The tale of 2 cities
Look in any good restaurant almost any night. It’ll be packed.
Memphians love to drink and dine. And they have the money.
Total wages and salaries exceed $400 million in a week, $21 billion in a year — record payrolls for metropolitan Memphis. This town looks vital. Even out-of-town investors are looking in, planning to renovate 100 North Main, the empty 38-story skyscraper.
Yet Greater Memphis Chamber chief Richard Smith and Memphis City Council Chairman Berlin Boyd surprised the city, describing an urgent need to grow the economy.
They warn Memphis has stalled. Birmingham, long a slower sister, is in a region with two major car assembly plants. It’s on pace to pass Memphis in a decade. Louisville already has eclipsed us in economic heft. So what are we — vital or slow? We’re both. Memphis is the tale of two cities.
Strickland and Smith
Mayor Jim Strickland touched on this the other day.
It was a weekday, late afternoon in City Hall. The mayor, a lawyer by training, had cleared time to discuss Smith and Boyd’s warning.
Both had insisted Memphis’ elected leaders must focus on economic development. If economic output grows, the tax base grows. Tax revenue rises. Money flows in for improving schools and parks, hiring police, eradicating blight, paving streets.
Strickland lauded their call for economic urgency, saying, “I completely agree,” although he started by talking not of Smith and Boyd, but Memphis’ future.
“What we as a community need to do is attract more people and get our citizens ready for the workforce,” Strickland said.
Tennessee’s tuition-free community colleges and vocational schools, he said, are like a unique pipeline able to train a new generation. Now, tens of thousands of Memphians must do what they have not been doing — find their way into the pipeline.
Growing the $71 billion economy here absolutely hinges on having a high number of individuals going through the pipeline or moving in from outside the region, he said.
“It is all workforce driven,” Strickland said.
Finding talent
He turns to the present.
Last winter, ServiceMaster Global Holdings relocated its 1,200-employee headquarters Downtown from East Memphis. Before moving, executives looked hard at other cities and decided to stay, he said, only after they judged Memphis’ talent pool sufficient.
“They concluded they could find enough” of the kind of workers they wanted, Strickland said.
Since then, the pool has shrunk. About 614,000 metro-area residents draw paychecks — almost 43,000 more workers than when ServiceMaster’s office hunt began three years ago.
Despite free tuition in two-year training schools and base wages at some employers reaching $15 per hour, he said, about 15,000 vacant positions remain unfilled.
“We ought to have a line of people waiting at the doors,” Strickland said, referring to job candidates interviewing at area employers.
Boom or bust?
It is one thing to say we are not growing fast as we might like. It is another to say we have stalled. And this is where the tale of two cities begins.
“We’ve had significant economic growth,” Strickland said.
He referred to the list maintained by Memphis commercial real estate executive Larry Jensen’s firm.
Cushman & Wakefield Commercial Advisors counts $13 billion in expansions since 2010 by more than 100 metro-area companies, primarily within Memphis’ city limits.
“We’re seeing organic Strickland said.
Memphis probably hasn’t seen investment on this scale since the cotton industry boom a century ago. It’s pulled the region out of the recession.
In the big city and the surrounding nine counties, a region classified as the Memphis metropolitan area, the jobless rate dropped to 3.9 percent in March from 4.6 percent a year earlier and 10.8 percent in 2010, when the metro area was still mired in the deep recession that had ended nationally in June 2009.
‘Falling behind’
growth,”
That 3.9 percent jobless rate — that’s as low as in the 1990s boom years.
Yet, Smith and Boyd insist we’ve stalled.They want leaders focused on economic development. Why the urgency?
It’s this number: $62.2 billion. And this number: $62.1 billion. See the difference?
Economic output in Greater Memphis — the metro area — shrank. It shrank slightly. But it shrank over the same years tallied on Jensen’s list.
This is the tale of two cities: Part of the area surged. Part retreated. Part spun in place. Memphis overall stalled, while peer cities expanded. “We are falling behind,” said Memphis financial executive David Waddell, a Smith ally on the Chamber’s Chairman’s Circle.
Growth problem?
How can we at once experience slow growth and have a $13 billion wave of new investment? That much money would afford 50 FedExForum arenas.
Waddell means we’re lagging behind other cities we should be surpassing.
Count every shop, store, factory, office, warehouse, gas station, government entity, bar, restaurant, museum and Uber gig in the nine counties of Greater Memphis — about 21,000 enterprises in total are open for business.
In 2010, they produced $62.2 billion worth of goods and services, and $62.1 billion in 2016. Those figures are called gross domestic product, or GDP. The numbers are adjusted for inflation.
Inflation means the dollar in 2010 bought more than today’s dollar. There’s a way to tune out inflation. That’s the adjustment. It shows we produce more but not a whole lot more.
Compute GDP for 2010 and 2016 based on the 2009 dollar’s buying power, and metro Memphis GDP on an inflation-adjusted basis slipped to $62.1 billion, according to the U.S. Bureau of Economic Analysis. The decline was centered in the big city of 653,000 population.
While the Memphis economy slipped, most metro areas advanced. Birmingham’s inflation-adjusted economy rose 0.7 percent, Louisville’s 2.1 percent. Huntsville, Alabama, climbed 5 percent; Jackson, Mississippi, 6 percent; Jackson, Tennessee, 5 percent; Nashville, 33 percent; Raleigh, North Carolina, 24 percent; Richmond, Virginia, 13 percent; Wichita, Kansas, 3 percent. All the nation’s metro areas averaged 1.2 percent growth.
‘They are correct’
Seated in a City Hall conference room, Strickland has turned from workforce challenges and Larry Jensen’s list to the subject aired by Smith and Boyd.
“I don’t know how all this is going to evolve,” Strickland said. “I think all of us have to do better.”
Strickland favors the new demand for an EDGE deal-making ambassador and an infrastructure chief representing the mayor and able to immediately commit resources such as road and sewer work.
He said there’s more to be done. Memphis can promote its qualities and amenities, play off Nashville’s congestion, Atlanta’s expenses, and ensure local leaders visit the nation’s key site selection consultants at least once a year.
As he talks, he describes no quick fix. Economic growth, he said, depends on the talents of the workforce. Unless the region attracts a wave of new residents, training people will take time. And it will require leaders usher students into the training pipeline.
“This is our time in Memphis where growth is more than just getting by,” he said the other day.
Smith’s demands
Smith seems satisfied with the progress since his April broadside.
It cast him as an activist business leader, part of a loosely knit crowd of young civic and political leaders including Boyd trying to separate themselves from the pragmatism long practiced in city affairs.
Memphis patiently has dealt with economic challenges festering here for years and common to most cities. Issues include empty storefronts, blighted neighborhoods, the departure of college graduates, a dearth of white and black entrepreneurs, insufficient investment capital, slack wage growth, a skilledworker shortage and government agencies that award relatively few contracts to minority vendors, although the city’s population is predominately AfricanAmerican.
Smith, a senior executive at FedEx, the city’s largest employer, put all those challenges aside. He said Memphis has attracted few out-of-town corporations. Reasoning that incoming employers could immediately lift the economy, help provide tax base to address the challenges, he demanded elected leaders dramatically step up economic growth campaigns starting with reform at the city-county EDGE board, the main economic development agency.
When he spoke out last month, Smith sounded like he stood on one hill, politicians in the city and Shelby County stood on another, although Smith said any rift soon closed.
“I believe the city and county are now more focused on solving our growth problem, and the mayors realize that if we don’t solve it nothing else we’re doing will matter much in the long run,” Smith said.
Ted Evanoff, business columnist of The Commercial Appeal, can be reached at evanoff@commercialappeal.com and (901) 529-2292.