, do you expect to see that continue?

Do you expect to continue to see the type of growth and population and employment that we've we've been seeing?

I certainly hope so.

We've been the third fastest growing state in the country since 2020.

Only Texas and Florida have grown faster than the state of North Carolina.

We've continued to be ranked as one of the most business friendly states in the country.

CNBC has had us in the top two for four years in a row.

Two of those is number one.

I think that we have the right mix here still in North Carolina to attract not only new business investment, but really just people voting with their feet to move here.

It's a great place to live.

We have everything that people want.

We have great amenities, schools, health care, etc.

I don't see that changing.

What I do think we all are grappling with is, some of the growing pains that are associated with this investment and growth, the good problems to have.

I would rather have these than have the problems of, a city in the north that was declining.

But, as Governor Stein likes to say, used to be if you build it, they will come.

And now it's if you don't build it, they'll say, okay, because we have this influx of people who want to be here and take advantage of living in North Carolina, which is a great thing.

But our infrastructure or everything from water, sewer, roads, multimodal and especially housing is really got to do a lot to catch up.

So you mentioned the CNBC rankings.

So let's dig in there a little bit.

So we were number one for two years and then dropped to number two behind Virginia.

They had to change the rules to make that.

And I believe it was infrastructure really where we got deemed the most.

So can you talk about that?

Like how do we get back to number one and those infrastructure investments that you're talking about that we need?

What's the key to to getting getting where we need to to be in with infrastructure?

Well, just to be really clear, they've got a, I think a fairly scientific system of waiting, different criteria.

And the thing that had was previously the most weighted criteria was workforce, where we scored very, very highly.

And I would love to talk more about workforce with you because you know so much about it.

But yes, they they raised up the profile of infrastructure in the scoring.

And so Virginia took it and we came in second.

And we're still proud to be in second.

But we want to be number one.

Yeah absolutely.

Obviously if you live in Charlotte or if you live in Wake County, you can look around and see places where we've got some gaps in infrastructure that need to invest, additional capital, additional resources, whether it's transportation infrastructure, when you get outside of the metros, it's, broadband infrastructure, water and wastewater in particular.

Are big needs.

And then you look at what we have as strengths in infrastructure.

We have two pretty good ports in North Carolina.

We have a good rail network.

I think those are good selling points for us.

But we went through a big spend in infrastructure over the last four years.

The combination of federal Covid dollars, which the General Assembly put a lot of that into infrastructure and then the bipartisan infrastructure law and the long tail on those investments we haven't really felt yet.

Right.

I mean, I'll give you an example.

There was a great grant that we got from, the federal government under the bipartisan infrastructure law to build a new bridge, in eastern North Carolina, to go over the alligator River.

I go over that river pretty frequently, and we got pilings, but no bridge yet.

It just takes a little while to to get some of this money deployed into infrastructure.

So there are benefits that we will see over the next two, three, 4 or 5 years from these investments in infrastructure.

But we really can't stop because the needs of a growing state are considerable.

Absolutely.

So let's talk about workforce.

Yeah.

So we have lots of people moving to the state for jobs, but we also have homegrown talent that's in North Carolina as well.

And the truth is, like our labor force participation rate could be higher.

We could have more people in the workforce that are there, born and raised here.

How do we encourage people to get into the workforce to join the labor force in 2025, in a year like we're having right now?

Well, one thing I want to say about our labor force participation rate, and then I want to answer your question, is it is our overall participation rate is relatively low compared to some peer states.

But if you look at it on our demographics, it's sort of tracking with retirement age, essentially.

And if you look at our prime age participation rate, basically 25 to 55, we have been very steady in the high 80s for a very, very long time.

So the people who are in prime working age are working, and that's not really declining or changing.

That said, we have tremendous workforce needs.

Yes, yes, it is growing like this.

Absolutely.

And we also have a mission at the department and with Governor Stein to make sure people have a pathway to great jobs, great careers that pay them family sustaining wages, and they continue to be a really happy member of their community wherever they live in North Carolina.

So what are we trying to do there?

Governor created when he came into office, a council on workforce and Apprenticeships, which I co-chair, along with Doctor Jeff Cox, who was the president of the State community College System.

As Senator, Eddie said, he was a state senator representing Wilkes County and is one of the chairs of the Senate Commerce Committee.

So he's one of my chairs, and the three of us have a mission that we're working on in conjunction with governor his staff to think about maybe 12, 13, 14 different goals in workforce development that we want to develop and then have strategies to implement.

We've got this great workforce system, but it's fairly decentralized.

We do a fair amount at the Department of Commerce using a large Department of Labor grant, running state career centers and workforce development boards.

Community college has a critical role to play K-12.

A huge and one thing that we really don't want to overlook, and what the governor wanted to integrate further, is the engagement of industry in what we do on workforce development.

When Governor Stein announces a large economic development project in the state, there's usually a write up about what the state incentives are, right.

And there's kind of a top line number on that.

Buried down in the text is usually an incentive for a customized program, one where we go and work with the North Carolina Community College System and the employer to say, your, employees are going to need a certain set of skills, we're going to help you build a curriculum to do that at an adjacent community college.

And depending on size, maybe a couple different community colleges.

And it's a great tool for us to say to an an incoming investor or an expanding company here, we're going to help you think about your pipeline of workforce and how we get people into it.

One thing that we're thinking about on growing that pipeline, though, is really starting in the places where we know we have opportunities, K-12, where we continue to see a need to help kids understand what manufacturing.

Really looks like, right.

What career and technical education really can be, what skilled trades pay and what it what it what they pay you relative to what you put into it in terms of cost for education.

And so integrating more of this curriculum earlier in K-12 and K-12, I should say the Department of Public Instruction already does some of this, but we want to do more and make sure it's aligned all the way through the chain for us.

And then thinking about where the places in the population that we have not tapped into, we always think about our military veterans community where we have, you know, tens of thousands separating from the military in this state every year.

People with great skills that we want to keep in the state need to find a way to get them into our programs, maybe with a leg up based upon their skill set coming out of the military, because employers love to hire them.

Absolutely.

Our, disabled community, making sure that people in disabled community have more access to workforce training and can get into jobs that we think are going to work well for both them and the employer, and then people who are justice involved, people coming out of our corrections system, which also represent a huge number of people.

And we've got a number of programs that are working to help folks when they come out of incarceration, get into a great job.

But we need to do more, and we need really more alignment across all of these decentralized pillars within workforce development.

So that's what we've been charged to do.

So, as you were talking about that, something popped into my head.

I'm wondering what you see the role in AI of AI being as we move forward.

I know this is a question that gets asked a lot, and it's hard to know exactly how this is going to play out.

But how does AI impact the workforce and what skills people need to to have those family sustaining wage jobs?

I probably ask you that question.

Oh, it's one of the charges we have on this council and is thinking about the impact of AI.

And and we want to think about it a couple different ways.

One is around use cases that actually help us do workforce development better.

How do we actually capture all of the data?

And then you've done some work for this data and information that we have on what's a successful training program looks like, what certifications are really valuable, and how are we aligning that in a way where we've captured that information, synthesized it and used it more effectively for our workforce systems to align, talk, communicate, and ultimately be more efficient.

Right.

And then there are use cases out in the marketplace, which might be really valuable for us to think about and workforce, but how would it positively or negatively affect the workforce?

I will concede to you, I don't really know.

Yeah, it's.

Hard to I know what I read and I was just out in San Francisco a couple of weeks ago, meeting with some of the larger AI companies trying to get their perspective on this.

And of course, they're very bullish, right, on the technology and what they're producing.

And I don't think there's any way that we are stopping it.

But what we have seen when you have large scale changes in technology is that there is a there could be a really difficult period for a workforce where there has to be some changes.

And one of the things that we think about with AI is that where traditionally changes in technology have impacted most often, blue collar workers, right.

This is something that's probably going to affect white collar.

Absolutely.

Yes, yes.

And to be frank with you, our workforce programs aren't really focused on white collar workers.

That's not really where we we tend to funnel people.

And so we might have to adjust what we do in workforce to think about skills and training and what happens when somebody walks in the door who says, I've had a white collar job for 20 years and I don't have it anymore because they've gone and automated this using an AGI platform.

That's going to be a different approach for us, and I think is one that we'll need to work with, with federal and state partners to think about safety nets that may be required for work.

Yeah, that will be a really interesting shift.

So we have time for one more question.

I don't want to end today without asking you about how growing up in rural eastern North Carolina changes the lens by which you see commerce in the state.

I know, and I'm asking you with like two minutes to go, so sorry about that.

But so I grew up in eastern North Carolina.

A place called Williamston is a great place to grow up.

It's 100 miles due east of Raleigh.

And growing up in rural eastern North Carolina, first of all, it really bred in me a love of community.

Community can be wherever you are.

Rural does not have any monopoly over what community looks like, but what you really want it to be is some place where people genuinely feel a kinship to the place, to the people you share it with, and the elements that are going to bring that together are this really alchemical mix of, the school, the business that everybody likes to go to the restaurant, everyone goes to the churches.

And some of the work we get to do in commerce is place building to help people do that.

We want to help you have a better main street.

So people will actually have a place to gather, spend time with each other, build community is crucial.

But we I see the biggest need here is that growth in the state has been great, but it hasn't been great everywhere and the place is very true.

And great are some of our rural communities, places where we've got to do a lot more work on the investment of workforce and infrastructure, because they're already great communities, places where people, if they get there, they're going to love living there.

But we got to give them a reason to get there.

And the way that we help them, give them a reason is build out the bones that they need to be competitive.

Those bones are going to be really infrastructure and workforce because the rest of it, I think, will take care of itself.

Really great.

It's so great to be able to talk to you about all these things.

And like you said, it's it's the experience of growth in the state is very uneven in some ways.

Do you see just really quickly 30s left.

Do you, do you see a positive change for those communities on the horizon?

Well, look, we've gone from a place where we saw several of them shrinking to their back, growing again, and they're growing through in-migration.

So it's possible to do this and we really do it around hubs to do that.

Thank you so much.

Thank you so much for joining us.

I could talk to you all day about these things.

And thanks to all of you for joining us.

Make sure to tune in next week.

Thanks so much.

Have a great weekend.

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