♪ opening music ♪ ♪ <Gavin Jackson> Welcome to This Week in South Carolina.

I'm Gavin Jackson.

With the holidays fast approaching, it's time for travel and shopping.

Will inflation and supply chain issues affect the season?

Laura Ullrich, regional economist of the Federal Reserve Bank of Richmond has the latest on the economy.

But first with the passing of long serving Senate Finance Chairman Hugh Leatherman.

We talk with former Florence Mayor on the impact he had not only on Florence County, but the entire state.

Stephen Wukela, thanks for joining us.

>> Thanks for having me, Gavin.

<Gavin> So, Stephen, Mr. Mayor, that's how I know you.

That's how I covered you when I was in Florence from 2011 to 2015.

I just want to ask you a little bit about the legacy of obviously the late Senator Hugh Leatherman, you worked with him very closely.

I covered him as well, a lot at the Florence level and at the state level.

...I saw a lot of the progress that you two accomplished specifically in Florence.

...I want you to maybe kind of tell folks about just what that relationship was like with you and the late Senator, and how he helped to get things accomplished with you and others in the Florence area.

>> Well, you know, what is lost by a lot of folks, when they...talk about our relationship he and I is they forget that I ran against him for Senate in 2004.

And, you know, it was a hotly fought race, I think it was a very gentlemanly race.

He beat me horribly.

...then while I won the mayor seat in 2008.

I think something very unusual in politics, happened.

Chairman Leatherman reached out to me.

He was staunchly conservative Republican.

I was a very liberal Democrat, and he reached out to me and said, "Listen, you and I "are not going to fight with one another.

There "are things that we need to accomplish in this "community.

...you and I are going to work together "to accomplish those things for the people of Florence," Chairman Leatherman... in my experience, was not ideological in any way.

He was, you know, by education, he was an engineer.

...so his nature was to kind of look at this machine or look at the system, figure out why it wasn't working, or what it needed to work better and more efficiently, and to do that thing.

...so he was very pragmatic, very strategic, and very much interested in getting things done, no matter whether it meant working with Democrats or Republicans or who, and that was our relationship going forward, that built into a close friendship.

But we went about the business of trying to advance the city of Florence and the Florence County, and the Pee Dee, in a very practical way.

And that was very, very rewarding for me personally, I don't think that exists very much at all in politics, Gavin.

It didn't then and it exist even less now.

I tell you, just a sample of his impact.

The last budget, I think it was $74 $75 million in the last budget went to the Florence area, like $50 or $55 million to Francis Marion alone.

That's on top of the 30 plus million that the legislature spent with his direction for early childhood education.

And that's that's his last budget when the man was 90 years old, Gavin The impact he's had on the Pee Dee and the whole state really can't be overstated.

<Gavin>Yeah, especially when we look at your tenure from 2008.

...then reelected in 2012.

You really oversaw the transformation of downtown Florence too and he played a big role in that too.

...you know, whether it's tax credits for fixing up old buildings or just helping get some more money to the area.

What was it like to really to make those changes?

A lot of places are even trying to replicate what we saw in downtown Florence like Aiken right now?

How can they do that?

Do they need to have a Senator Leatherman like we had or y'all had in Florence?

<Stephen Wukela> Well, you know, there's no question that it was an enormous benefit for a very, very young mayor, to be able to sit in the room with someone of the stature and position in the state as Chairman Leatherman.

Fred Carter, the president of Francis Marion University, former Budget Control Director, who had those kinds of understandings of state government and government at large, Dr. Eddie Floyd from the Drs.

Bruce and Lee Foundation, and for that group to be able to sit in a room, make decisions about what needed to be done to advance the community, and then do those things.

...of course, that involves spending.

All said, hundreds of millions of dollars, but it was done.

I think very collegiately, very efficiently and all at the direction, and with the really the tutelage of Chairman Leatherman, <Gavin> ...mayor...it took him decades to get to that power, right?

Like he was there for more than 40 years, he became Chairman of the Finance Committee in 2001.

You know, and all the positions that came with the appointments that came with it, the power that came with that, but he was always, you know, the butt of a lot of criticism from some from some governors, like Sanford and Haley.

...but from a Pee Dee perspective, how significant was he, specifically when he's trying to put Florence, that area, on the map when you're dealing with the Greenville's of the state, the Columbias and the Charlestons of the state, who seemed to get a lot of attention?

...there's a lot of power dynamics that go on the state that people maybe don't realize, especially in your place like the Pee Dee?

<Stephen> Sure, I think there were two parts of that.

One part is the part you spoke to, and your lighter comments.

The state had, for so long, kind of had this emphasis on Charleston and Columbia and Greenville.

Naturally, these are these are large metropolitan areas in the city.

...they got a lot of focus, and they got a lot of attention.

But when Chairman Leatherman rose to Chairman of the Senate Finance Committee, he aggressively advanced rural areas in the state and the more rural areas, including the Pee Dee and Florence, naturally, given that's where he's from.

He didn't make any excuses for that.

They certainly hadn't made and excuses for advancing Greenville and Columbia and Charleston for years.

...He did that aggressively.

...of course, that ruffled some feathers around the state.

But it should also be said that you can't understate what he overstate what he did throughout the state.

I mean, what he did at the Port of Charleston, and what he did with Boeing.

These are are major state accomplishments.

So he wasn't exclusively focused on the Pee Dee, but he certainly was aggressive in advancing the Pee Dee.

...I think there's another part to that, too, though Gavin, I said in my comments earlier, that Chairman Leatherman was not ideological.

...I think frequently, and certainly true with Governor Haley, ran into governors, who were ideologically motivated, and motivated to make decisions and advance policies on some ideological basis.

That was not his motivation.

He was practical.

He wanted to see things accomplished.

...that I think, caused some tension.

In addition to the fact that frankly, this is a legislative state.

...Chairman Leatherman by my measure, I think had a lot more power and ability to get things done than most of the governor's he dealt with.

<Gavin> Exactly.

Yeah.

Mayor, we have about two minutes left, I want to ask you about economic development, like you were saying, there was that one point, the Florence area lost out to Spartanburg for a carbon fiber plant.

...Chairman Leatherman said any company that's coming to South Carolina, I want in our area.

If our area does not fit you and your needs.

I want you in South Carolina, I think that kind of encompasses what you're saying there in terms of how he attracted Boeing and Volvo and of course, the harbor deepening project and the new terminal down there in North Charleston that bears his name.

So what was it like to see him work those deals?

I mean, you saw some things come to the Florence area, how would he... work?

How would he politic to get things done in the state?

<Stephen> Well, Chairman, Leatherman and I think taught me very early, the importance and the value of relationship and trust.

I mean, that was the the first thing he and I did was build relationship and trust.

And you saw that...in the Boeing deal.

I think, to a large extent, that was made possible simply because of the relationships he had built with the executives at Boeing, and the confidence that they had that he could produce in South Carolina.

What they needed to be successful in South Carolina, and certainly he had a focus on bringing jobs and industry to the Pee Dee.

And I think he saw from my perspective at the city, he saw the importance of the cultural amenities of Florence, in order to attract industry.

Very early on when I came to Florence, we lost a Starbucks manufacturing facilities.

They were going to start processing coffee beans here in the States.

We lost that to Augusta.

And we lost that I think primarily because of the lack of amenities in the Florence area.

...I think Chairman Leatherman saw downtown redevelopment which you speak to as an economic development necessity, and very much advanced that on that day.

<Gavin> Definitely, definitely an end of the era when we talk about his leadership, and for not only that, the Pee Dee but for the state.

So that's former Florence Mayor Steven J. Wukela.

Thank you so much for your input, sir.

And our thoughts and prayers are with the Leatherman family.

<Stephen> Thank you, Gavin.

Good to see you.

<Gavin> Joining me now to discuss the economy is Laura Ullrich.

She's a regional economist at the Federal Reserve Bank of Richmond.

Laura, thanks for joining us.

>> Thanks for having me.

>> So, Laura, I want to talk to you about just what we're seeing right now in the economy, inflation supply chain issues.

Everything that everyone's talking about right now, specifically a Washington Post ABC poll that found 70% of Americans rate the economy negatively, including 38%.

who said it's in poor condition?

How would you rate the economy right now?

>> Yeah, so overall, the fundamentals of the economy have have remained pretty strong through COVID In terms of GDP.

So that's the amount of final goods and services that are made in the United States in a year, we've recovered beyond pre-COVID levels, which is pretty amazing.

If you think about everything that's happened in the past, I guess, 19 or 20 months now, at this point.

There's other parts of the economy, though, that have not recovered as strongly.

Employment is a good example of one that I think people are observing, you know, they're seeing some of the labor shortages that are occurring.

...actually, we're still 4.2 million jobs below where we were in February 2020, before COVID hit so.

...in addition to that, of course, as you mentioned in the intro, there are supply chain issues that are impacting some of the goods and services that we might want to purchase, right?

You go to grocery store, today, there might be certain things that you can't find that you're used to seeing on the shelves.

If you want to buy a new car, good luck right now, because there's not a lot of cars on the lots.

...so people are seeing this and when they're out and about every day.

And so while overall the economy is doing well, it doesn't necessarily surprise me that there are people that are better voicing frustrations, <Gavin> and like you said a multitude of issues, you know, contributing to all this as well, you know, recovering from a pandemic, global supply chain issues.

That's the world we live in these days, too.

And also, we're looking at, you know, we saw jobs numbers be revised up from September, from June to September by 626,000 jobs.

I mean, again, a lot happening there in the labor market, even though shortages are still being reported.

But you know, 401k's are strong wages are strong.

How do you mesh all that?

<Laura> Yeah, it's it's really interesting, right?

This is not typical, which makes sense, because COVID is not typical, right?

This is such a unique period of time in history, right.

And we're living it in real time.

And so, you know, looking at what's happened in the past can be helpful in some ways.

But in others, this is so unique, that what happens during a typical recession is not going to happen during this situation.

So some of the things that are going on, it's just going to take some time to work through.

You know, there are certain industries where it's very obvious the ways in which they were impacted by COVID.

itself, right, or decisions that were made during COVID.

So for example, rental car companies sold off a lot of their fleets during COVID, because people weren't renting cars.

So they sold the cars to make revenue.

And now they're trying to buy new fleets of cars, and there's a car shortage.

So it's very difficult for them to do that.

So what happens, price of rental cars goes up, right?

That's going to work its way out.

Because these are things that are directly related to COVID.

But then there's other issues that we might not be able to trace that directly that might take a little longer.

<Gavin> Laura, talk about your role as a regional economist at the Federal Reserve Bank of Richmond, you're based in Charlotte.

So you really have your finger on the pulse here in the Carolinas.

Tell us what you do and who you're talking to?

And what's it like regionally right now?

<Laura> Yeah, great question.

So, I am the Regional economist for North and South Carolina.

And you're correct, I'm based out of the Charlotte branch of the Federal Reserve Bank of Richmond.

And what we try to do is get kind of a boots on the ground view of what's going on in the economy in real time.

...as I mentioned a minute ago, things are so unique right now.

And so it's important for us to gather as much data as we can - and some of that is quantitative, you know, actual data from from publicly available, or privately available data sources.

But then other outreach that we're doing and just having conversations with people is extraordinarily valuable to what we do, too.

So we talk to business leaders, we, you know, earlier this week, I talked to a South Carolina farmer.

We talked to government, you know, government officials, we talked to people all across the spectrum to try to get a feel for what they're experiencing in their economy and what consumers are experiencing in the economy.

<Gavin>...what's it like out there right now in the Carolinas?

<Laura> Yeah, great question.

So, the Carolinas actually have recovered very well compared to the US as a whole.

So, in the fifth district to the Federal Reserve, our district, South Carolina, our districts is the Carolinas, Virginia, Maryland, West Virginia and DC and the Carolinas are the only two states that are outperforming the US as a whole in terms of employment growth and employment recovery.

So South Carolina and North Carolina have seen relatively strong patterns of recovery.

But, we're also seeing some pretty significant labor shortages, because of the growth that's occurring, and because of some of the other issues going on in the economy.

So, while overall I would say the health of the economic health of the Carolinas is really strong, that doesn't mean things are things are just completely smooth out there right now.

And that's why you're seeing people report.

<Gavin> Yeah.

And we heard from your boss Tom Barkin, the president of the Federal Reserve Bank of Richmond, talking about this a few weeks ago, just about how the labor shortages have really been underpinning so much of the problems we're seeing out there...whether its supply chain, not having enough truckers per se, to maybe drive freight across the country originally.

And then also the pandemic still needs, we still need to recover from the pandemic.

So is that...what you guys are looking at right now, when we're talking about, you know, the next six to 12 months when it comes to sustaining this kind of growth?

<Laura Ullrich> Yeah, labor?

I'll be honest, this is kind of what I'm spending most of my time looking at right now.

Because it's a very interesting situation.

You mentioned people's 401k balances are strong and, you know, the stock market has done well.

Because of that, along with a lot of COVID related phenomenon, ...we've seen a lot more people retire than we would expect in a normal year.

So, I've seen estimates that, you know, maybe there were a million extra retirements this past year than what we would have expected.

And we've got about 3 million people who've left the labor force.

So that so that explains maybe a third of it.

The other two thirds, though, it's a bit of a curiosity in terms of why have they left the market?

What will get them back?

...from most of the research I've done, but you know, I believe personally, that it really is a complicated matrix of things that are going on.

Right!

People do have concerns over COVID, childcare is an issue.

Schools have been an issue.

People are more stressed than they've normally been.

Right!

There's all these different things going on.

And so, you know, there are reasons why people are staying out of the labor force are complicated, so I think getting them back into the labor force may also be complicated.

...so I think that's what we're seeing play out in real time is that some people who have left the labor force or just have not been as eager to reenter as we might have thought?

<Gavin> Laura, I want us to get about a somewhat of a maybe possibly emerging COVID related phenomena, like you're talking about - the term wage price spiral.

...I know we're not in one right now.

...the Federal Reserve Chairman himself has said he hasn't seen any evidence of one.

But should we be concerned about this term?

And really, what does that look like?

What is that?

>> So, you know, wages are a big component into the price level of products.

Right!

...because you're paying - wages are an input into whatever you're making, whether that's a good or a service.

So, one of the things that can drive inflation is wage growth.

And especially because, you know, I mentioned the example of like the rental cars, that's a price change that could adjust very quickly.

But wage growth is stickier.

And what do I mean by that?

I mean, if you weigh... somebody's wages this year, you know, somebody was making $12 an hour, and you raise them to $14, it's very difficult than to get back to that person and say, "You know what, we're going to take you back down to $12...

...So once that increase happens, it tends to stick.

So you can get into a situation where wages are going up, and then prices are going up.

We have seen wage growth, but we have not seen wage growth beyond what, you know what we've seen in the past.

And so it's going to be really interesting to see what happens.

I think, in the next year or so with wages, we are hearing from a lot of companies that they have increased lower level wages and wages for like entry level employees.

But we're not necessarily seeing a lot of across the board.

Significant wage increases, yet.

<Gavin> Gotcha.

And then along with that, we're talking about price increases, we're talking about inflation.

Tell me about how concerned we should be about inflation, when we saw those numbers come out for October more than 6% year over year.

Is this more?

Is this still going to be the transitory inflation that we heard so much about?

Or do you fear that this might be more long term at this point?

>> Yes.

So you know, the example that I just gave a second ago about like the rental cars that would be transitory, right!

That's something that's temporary, the wages would be something that would be less likely to be transitory, what we're paying close attention to is kind of what segments of those price increases appear to be transitory and which don't.

The Fed and Jay Powell if you if you've watched his interviews and his testimony, and listened to the comments from Tom Barkin, and other fed presidents, much of the price increases that we saw, especially earlier in the pandemic appear to be quite transitory and that's true to some degree, but as we do see things like wages or rents, which also tend to be pretty sticky, you know, what, when we see those increase, those are much less likely to be transitory.

So, you know, I would just say that the the Federal Reserve all 12 banks and the board governors are paying very close attention to this.

And I think it's, a question mark still at this point, because we just probably, need a little more time to see how this is going to play out.

<Gavin> ...we talked about inflation factors too.

Several Republican House members, some in our delegation did not vote for the bipartisan infrastructure bill because they say that it could impact inflation even though a lot of that spending is over several years.

How do you see such - how do you see these big spending bills affecting inflation, if at all, maybe even like the COVID relief money?

We saw we saw a couple billion dollars coming to our state as well.

Will that affect inflation anywhere that you can point to?

<Laura> You know, if you think back to you know, the people are watching, if you took basic economics, you know, when demand goes up, prices go up, when supply goes down, prices go up.

...that's kind of what we're seeing right now.

You know, you make a good point about the government fiscal aid that came in last year that increased demand for a lot of goods and services, right, people had more money to spend.

We can see that in the data and they spent it.

...so that increased demand, and then we're seeing supply shortages and things because of supply chain issues, or just because the typical production didn't keep up with that higher demand.

So, you know, that can increase prices...to some point, but that government fiscal aid wasn't, it's not long term sustaining, right!

Those are one time shocks.

And so that would be an example of price changes that we would expect to be transitory, right!

There's a one time shock.

Maybe prices of certain things like used cars go up, because there's a lot of people out there buying used cars, because they have stimulus money and other maybe aid money that they've gotten, but then that will settle out now that the aid has ended.

...we've seen that.

we've seen where some of the, you know, some of the data is showing there were these spikes, you know, spikes and saving spikes and spending, and now it's settled out a bit.

So, you know, I don't expect it to see cause long term inflation.

<Gavin> Gotcha.

But as a result of all those spikes, too, we've seen, you know, massive surpluses come into our state coffers, you know, when it comes to tax revenue, and then also, you know, $3 billion for the American Rescue Plan dollars that lawmakers will determine how to spend next year.

What kind of advice would you give to policymakers right now, when it comes to spending these surpluses spending this money this, you know, some would call it transformational amounts of money?

<Laura> Yeah, I agree that it's transformational amounts.

It has the potential to be transformational.

Let me say that.

I actually wrote a recent article on our website and the Regional Matters post that we do, you would find something I wrote on this topic, exactly.

This...is one of the more unique things that happened this time, because normally during an economic downturn, state and local tax revenues are hurt significantly.

And the money that came through from the Cares Act really was put in there because economists and politicians alike expected that to happen, because that's the normal pattern.

But then we also had the tremendous fiscal support.

And so we ended up seeing personal income spike, and and state and local tax revenues went up as well.

So, to your point, we have large surpluses and on top of it all this ARPA money from the second stimulus, the second large stimulus bill.

I think states are going to have to be states and local governments are going to have to be really thoughtful about how they spend this money.

Because...once again, these funds have to be spent by 2024.

So it has a there's a bit of a runway, but it's a short runway.

...so you don't want to spend the money on things that require high levels of recurring revenue, because you don't have a recurring revenue stream from this, right!

...so thinking about how do you spend this?

I know at the state level, there's... they're spending some of it...to right size, the unemployment program insurance program, you know, thinking about deferred maintenance on government buildings, which I know in the state of South Carolina is a significant issue, that spending, those are great ideas of how to do it.

But there's already some examples of things that are really not the intent.

You know, there's I think it was in Wisconsin, a school district that used it to build, put in turf football fields, that's really not what this money is for.

Right.

And also, I think we have to keep in mind that there are significant issues that have occurred due to COVID.

And education is a space in which, you know, that really K through 12 schools, and then some of the state colleges and universities and community colleges across the technical colleges across the state really have been significantly impacted.

And so also thinking about how to fill those learning gaps is also just absolutely essential right now.

<Gavin> Yep.

Laura, we have about a minute left.

...I know you just mentioned that about education, they have a whole separate billions of dollars for educational loans, too.

But when we look at community colleges, the governor just proposed some ARPA money being spent to help, you know, give scholarships to help get people into these in training for these high demand jobs.

You know, advanced manufacturing, nursing a lot of different things.

And I know you just did some research on community colleges in the region and South Carolina was one of the only ones I think the only one that actually had an uptick for fall 2021 when it came to enrollment.

What's going on there when it comes to community colleges and the role they're playing in this whole situation?

<Laura> Yeah, so nationwide since 2019, community college enrollment's down 14.4% overall.

It's a real issue and a lot of schools across the state of South Carolina have seen enrollment declines.

And right now, we hear a lot about needing more truck drivers, needing more welders, needing more nurses and that's the place where these people are trained.

So, thinking about how to create programs that train people in the best, fastest way possible, right, most efficient way possible.

But also we have to think about the financial side of it.

...historically, community colleges nationwide have gotten kind of the short end of the stick in terms of funding.

...so I think thinking really about how to fund schools and also fund students in that space is extraordinarily important.

<Gavin> Laura, 30 seconds.

I know we just talked about all these things.

But Thanksgiving's coming up, you'll be at your dining table, talking to people about these issues.

How should people maybe talk about these economic issues?

What should people be telling folks about what's going on right now with the economy?

<Laura> Yeah, I think there's so you know, as we started with, this is such a unique time.

And, you know, I often tell people, you know, this is something down the road, we're going to have just extraordinary economic research done on this period of time, but we're living in it now.

...So we're gonna have to expect things to be a little bumpy at times, I think.

But I think this also gives us the opportunity to look at some issues that have probably been existing for longer periods of time that have just been exacerbated by COVID.

And with the resources that we have right now maybe is a good time to think about...how to fix some of these issues.

<Gavin Jackson> Definitely unprecedented times.

Well, thank you, Laura Ullrich.

She's a regional economist at the Federal Reserve Bank of Richmond.

Thanks.

>> Thanks for having me.

<Gavin Jackson> Stay up to date with the latest news throughout the week, check out the South Carolina Lede.

It's a podcast that I host twice a week and you can find it on South Carolina public radio.org or wherever you find podcasts.

For South Carolina.

ETV, I'm Gavin Jackson.

Be well, South Carolina ♪ closing music ♪ ♪ ♪