(opening music) (opening music) (opening music) (opening music) <Gavin>: Welcome to; " This Week in South Carolina ".

I'm Gavin Jackson, The University of South Carolina's, Darla Moore School of Business released its 2023 economic outlook this week.

And research economist Dr. Joey Von Nessen, Joins us to tell us what it means for the state.

But first, a conversation with the US Attorney for the state of South Carolina, Adair Ford Boroughs <Adair>: I'm glad to be here.

Thanks for having me.

<Gavin>: So Adair, start by telling us about what this position does and what you oversee as the US Attorney, for South Carolina.

<Adair>: So, the US Attorney's Office is the federal prosecution and also does all the civil work for the Federal Government.

So my job is the chief federal law enforcement officer in the state.

If there's any federal crime in the state, it goes through our office to be prosecuted.

And we also, of course, handle civil litigation on behalf of the United States Government and federal court here.

<Gavin>: Gotcha.

So that being said, what are you looking at right now?

You've been on the job since July?

What are your priorities?

You've been on the job.

What are you looking to do?

What maybe needs to be shaken up in the U.S. Attorney's Office here in South Carolina?

<Adair>: Yeah, so my first priority is definitely gun violence, violent crime, it's just it is the job of today, whatever might else be the issues.

So that's where I've been spending a lot of my time.

Recently, of course, the first few months, I was spending a lot of time getting to know my own team and internal, but I've really now kind of pivoted to working on some of these projects in violent crime.

The second thing is to really look at areas where we're the only protection that the citizens of the state have.

So there are certain types of crimes and issues that only we can address, because only federal laws address them.

So things like civil rights, where those laws really only exist at the federal level, hate crimes, only.

We only have a hate crimes law at the federal level here in our state.

And we also have a lot of abilities on really complex financial crimes that can't always be handled at the state or local level.

We have federal investigative agencies able to do things like seize crypto wallets, and that's something that you know, your local sheriffs or police department may not be able to do.

So really focused on making sure we're showing up in areas where we're the kind of only one there to protect the public.

<Gavin>: And Adair, just to kind of keep up with what we're talking about gun violence, and rising crime rates just in the state.

Of course, SLED released statistics that showed our murder rate last year was as high as it was in 1991, with 566 murders.

There was an increase in sexual battery cases, but decreases in robberies and aggravated assaults.

So overall when we talk about gun violence, we talk about gun crimes, what do you see fueling that?

And what do you see fueling these murder increases as well, which have increased 52% In the last 10 years?

Is it just easier access to guns?

Or do we need tighter gun laws on our books in South Carolina?

<Adair>: Um, so when we're looking at these things, it's really the guns are being used more and more for things that might have been less than lethal kind of violence before now.

So the way we're looking at it is very evidence based programming, where we want to do things that actually reduce the violence in the community, and really on focused deterrence.

And so, when you look at the data, there's actually a relatively few number of people, individuals that drive violence in a community that are really kind of the instigating kind of force there.

And so we're working with our law enforcement partners at the state and local level to make sure we identified those people.

And that's where the federal government needs to step in, because we can have high impact by focusing our deterrence in these on these individuals that are really driving violence in the community.

<Gavin>: So when you look at what your predecessor did too, in terms of working with the local law enforcement in increasing those partnerships, is that something that you're going to continue to do reaching out across the state to all the county sheriff's, police chiefs?

<Adair>: Yes, we've already been doing that.

And so and our partners also include community organizations.

So what we know about what actually works to reduce violence is kind of having everybody at the table being transparent and being on the same page.

So when we work to map out where violence is coming from, and when I say map, I don't mean just geography.

I mean, really mapping social networks, neighborhood crews, gangs, that kind of thing.

We have the community at the table too, to say let me tell you about what I see about violence in my community.

When we do that, we can really zero in on the areas where we can have the most impact.

And so we are continuing those conversations.

And we're continuing to make sure we set up a way to identify those individuals that's not so rigid the way we used to do it with a checklist of like prior crimes.

So we can be flexible enough to really get at the root of the problem in the community, whatever that may be.

<Gavin>: What about when it comes to trust in law enforcement and trust in the community?

That's obviously been something that's been under a lot of stress in the past few years, both in South Carolina and across the country?

Do you see that improving somehow?

Is that a goal of yours to also just, you know, strengthen those community relations with law enforcement as well?

<Adair>: Absolutely, it's crucial.

What we know is that the community's trust in law enforcement and the legitimacy of law enforcement in a community is directly related to the amount of violence in that community.

To the extent there's lack of trust, in law enforcement, violence rises.

And so it's a really key to have that community trust for itself, but also to reduce the violence.

And when we have that community trust, we have crimes reported more often, people cooperate to help us take some of these really high impact players off the street.

And so that's why the community has to be at the table throughout and have input in the violent crime strategies that we're working with in these communities.

<Gavin>: Well, we'll keep with gun violence, we saw we've so far had 20 mass shootings in the state this year with 15 deaths and 90 injuries.

You know, a big factor, including in that Columbiana Mall shooting is the state's lacks a full unlawful carrying law.

Is there anything that you can do?

Or will you be advocating to get stricter gun laws like unlawful carry making that maybe instead of a misdemeanor, into a felony, like unlawful possession, anything you can see moving the ball forward on that?

Does that need to be changed?

<Adair>: Um, so I actually in my position, under the Federal Hatch Act, I'm not allowed to lobby for any legislation.

So I can't take part in that.

But we do have really good kind of gun laws at the federal level that we can make use of, to attack some of these violence issues that are going on.

So we have had a number of mass shootings.

But there's kind of different groups of violence and mass shootings, percentage wise, are actually a pretty small number of the murders that you cited earlier.

And if we really want to drive our numbers, we need to be looking at some of this.

Community violence is not necessarily the mass shootings.

<Gavin>: So maybe also aligning state laws with federal gun laws a bit more to when it comes to, you know, possessing for felons possessing firearms.

<Adair>: Yeah, so at the state level, one thing that we're working with our community partners on is like, what leverage do we have or don't have to make sure we're making the best use of our resources.

And now I'll leave it to my state and local partner to address what they think would be the most useful tools in their toolbox.

<Gavin>: So Adair, when we hear this, you know, tough talk on crime, too.

And you mentioned earlier, when in terms of what you can do at the federal level versus the state level when it comes to hate crime.

As we have tried, we've seen the state legislature try and pass a hate crimes law, the house got it out the Senate blocked it.

There was no movement there this past legislative session, a lot of concerns there too.

What do you think is preventing that from happening, in your opinion, especially when folks are saying we need to be tougher on crime?

Well, wouldn't a penalty enhancing law, be tougher on crime?

<Adair>: You know, I wish I knew what was preventing that.

I don't have any great insight on why we can't seem to pass a hate crimes law at the state level.

What I can say is we are committed to prosecuting hate crimes at the federal level, because we do have a statute, and we will be prosecuting those cases.

Every time there's a reason to do so in our state.

<Gavin>: And another position within your office is an environmental justice coordinator.

Can you discuss what that person does and the need for that position and what you hope to accomplish with that?

<Adair>: Yeah, so on the environmental justice front, we - this is, again, we want to make sure that as we enforce our environmental laws across the state, that we make sure we're doing it in a way that our kind of poor and often, our communities that are left out of the conversation are also getting their fair share of enforcement, that we're not just enforcing in particular neighborhoods.

And so our environmental justice coordinator, Johanna Valenzuela, she is working hand in hand with the South Carolina DHEC, who also has a really good environmental justice program going.

So we are cooperating with a lot on on talking to members of the community and leaders of the community in the grassroots level about where we should be looking on some of our environmental justice work.

And a lot of that is going to be affirmative enforcement of environmental laws within our state.

<Gavin>: And then of course, you've talked about the Civil Rights Division too, and just the role they play.

And we've seen so many cases over the past few years when it comes to violation of civil rights.

You know, whether that's someone in police custody, or any number of other cases, can you just tell us maybe give us an update on what you see that position doing and going forward in terms of addressing and maybe reinforcing?

South Carolina civil rights?

<Adair>: Yeah, so Civil Rights has been a place where the federal government has needed to be present for a long time, it's a very important place for the Department of Justice.

It's actually part of the reason that the Department of Justice was founded.

It was not founded until after the Civil War, because we felt like the federal government was going to be needed to make sure we enforce these these civil rights amendments and now civil rights laws across the country.

So we've been in close contact with the Civil Rights Division in Washington, DC, the Assistant Attorney General for Civil Rights has been to our office and met with me and met with our management team.

So a lot of our civil rights work has to have approval at the DC level.

So we've done a lot on that relationship to make sure we can move cases that we think are really important for our state.

And we are going to start pivoting to more outreach to civil rights groups across the state so they know what they're doing.

And they know what they can bring to us, refer to us, for us to investigate.

<Gavin>: Gotcha.

And so they're just wrapping up, you graduated from Furman with a math degree then Stanford Law worked for DOJ than private practice and the challenged Second District Congressman Joe Wilson, 2020.

Now you're you're now your US Attorney for the state appointed by Joe Biden.

What's the future hold for you as you see it right now?

<Adair>: I have no idea.

I have unprofitably, the services organization in there, I have never had a five year plan.

My theory has always been to do the best job at the job I have right now.

And the future will take care of itself.

And so I'm very focused on this job and what we can accomplish here in the US Attorney's Office, and the future will take care of itself later.

<Gavin>: Very good.

That's Adair Ford Boroughs.

She's the US Attorney for South Carolina.

Thanks for joining us.

<Thank you.> Joining me now to talk about the economy in 2023 is Dr. Joy Von Nessen.

He's a research economist at the Darla Moore School of Business at the University of South Carolina.

Joey welcome back.

<Joey>: Thanks, Gavin.

Always great to be here.

<Gavin>: So we're wrapping up the year here.

We want to just hear what you and some other economists had to talk about in your annual economic outlook for 2023.

What are some of the some of the big themes what should we be looking forward to in the new year?

<Joey>: Well, the major theme for 2023 is recalibration.

This economy that we are in right now at the US level and in South Carolina has been very much imbalanced.

That's been the case for the past two years in the sense that demand is far outpacing Supply, we've had very high levels of consumer demand.

And the analogy that I like to use is that the US economy basically drink two Red Bulls, one in 2020, and one in 2021, in the form of two major federal stimulus packages.

And as a result, we've been on on a caffeine high, very high levels of demand.

And one of the side effects of that caffeine high has been this persistent inflation that we've seen.

So 2023 will be the year where that begins to recede more quickly, and where we we really begin to come off with this caffeine high and recalibrate more towards long run rates of growth.

<Gavin>: And that caffeine high has led to a lot of fallout to economically speaking and we were talking about, you know, still that strong labor market, that red hot labor market that is tapering a little bit too, but then you're talking about inflation as well, that's still stubbornly high.

<Joey>: Yes, inflation has come down somewhat since this summer from a peak of 9.1% to seven, seven where it is today, in the second week of December, and we expect that to continue to taper in 2023.

But that's having real effects and real consequences for South Carolinians.

If we look over the past two years, wage growth has been outpaced by inflation by about five percentage points over the last two years.

And by about three percentage points over the last 12 months.

So even though we do have a very strong labor market, inflation is very much eating into the purchasing power of South Carolinians.

<Gavin>: So Joey, when you're talking about economic recalibration to talk about recession to I mean, how does that fit into that?

Is that a possibility?

And if so, what does that look like for South Carolina?

<Joey>: Right now we do see the possibility of recession.

I think the well the consensus among most economists is that we are likely to see there's a greater than 50% chance that we'll see a mild recession in 2023.

I agree with that assessment.

I think that's probably right.

And for South Carolina, what that would mean would be a pullback in consumer demand, that would lead to a small uptick in unemployment.

So a pullback in the labor market.

Probably by about one percentage point or so.

So the unemployment rate right now in South Carolina at a historically low rate of 3.3%, I think we could see that go up to as high as 4%.

But again, I think it's important to keep that in perspective that is still very mild.

The average unemployment rate in South Carolina, over the last 40 years during non recession periods, is actually 5.8%.

And so when we just compare 5.8% to 3.3, where we are now that really shows you how good this labor market really is right now.

So a mild recession getting us back to closer to 4% unemployment, that would still leave South Carolina in a pretty good position going forward.

<Gavin>: Joy, when you talk about a mild recession, you're talking about some increases there in unemployment.

Who do Do you see being most affected by this?

If we're talking about, you know, layoffs, or, you know, just downturns in the economy?

<Joey>: Well, it would probably be across most sectors, although, again, at very limited levels, because we do currently face still a significant labor shortage, the housing market is one that is being affected in that we've already seen some some pullback.

It's the only industry in South Carolina that has actually seen negative employment growth in 2022.

And part of that pullback is because interest rates have been going up.

And so the cost of buying a house has been rising, mortgage interest rates have effectively doubled in 2022.

So we're already seeing some effects in the in the housing industry.

And I think more broadly, as we see consumer demand recede a bit that would affect industries across the board.

<Gavin>: And we've heard from state economists at the state level when it comes to, you know, what they project in terms of revenue for lawmakers to budget with and we're still seeing, you know, strong organic growth there in the tax base, as well as these huge stimuli, these huge surpluses, I should say, as a result from all those stimuluses.

What's your read on that too, especially when they're saying, you know, we can weather a storm?

If there's if there's a recession in the offing?

Is that encouraging the news, I guess, and what do you attribute to that?

<Joey>: Yes, I think it is encouraging news because right now we are even though we are concerned that we will see a pullback in the new year as interest rates continue to rise.

We haven't seen that except for in the housing market yet in in South Carolina, demand is still strong, most industry sectors are still doing well.

And one of the reasons for that is that household checking account balances are still about 10% higher on average compared to where they were back in 2019.

Which means that as we head into the new year, consumers still have these excess financial resources that can help them continue to spend at previous levels, the same levels they've been spending for the last several years, despite the fact that they're facing these inflation pressures.

And despite the fact that all goods and services have have gone up in price.

And so that's what we're going to be looking for next year.

And I think the real key as to whether we do see a mild recession or not, or get more towards a soft landing, which the Federal Reserve is trying to, to get us to, is to look at this race between this downward race between inflation and household excess savings.

So if household savings come back down to pre pandemic levels, and inflation is still high, then we're more likely to see a cutback in consumer spending.

So we want to see inflation coming down faster.

And hopefully before we see these, these excess savings eroded on the on the part of households, <Gavin>: and you're talking about soft landing.

It sounds a little bittersweet, too, especially when you think about how we've recovered from the pandemic.

I think our employment levels also have rebounded prior to February 2020 levels to that, did that happen this year?

And how do you see that, you know, potentially, again, whether in a storm, would that just be more isolated to housing or some of these other industries that already have a lot of job openings, just absorbing these jobs?

What do you make of the labor market?

<Joey>: Yes, the labor market still is unusually strong, historically strong.

And so from a worker perspective, this is absolutely the best job market that we've seen in a generation.

So great news for workers.

And as we look forward, this labor shortage likely to persist for the long run for the next decade, because many, many of the workers that left in 2020, and in 2021, are not coming back because they were baby boomers, who in many cases, we're seeing their 401 K's do well who are concerned about getting sick.

And if we actually look at the change in labor force participation in South Carolina, in other words, the number of people that are looking for work as a percentage of the population that's gone down.

But most of those people more than half are over the age of 55, which suggests that going forward, this labor shortage is likely to persist.

And that's going to be true even if we do have a mild pullback.

So that's good news for workers in the long run as we go forward.

<Gavin>: And we'll talk more about labor shortages in a moment but I want to stick with inflation really quickly.

Talk about you know, this time last year, we heard from Federal Reserve Chairman Jerome Powell about how the term transitionary was a transitionary.

Inflation should be retired that phrase, you know, that was something that we always heard about, a transitory should say, and now I'm wondering, is it becoming more sticky?

Is inflation sticking around longer, especially when we see interest rates now being pushed up by 4%?

This past year?

What do we expect the Fed to be doing in the coming year to again, kind of combat these What 40 year record high inflation rates?

<Joey>: Yes, we're definitely not out of the woods yet.

On inflation, I think there's no question about that.

And the way you can really see that is if you look at the core inflation rate, which is what the Federal Reserve likes to use as their measure.

And that's if you look at the price level of all goods and services, and exclude food and energy, not that those two aren't important, of course, but food and energy tend to be very volatile in terms of their price swings.

So we throw those out and just look at core inflation.

And that helps together give us a better sense of how inflation in the broader economy is changing over time.

And core inflation has not seen any appreciable declines in 2022.

Most of the pullback that we've seen in the second half of the year has come from changes in gas prices, which which have receded a bit.

And that's good news.

But this core inflation that measures how much inflation is really embedded across the economy has not seen much improvement.

And so what that suggests is that in 2023, the Fed is going to continue these rate hikes.

I don't think there's any way around that.

But they may back off in terms of how aggressive they are at each for each individual rate increase.

I don't think we see, for example, 75 basis points anymore.

But but we're not done yet.

I think I think we're going to see several more rate hikes in the new year, <Gavin>: I was gonna say you're talking about gas prices, and we saw oil, really reaching the bottom this year, so far around $72 a barrel.

So that's encouraging news gives people more money to spend and wonder if that also helps fuel inflation further, of course, it can go round around, I'm assuming?

<Joey>: Well, it has been the main reason why we've seen inflation come down to 7.7% where it is now compared to that nine, that nine one.

And again, it is a good news, bad news situation, because it's great that gas prices are coming down.

And that's helping.

But it's that's only one part of the economy.

And again, we need to see broad base pullback in inflation and that that we're clearly not seeing yet.

<Gavin>: Joey, I want to talk about some economic development announcements that we heard this week, Envision AESC announced a an $810 million battery plant in Florence to support BMWs pivot to electric vehicle production in Spartanburg.

There's also potentially a $3.5 billion battery recycling plant that will be located near Volvo in Berkeley County.

Tell us about just these developments in these sectors, the automotive sector, and just how we're seeing this industry grow.

There's something we've been talking about for years.

And now it seems like everything is starting to really fire up when it comes to EVs and batteries.

What does that say about our state and our ability to attract this kind of level of investment?

<Joey>: I think the bottom line is it's great news for South Carolina.

And for the automotive industry, we are clearly seeing a pivot in terms of growing in the automotive sector towards electric vehicles because of global growing global demand.

Demand especially is increasing in Europe and in China, more so than in the US in terms of the rate of adoption of electric vehicles.

But we have to remember that South Carolina is an export oriented manufacturing state.

So the majority of vehicles produced in South Carolina are sold overseas.

So the manufacturing industry here has to respond to global demand.

And there they are doing that very well.

The other the other factor here is you look at these large investment numbers in terms of the close to billion dollar investment numbers that we hear announced.

And part of that is because these these battery production facilities are looking at the long run, and they recognize that this industry is going to continue to transition.

But we really don't know how quickly that's going to happen.

So they're looking at a period of a decade or longer of scaling up.

And so they're making an initial investment, knowing that early production may be limited, but that it could scale up very rapidly as technology continues to evolve as storage capacity increases from a technology standpoint, as battery life improves.

So so all of that is in the mix.

We're in the very early stages, but it's very promising as we look ahead and great news for South Carolina.

<Gavin>: And we see these massive amounts of investment and of course new jobs as well that the Florence County announcements 1100 new jobs, do we have enough people for all these big job announcements?

I mean, tell us about you know, workforce development and how we fill these jobs.

And, you know, keep these these folks still coming to our state?

<Joey>: Yeah, that's a great question.

And that is a major concern.

With this labor shortage we've been talking about it certainly makes these new jobs and these new investment announcements relevant.

Where do we get these workers?

I think South Carolina is well positioned, especially relative to our our, our neighbors, In the southeast and across the US more generally.

And that's really what's most important is South Carolina has to be relatively attractive compared to other regions.

And there we are, because we do a great job with our Technical College System.

Ready SC Apprenticeship, Carolina a number of internship programs that tie employers directly to South Carolinians.

And I think we need we're clearly going to need to do more of that and scale those programs up.

But they've been very successful in the past and it puts South Carolina in a very competitive position relative to the rest of the southeast.

Because yes, the the workforce challenges is I mean, this labor shortage is going to continue to be a problem.

But the whole country is facing this problem.

So the key is really making South Carolina competitive relative to our neighbors.

<Gavin>: And Joey, I wanted to talk about the Charleston harbor deepening, but I don't think we have enough time right now.

ran out of time talking about the economy, potential recession, 2023, and, of course, the labor market, as well as reset inflation.

So a lot to look forward to in 2023.

I know we'll be talking to you in the future.

And we thank you for your time.

That's Dr. Joey Von Nessen, and he's a research economist at the Darla Moore School of Business at the University of South Carolina.

Thanks, Joey.

<Joey>: Thank you, Gavin.

My pleasure.

<Gavin>: To stay up to date with the latest news throughout the week.

Check out the South Carolina Lead.

It's a podcast that I host on Tuesdays and Saturdays that you can find on (southcarolinapublic radio.org) or wherever you find your podcasts.

For South Carolina.

ETV, I'm Gavin Jackson.

Be well South Carolina.

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