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By: Steven Rattner
Via: The New York Times
WITH metronomic regularity, gauzy accounts extol the return of manufacturing jobs to the United States.
One day, it’s Master Lock bringing combination lock fabrication back to Milwaukee from China. Another, it’s Element Electronics commencing assembly of television sets — a function long gone from the United States — in a factory near Detroit.
Breathless headlines in recent months about a “new industrial revolution” and “the promise of a ‘Made in America’ era” suggest it’s a renaissance. This week, when President Obama gives his State of the Union address, he will most likely yet again stress his plans to strengthen our manufacturing base.
But we need to get real about the so-called renaissance, which has in reality been a trickle of jobs, often dependent on huge public subsidies. Most important, in order to compete with China and other low-wage countries, these new jobs offer less in health care, pension and benefits than industrial workers historically received.
In an article in The Atlantic in 2012 about General Electric’s decision to open its first new assembly line in 55 years in Louisville, Ky., it was not until deep in the story that readers learned that the jobs were starting at just over $13.50 an hour. That’s less than $30,000 a year, hardly the middle-class life usually ascribed to manufacturing employment.
This disturbing trend is particularly pronounced in the automobile industry. When Volkswagen opened a plant in Chattanooga, Tenn., in 2011, the company was hailed for bringing around 2,000 fresh auto jobs to America. Little attention was paid to the fact that the beginning wage for assembly line workers was $14.50 per hour, about half of what traditional, unionized workers employed by General Motors or Ford received.
With benefits added in, those workers cost Volkswagen $27 per hour. Consider, though, that in Germany, the average autoworker earns $67 per hour. In effect, even factoring in future pay increases for the Chattanooga employees, Volkswagen has moved production from a high-wage country (Germany) to a low-wage country (the United States).
All told, wages for blue-collar automotive industry workers have dropped by 10 percent, after adjusting for inflation, since the recession ended in June 2009. By comparison, wages across manufacturing dropped by 2.4 percent during the same period, while earnings for Americans in equivalent private-sector jobs fell by “only” 0.5 percent. (To be fair, including benefits, compensation for manufacturing workers remains above that of service employees.)
These dispiriting wage trends are a central reason for the slow economic recovery; without sustained income growth, consumers can’t spend.
Low wages are not the only price that America pays for its manufacturing “renaissance.” Hefty subsidies from federal, state and local government agencies often are required. Tennessee provided an estimated $577 million for Volkswagen — $288,500 per position! To get 1,000 Airbus jobs, Alabama assembled a benefits package of $158 million.
Now Boeing has just used the threat of moving to a nonunion, low-wage state to win both a record subsidy package — $8.7 billion from Washington State — and labor concessions.
Over objections from their local leadership, union workers approved a new contract that would freeze pensions in favor of less generous 401(k) plans, reduce health care benefits and provide for raises totaling just 4 percent over the eight-year term. (Boeing’s stock price rose by over 80 percent last year.)
FOR all the hoopla, the United States has gained just 568,000 manufacturing positions since January 2010 — a small fraction of the nearly six million lost between 2000 and 2009. That’s a slower rate of recovery than for nonmanufacturing employment. “We find very little real evidence of a renaissance in U.S. manufacturing activity,” a recent Morgan Stanley report stated, echoing similar findings from Goldman Sachs.
If anything, the challenges to American manufacturing have grown, as less developed countries have become more adept. In Mexico, where each autoworker earned $7.80 per hour in 2012, auto industry officials say productivity is as high as in the United States, where total compensation costs were $45.34 per hour. No surprise then that in 2013, Mexican automobile production was 50 percent higher than seven years earlier, while output in the United States was at the same 2006 levels.
For the United States to remain competitive against countries like Mexico, productivity must continue to rise. But unlike past gains in productivity, these improvements in efficiency are not being passed along to workers.
And these necessary productivity gains often take the place of hiring more workers; the United States remains the world leader in agriculture while employing less than 2 percent of Americans.
Advanced manufacturing — a sector that many advocate as a path for the United States to remain relevant at making things — also involves a high degree of efficiency, meaning not as many hires and particularly, not as many of those old-fashioned, middle-class, assemble-a-thousand-pieces jobs.
Moreover, the lead that the United States has in some advanced manufacturing areas — notably aerospace — is being compromised by growing capabilities of workers elsewhere. Bombardier is now assembling Learjets in Mexico, and later this year Cessna will start delivering Citation XLS+ business jets that were put together in China.
Similarly, while America’s energy boom will provide an incentive for manufacturers to locate here, don’t count on cheap natural gas to fuel an employment boom. According to a 2009 study, only one-tenth of American manufacturing involved significant energy costs.
While we shouldn’t expect manufacturing to save our economy, we needn’t despair. Among other things, we need to get over the notion that service jobs are invariably inferior. The United States remains a world leader in service industries like education and medicine. Not only do these fields generate well-paying jobs, but they also help with our balance of trade: when foreigners come to America to be educated or treated, those services are tallied as exports.
Manufacturing has been an emotional American touchstone since George Washington wore a wool suit that had been woven in Hartford, Conn., to his first inauguration to illustrate the importance of making stuff at home. We do need to maintain an industrial presence, but perhaps not for the obvious reasons.
For one thing, companies often locate research and development facilities — stuffed with high-paying jobs — near their manufacturing facilities. In addition to jobs, R&D yields high-value intellectual property that spills over into still more innovation and employment. And not surprisingly, every manufacturing position requires an additional 4.6 service and supplier positions to support it.
The challenge for the United States is particularly acute because manufacturing now accounts for just 12 percent of our economy, down from a peak of 28 percent in 1953 and on a par with France and Britain as the least industrialized of major economies.
While keeping that share from dipping further should be a priority, we should be careful to avoid raising false hopes (like Mr. Obama’s unrealistic second-term goal of creating a million manufacturing jobs) and pursuing ill-conceived policies (such as special subsidies for manufacturing).
The president’s proposals — unveiled over the last several years — include the two most important elements of a sensible manufacturing strategy: more training focused on the skills needed by employers and increased spending on research and development.
The United States work force is simultaneously overqualified (15 percent of taxi drivers are college graduates) and underqualified (we rank in the bottom half of many comparisons of developed countries).
When Volkswagen arrived in Chattanooga, it found that not enough eager applicants had the requisite technical skills, so it established a German-style training system (including three-year apprenticeships) at the factory.
As for research and development, the fiscal tightening by the federal government has prevented more investment in this critical area, the exact opposite of what is required. At the same time, while subsidies to draw jobs have become a necessary evil, we should be rigorous about analyzing the value of these costs. And we must stop short of excessive meddling in the private sector, and particularly the notion of picking winners. (Think Solyndra or Fisker.)
Mr. Obama skirted this problem by proposing to create 45 “manufacturing innovation institutes,” which bring together companies, universities and government experts in a kind of laboratory setting to help develop advanced manufacturing strategies.
While these institutes are not going to turn the tide, they might help at the margin. But like the president’s other proposals, they have been largely ignored by Congress. (The White House managed to establish a pilot center in Youngstown, Ohio, and another is coming in Charlotte, N.C.)
Manufacturing would benefit from the same reforms that would help the broader economy: restructuring of our loophole-ridden corporate tax code, new policies to bring in skilled immigrants, added spending on infrastructure and, yes, more trade agreements to encourage foreign direct investment and help get closer to Mr. Obama’s seemingly unattainable goal of doubling our exports.
Those who see a brighter manufacturing picture for the United States argue that wages are rising more rapidly elsewhere, not just in China and Brazil but also in Japan, Germany and France. But just like the “feel good” stories, celebrating this fact ignores the reality that the flip side of wages’ rising faster elsewhere means they are rising more slowly here.
And that is the essence of our challenge: In a flattened world, there will always be another China.
Interview with Krissy Clark
A novel plan by one city to use eminent domain to rescue underwater mortgages has sparked a lawsuit by major banks. The complaint filed in federal court yesterday is against the working class city of Richmond, California, a suburb of San Francisco, where nearly half of homeowners’ mortgages are underwater.
Since the mortgage crisis, homeowners all over Richmond are underwater — meaning they’re stuck in mortgages where they owe way more than their house is currently worth. If the banks won’t refinance or modify the loan — and often they can’t or won’t — the next step is commonly foreclosure.
In order to stem a tide of more foreclosures, the city of Richmond recently approached lenders of more than 600 underwater mortgages and offered to buy the loans at their much lower current market value. The city says it will then help homeowners refinance in order to keep its citizens in their homes. If the banks refuse Richmond’s offer, the city plans to use eminent domain to force a sale.
Wells Fargo and Deutsche Bank, two of the banks involved in the lawsuit, argue that the plan would hurt their investors — everyone from big Wall Street firms to retirees with pensions. The banks also say using eminent domain would be unconstitutional because it’s not for a “valid public purpose,” and instead would benefit a small group of Richmond citizens and the company that’s coordinating the plan, at the expense of out-of-state investors.
Richmond is the first city to try using eminent domain to help underwater homeowners, but others — like Newark, Seattle, and North Las Vegas — are paying close attention to what happens in Richmond. The case will be a key legal test for all these cities.
Underlying the case is a deeper question — what really is a “valid public purpose”? In eminent domain cases, usually it’s homeowners who are the ones who lose out, when municipalities build something like a freeway or a sports stadium. In this case, the city is arguing that the public good is the benefit to the local economy of keeping homeowners in their homes.
By: Catherine Rampell
Via: The New York Times
SACRAMENTO — After six years of waiting on the sidelines, newly eager home buyers across the country are discovering that there are not enough houses for sale to accommodate the recent flush of demand.
“In my 27 years I’ve never seen inventories this low,” said Kurt K. Colgan, a broker with Lyon Real Estate in the Sacramento metropolitan area, where the share of homes on the market has plummeted by one of the largest amounts in the nation. “I’ve also never seen a market turn so quickly.”
The housing turnaround seems to have caught almost everyone in the business by surprise. As desirable as the long-awaited improvement may be, the unusually low level of homes for sale is creating widespread problems for buyers and sellers alike, leading to bidding wars and bubblelike price jumps in places that not long ago were suffering from major declines. In the Sacramento area, where the housing bust took an especially heavy toll, the median sales price has surged 15 percent over the last year, according to Zillow.
Nationwide, sales prices rose 7.3 percent over the course of 2012, according to the Standard & Poor’s Case-Shiller index, ranging from a slight decline in New York to a surge of 23 percent in Phoenix. Tracking more closely with the national trend were cities like Dallas, up 6.5 percent; Tampa, which rose 7.2 percent; and Denver, which gained 8.5 percent.
In many areas, builders are scrambling to ramp up production but face delays because of the difficulty of finding construction workers and in obtaining permits from suddenly overwhelmed local authorities. At the same time, homeowners — many of them lifted above water for the first time in years — often remain reluctant to sell, either because they want to wait and see how much further prices will climb or because they are afraid of being displaced in the sudden buying frenzy.
“You see a home go for sale and within a couple days there are three, four, six offers,” said Carrie Miskawi, a mother of three young children who has been looking for a new home for the last six months with Mr. Colgan’s help. She and her husband have decided not to put their current home on the market because they fear it will be snatched up before they have a chance to bid successfully on a new one.
“It’s kind of a Catch-22,” Mr. Colgan said. As long as large numbers of people are hesitant to put their own homes on the market because so few other homes are available, he said, there won’t be many homes available.
Across the country, the raw number of homes for sale is at its lowest level since 1999, according to the National Association of Realtors. In the Sacramento metro area, home listings were down 60 percent in January from a year earlier, compared with 23 percent for the country over all, according to Zillow.
Inventories have been whittled down largely because new construction ground to a standstill for several years. Investors large and small have also scooped up most of the backlog of foreclosures and short sales; about 40 percent of all homes bought in Sacramento County over the last year were purchased by owners who currently live at a different address, according to county records and title data provided by the Fidelity National Title Insurance Company.
But steady job growth has put more people back to work, and families that put off moving because they couldn’t afford it are finally ready to do so. “Distressed” sales are down and conventional sales are up.
Extraordinarily low mortgage rates don’t hurt, either.
“The recovery is real,” said John Burns, chief executive of John Burns Real Estate Consulting. “But the pace of the recovery has an artificial component to it.”
Some real estate agents in Sacramento, like Tom Phillips, have resorted to knocking on doors in desirable neighborhoods to see if the owners might, if asked nicely and promised a healthy gain, sell to one of his clients. One couple he represents, Darcey and Jason Schmelzer, just moved into a yearlong rental with their two boys because they sold before they could find a new place. They received four offers on the first day they put their home on the market, with the winning bid about $10,000 above asking price.
For the builders who survived the collapse, the tight market is a signal to get back to work.
Monthly permits for single-family homes in the Sacramento area more than doubled from January 2012 to January 2013, though they are still only a quarter of the level they reached during the bubble. Nationally, the construction industry added 48,000 jobs in February, the biggest increase since 2007.
The housing upturn looks set to continue, finally adding a crucial element of support to the slowly improving economy. The government reported Tuesday that housing permits, while far below their peak, surged in February to their highest level since June 2008, an increase of nearly 34 percent from a year earlier. But it will still be many months before new homes now going through the approval process will be ready to move in.
The New Home Company has ramped up building as fast as it can, said Kevin S. Carson, the president of the company’s Northern California division. Founded in 2009 by the veterans of a major home builder that filed for bankruptcy during the crisis, the company plans to build 120 homes in Northern California this year, in contrast to 50 homes last year.
Construction is expected to take longer than usual, though, and expenses are rising, Mr. Carson said. That is primarily because after six years of almost no local building, skilled labor is scarce.
Many workers in the immigrant-heavy industry have left the area, returning to Mexico and other points south. Others pursued work in Texas’s energy boom, where both drilling and construction jobs have become more plentiful. Those who stayed in the local area often switched to medical data entry, U.P.S. delivery services, or anything else that they could find. Or they filed for disability and dropped out the labor force altogether.
Some, like the 38-year-old electrician Gideon Jacks, are gingerly returning to construction work after taking a hiatus (in Mr. Jacks’s case, the hiatus was in several low-paying jobs at restaurants), but others remain reluctant to return to the hard physical labor and unstable job prospects.
“They say, ‘That’s the last time I’m riding that roller coaster,’ ” said Rick Wylie, president of the Beutler Corporation, a Sacramento air-conditioning and plumbing company. In 2005 he employed 2,100 workers, but by 2009 Beutler had only 270 employees. Mr. Wylie, who currently employs about 550, is now having trouble luring back many workers he let go.
“I don’t mean to complain,” he said. “This is a good problem to have, a world-class problem, to not be able to find workers to do all the work you’re getting.”
The shortages aren’t limited to the workers toiling in the hot sun, either.
“You walk into the permit office, and it’s like a ghost town in there,” said Michael Haemmig, president of Haemmig Construction in Nevada City, Calif., about an hour north of Sacramento. He says local governments were caught off-guard by the suddenly renewed interest in building and do not have enough people in place to handle the paperwork.
“This being California, we have more regulations and permits than ever, and it takes more time to get each permit approved,” he said.
For builders still hesitant to dive into the market too deeply, such delays may actually be welcome, since they help buy more time for prices to rise further.
“If we could build 500 houses right now, could we sell them?” asked Harry Elliott III, president of Elliott Homes, a century-old company that built 250 homes last year and plans 350 this year, compared with a high of 1,400 in 2006. “Possibly, but I don’t want to sell all my lots that I’ve held on to forever and have to give them away at these prices.”
“We lost money for a lot of years, and I’d like to make some money for a change,” he added. “I’m not building because I need the practice.”
By: Catherine Rampell
Via: The New York Times
American employers have a variety of job vacancies, piles of cash and countless well-qualified candidates. But despite a slowly improving economy, many companies remain reluctant to actually hire, stringing job applicants along for weeks or months before they make a decision.
If they ever do.
The number of job openings has increased to levels not seen since the height of the financial crisis, but vacancies are staying unfilled much longer than they used to — an average of 23 business days today compared to a low of 15 in mid-2009, according to a new measure of Labor Department data by the economists Steven J. Davis, Jason Faberman and John Haltiwanger.
Some have attributed the more extended process to a mismatch between the requirements of the four million jobs available and the skills held by many of the 12 million unemployed. That’s probably true in a few high-skilled fields, like nursing or biotech, but for a large majority of positions where candidates are plentiful, the bigger problem seems to be a sort of hiring paralysis.
“There’s a fear that the economy is going to go down again, so the message you get from C.F.O.’s is to be careful about hiring someone,” said John Sullivan, a management professor at San Francisco State University who runs a human resources consulting business. “There’s this great fear of making a mistake, of wasting money in a tight economy.”
As a result, employers are bringing in large numbers of candidates for interview after interview after interview. Data from Glassdoor.com, a site that collects information on hiring at different companies, shows that the average duration of the interview process at major companies like Starbucks, General Mills and Southwest Airlines has roughly doubled since 2010.
“After they call you back after the sixth interview, there’s a part of you that wants to say, ‘That’s it, I’m not going back,’ ” said Paul Sullivan, 43, an exasperated but cheerful video editor in Washington. “But then you think, hey, maybe seven is my lucky number. And besides, if I don’t go, they’ll just eliminate me if something else comes up because they’ll think I have an attitude problem.”
Like other job seekers around the country, he has been through marathon interview sessions. Mr. Sullivan has received eighth- and ninth-round callbacks for positions at three different companies. Two of those companies, as it turned out, ultimately decided not to hire anyone, he said; instead they put their openings “on hold” because of budget pressures.
At one company, while signing into the visitor’s log for the sixth time, he was chided by the security guard.
“He thought I worked there and just kept forgetting my security badge,” Mr. Sullivan said. “He couldn’t believe I was actually there for another interview. I couldn’t either! But then I put on a happy face, went upstairs and waited for another round of questions.”
The hiring delays are part of the vicious cycle the economy has yet to escape: jobless and financially stretched Americans are reluctant to spend, which holds back demand, which in turn frays employers’ confidence that sales will firm up and justify committing to a new hire. Job creation over the last two years has been steady but too slow to put a major dent in the backlog of unemployed workers, and the February jobs report due out on Friday is expected to be equally mediocre. Uncertainty about the effect of fiscal policy in Washington is not helping expectations for the rest of the year, either.
“If you have an opening and are not sure about the economy, it’s pretty cheap to wait for a month or two,” said Nicholas Bloom, an economics professor at Stanford University. But in the aggregate, those little delays, coupled with fiscal uncertainty, are stretching out the recovery process. “It’s like one of those horror movies, an economic Friday the 13th, where this recession never seems to die.”
Employers might be making candidates jump through so many hoops partly because so many workers have been jobless for months or years, and hiring managers want to make sure the candidates’ skills are up to date, said Robert Shimer, an economics professor at the University of Chicago.
But there’s also little pressure to hire right now, so long as candidates are abundant and existing staff members are afraid to refuse the extra workload created by an unfilled position. Employers can keep dragging out the hiring process until they’re more confident about their business — or at least until they find the superstar candidate.
“They’re chasing after that purple squirrel,” said Roger Ahlfeld, 44, of Framingham, Mass., using a human resources industry term for an impossibly qualified job applicant.
An H.R. professional himself, Mr. Ahlfeld has been looking for work since August 2011, and has been frustrated to find himself the “silver medalist” for a couple of jobs after six separate rounds of interviews totaling 10 to 20 hours for each position, not including prep work and transportation time. For both of those jobs, though, there still has been no gold medalist. After eight months, they remain unfilled, with the companies intermittently posting a job ad, taking it down, and then posting it again.
In addition to demanding credentials beyond what a given position traditionally requires, employers have thrown up more hurdles as screening devices.
In his job hunt over the last year, Mr. Sullivan has taken several video-editing tests, which he says he aced. But he has also been subjected to a battery of personality and psychological exams, a spelling quiz and even a math test (including a question that began, to the best of his recollection, “If John is on a train traveling from New York at 40 miles per hour, and Susie is on a train from Boston…”).
He passed the math test with a 90 percent score, he said.
“Sister Callahan would be very proud that I was able to remember math problems I learned in prep school,” he said. “But what on earth does that have to do with the job I was applying for? It was like something out of ‘Seinfeld.’ ”
For the companies themselves, economists say, the gantlets they have constructed may be wasting managers’ time and company resources. Besides, there are diminishing returns to interviewing candidates so many times; a recent internal analysis at Google, a company that developed a reputation for over-interviewing even when the economy was good, showed that the optimal number of interviews for any given candidate was four. But according to user reviews on Glassdoor.com, the average Google interview process has expanded in the last two years, to 30 days from 21. Google declined to comment.
And for applicants, the expenses add up fast.
Mr. Sullivan calculates that the three positions he applied for cost him $520.36 in parking fees, two parking tickets, gas and trips to Starbucks while waiting for his interviews. (He recently switched to taking a coffee thermos, he says.) That excludes the costs of producing and mailing his video work, dry-cleaning bills for the suits he dons for interviews and thousands of dollars of fees to become certified in new video-editing programs.
Job seekers just have to hope that the investment pays off.
Jameson Cherilus, 23, counts himself as one of the lucky ones. Since graduating at the top of his 2012 class at Quinnipiac University in Connecticut, he has spent hundreds of dollars traveling from his home in Bridgeport to interview for jobs in New York. After about six weeks of interviews for an entry-level administrative position at a talent agency, he was finally offered the job in mid-December.
There’s just one catch.
More than two months later, he said, “They still haven’t given me my start date.”
by Karen Beard and Tom Stellman
The presumed mismatch between the skills of the workforce and the needs of employers, commonly referred to as the “skills gap,” has garnered the attention of politicians, employers, economic developers, and professionals in workforce and education. A number of authoritative sources—Manpower, Deloitte, McKinsey—point to statistics which show that, despite relatively high levels of unemployment, a number of jobs are going unfilled because employers can’t find candidates with the skills they want. This issue will be the subject of discussion led by TIP’s president and CEO, Tom Stellman, at the Texas Economic Development Council’s 2013 Legislative Conference this week.
Several factors are contributing to this gap, including an aging workforce, an education system focused on 4-year degrees, the growing use of automation, and distortions caused by the labor demands of the energy sector. Yet some argue the current situation is less of a “skills” gap than a “wage” gap. Manufacturing wages have stagnated as the value of goods produced per worker has soared. This lackluster performance can make it even harder to attract young workers to manufacturing careers, particularly in a culture that often perceives the industry as a less–than-desirable option for its children.
Even if we could agree on its existence, the question of how best to fill it remains. Focusing on education is at the heart of many initiatives. Yet even if education is the answer, the challenges of timing the flow of workers with the needs of industry remains. Trying to predict which skills will be in demand can result in well-meaning training programs that produce a number of workers in a particular industry only to find that the economy has moved on and left these newly minted skills in the dust.
So, reality or myth? Maybe, like many of life’s questions, the answer is a little of both.
By: Mitchell Hartman
With unemployment at 7.9 percent in January, the U.S. economy has a long way to go to return to anything resembling ‘full employment.’ Economists debate what that would be — a base-level structural unemployment rate at which any employable person who wanted to work, could find a job, given time. The consensus settles around 5 percent to 5.5 percent.
The Federal Reserve’s Open Market Committee has set its target rate of ‘healthy’ unemployment at 6.5 percent, at which point it will begin to tighten monetary policy and raise interest rates that are now being maintained at historic lows to encourage hiring, consumer spending and business investment.
But some places in the U.S. have already managed to push local unemployment down to more palatable levels.
Boise, Idaho, is one such place that finds itself sitting in the Fed’s ‘unemployment sweet spot.’
Boise sits in an idyllic valley in Southwestern Idaho, snow-capped mountains at the horizon. Nearly half of Idaho’s population of 1.5 million lives in this remote corner of the state, known as the Treasure Valley, where tributaries like the Boise, Payette and Owyhee feed into the Snake River.
The region doesn’t have oil fields, or a lot of corporate headquarters, or foreign car plants. What it has is a little bit of this, a little bit of that: a major hospital and Boise State University; state government; tech firms large and small; plus timber, ranching, and potato farming.
And, lately, you can hear the sounds of hammers and nailguns on the outskirts of town.
The local economy has a pulse once more. Homebuilders that survived the recession and housing crash — which was as severe here as in other Western boom towns like Las Vegas and Phoenix — are putting up single-family homes again.
Boise Hunter Homes has several on the market in the Harris Ranch subdivision along the Boise River about 15 minutes from downtown. They’re nicely-appointed, three- to four-bedroom homes with hardwood floors, hickory cabinets, granite countertops, double-shower master baths. All starting in the low-$300,000-range.
All over the valley, builders are putting up starter homes, trade-up homes, and McMansions in suburban subdivisions that were platted and plumbed, then went to weeds, when housing went bust in the recession.
Dave Checkitts works for Idaho Hardwood Flooring on the Harris Ranch building site. “I’m making $16 an hour right now,” he says. “During the recession, when building stopped, I was doing whatever I could — delivering pizzas. Making ends meet was a hard thing to do. This is my trade, this is what I’m trained to do. Seeing this come back — you make a living wage.”
Construction is a virtuous cycle. Guys like Checkitts can go out for dinner, even buy a new truck, because lawyers and nurses and small-business owners are buying new homes again.
At the very least, working people are living less in fear of the economic apocalypse, now, says Marci Glass, pastor of Southminster Presbyterian Church in Boise. Glass serves a neighborhood of lower-middle-class families living in modest ranch homes. Many are near retirement. She says the neighbors were in a world of hurt during the recession.
“A number of them have been dealing with foreclosures and unemployment — long-term unemployment,” says Glass. “Insecurity with jobs, whether at Micron or Hewlett-Packard, fear of layoffs: are they going to make it through the next round? I think there is a sense now that things are getting better for the parishioners that I serve.”
“Boise is very fortunate, Boise is growing,” says Bill Connors, chief local business booster, CEO of the Boise Metro Chamber of Commerce. He offers a visitor a ‘downtown- skyline-tour’ from the windows of his high-rise office: “If you look off to the left, you see two huge cranes going up. We’ve got a 20-story high-rise going up over here for Zion’s Bank, and a big project for the Simplot Corporation. We’re one of the fastest-recovering cities in the country, our regulatory environment is one of the best.”
Connors says companies like Boise — and Idaho — because of the quality of life, affordable housing, and laissez-faire business climate. “Last year, we lowered corporate income taxes and individual taxes,” Connors brags. “Not too many states are doing that right now.”
What’s happened here in Boise — unemployment dropping from 9.4 percent at its worst in mid-2010, down to just 6.2 percent in December of 2012 — isn’t miraculous. It’s steady growth of a diversified economy fueled by low interest rates, high technology, and local talent.
It helps to have a corporate heavyweight to anchor that growth. The 800-pound Fortune-500 gorilla here is Micron Technology, one of the top memory-chip-makers on the planet.
Company spokesman Daniel Francisco led this reporter on a tour of a new global research and development center on Micron’s sprawling glass-and-steel campus just minutes from downtown Boise. “This is what we call the sub-fab,” Francisco explained as we descended a flight of stairs under the 50,000-square-foot complex of gleaming new clean rooms full of technicians scurrying around in bunny suits. “We’re underneath where the R&D manufacturing’s occurring. You have the gas sources, power sources, drains here.”
Micron spent millions to build this new facility. Francisco says it will pump wages and wealth into the local economy. It will also attract highly educated scientists and engineers from San Francisco, Boston, Bangalore.
But Micron only employs around 5,000 people in Boise now. It used to employ 10,000. The company downsized in the recession, laying off thousands of high-paid production workers and managers from an outdated chip fab. Hewlett-Packard also shed workers in the past few years.
Bill Connors says some laid-off tech professionals picked up stakes and headed for bigger high-tech hubs with more job opportunities — the Bay Area, Seattle, Portland. “But what’s interesting,” says Connors, “is a lot of people didn’t want to leave. So they started up their own little start-ups here in town.”
One example: a cluster of new urban wineries that have opened in a cavernous warehouse in Garden City, a few minutes’ drive from downtown Boise. The décor at the Telaya, Cinder, and Coiled cellars is industrial chic. The wines they’re making are respectable reds and whites — appellation ‘Snake River Valley’—made with local grapes that like the cool winters and warm summers, along with a dry, sandy soil resembling some regions of California.
Winemakers Leslie Preston of Coiled and Melanie Krause of Cinder were both raised in Boise, traveled abroad after college, then settled down at top-flight wineries in California and Washington to learn their trade.
Krause says she had three criteria for coming back home to start a business and a family: “One was that I had to feel that I could make world-class wine here,” she says. “The second was business climate — and we thought there was a very good opportunity here. The third was lifestyle, and the lifestyle here is great.”
Krause’s husband, Joe Schnerr, used to be an analytical chemist at Micron Technology. Then came the great downsizing — he took a buyout and a pay cut. Now, he sells wine in the tasting room.
“This is a dry Viognier,” he says, introducing one of the winery’s specialties. “So you should have a bright, aromatic white wine, but it’s going to finish crisp. I think that shows the Snake River Valley in Idaho really well.”
So, another sound of success can be heard here, in the local wines being poured at hip downtown restaurants packed with prosperous urban professionals. People with discretionary income who are living it up and spending again.