Leaders of statewide business groups told Outer Banks business leaders and government officials that despite concerns of at least a soft recession setting in by the middle this year, North Carolina is set up to weather the possible economic storm.
But the biggest challenge across the business community in all sectors is still having enough workers to fill the jobs they have available.
Christopher Chung, CEO of the Economic Development Partnership of North Carolina; Lynn Minges, President & CEO of the N.C. Restaurant & Lodging Association; Andy Ellen, President & General Counsel for the N.C. Retail Merchants Association; and Gary Salamido, President & CEO of the N.C. Chamber of Commerce took part in the 2023 Outer Banks Regional Economic Summit hosted by the Outer Banks Chamber of Commerce on February 23 at the Ramada Plaza in Kill Devil Hills.
“In the past three years, North Carolina has welcomed 472 individual corporate location and expansion announcements all across this great big state,” Chung said.
The companies that chose to either locate new operations here or expand existing operations accounting for over $30 billion in capital investment and 71,000 new jobs, according to Chung.
“That’s a tremendous economic impact all across North Carolina, which is going to really set the state up well for the next several decades,” Chung said.
The firms range from electric vehicle manufacturing to electric vehicle battery production to food and beverage manufacturing, technology, jobs, biotech, and life sciences.
“It’s across many of those types of sectors that are creating the types of well paying jobs,” Chung said.
Chung added that on any given day, the Economic Development Partnership of North Carolina is seeing anywhere from 12 to 18 of additional projects they are pursuing.
A Raleigh resident that regularly vacations on the Outer Banks, Chung said those new companies coming to the state will also be a boost to the Outer Banks.
“That kind of population growth bodes well for a lot of our tourism communities as well, because that’s more people who are now just a couple hours away, or three hours away from a beautiful place like the Outer Banks, folks like myself who transplanted here at some point, but learn about the Outer Banks and start spending as much of our personal time there as we can,” Chung said.
He also noted with the shift during the COVID-19 pandemic from in-office work to remote, that bodes well for not only vacation destinations but also the state’s exurban and rural areas.
Later in the two-hour breakfast and forum, Chung shared other initiatives the partnership works on besides business recruitment.
“One is to work with existing employers on future expansion plans they have so we break the state up into eight different regions,” Chung said. “We have someone of course, who covers this region of the state, her job every day is to sit down with plant managers or site heads or business owners and say, what are the challenges facing your business? What are the chances you may need to expand here in North Carolina?”
“Second thing is small business startup counseling. (Those of you who) started your business here in the Outer Banks or somewhere in North Carolina, you probably had to figure out early on permits and license requirements, things you had to do to basically get squared away with state, local and federal requirements,” Chung said.
EDPNC has a team of staffers who field calls about how to move through those processes, Chung said.
“If you’re starting a business for the first time, that can be very daunting for a lot of people, our team is there to walk them through those processes of what’s required here in North Carolina make that a little bit of an easier experience for people who are finally realizing that lifelong dream of becoming their own boss,” Chung said.
“The first thing we have to say is thank you to everybody in this room and across the state over the last 12 to 15 years, that has intentionally done the things we need to do to be the best state in the country for business,” said Gary Salamido, N.C. Chamber President and CEO.
“We want to be the best place in the world for private sector job growth so that our communities can have the resources they need to live into work,” Salamido said.
Salamido said North Carolina’s economic engines have shifted since the 1970s, when it was essentially just tobacco, furniture, textiles and tourism.
“One of the things that I learned when I came to the Chamber of particular, about 12 years ago, is folks said manufacturing was dead. It was never dead in North Carolina, it was just transitioning,” Salamido said.
“Now we’re seeing the fruits of that transition and the investments in the vision that people have had for many years, as as Chris is out there seeing every day and across the world,” Salamido said.
He said that a key to keeping North Carolina’s economy healthy is lowering the urban-rural divide, primarily through the state’s education systems from K-12 to community colleges to the UNC System.
“Historically, our education community and our business community, they’re speaking different languages, but they’re saying the same thing. We want people to have the skills and education they need for the good jobs that are there that helped build communities,” Salamido said.
While the General Assembly is on the verge of expanding Medicare to more North Carolina residents, Salamido said healthcare in North Carolina is another key to success, along with upgrading deteriorating infrastructure and continuing to expand highspeed internet service.
Lynn Minges, President & CEO of the N.C. Restaurant & Lodging Association, reported on the main hills that the visitor economy still have to climb.
While the Outer Banks had record numbers of visitors, occupancy and sales tax revenue the last three years, the rest of the lodging industry in North Carolina, mainly in urban areas is still struggling to rebound, with overall occupancy down five percent from 2019.
“And so these people who used to come in to cities and urban areas to meet with people need to be worn in their office,” Minges said. “So we’re not seeing that travel, rebound and meeting and convention business. I think it’s coming back, but not quite as strong.”
While occupancy lags, revenue is booming thanks to rate increases.
“Room rates have never been higher than they are today. You all are commanding higher prices for rental properties here at the Outer Banks. And so that’s making up in a big way,” Minges said.
Minges noted that North Carolina was the only state in the union to assist the restaurant and hotel industry with a $500 million business recovery grant.
“Any restaurant hotel in North Carolina, that was down by 20 percent got a check for 10 percent of their losses,” Minges said.
“Not any surprise to those of you who work in the hospitality industry, you know that we’re challenged with workforce,” Minges said. “That’s our number one challenge today, we’re down only about 8,000 jobs of where we were pre-pandemic.
“But the reality is, you can’t really look back five years versus an industry that continues to add product, and we continue to see demand grow across North Carolina. We need as many as 30 to 50,000 more workers than we had in 2019. So this is a big challenge,” Minges said.
“We’re still hamstrung, and that’s going to continue to affect us until we address the elephant in the room. And that is significant workforce challenges,” Minges said.
Minges gave details on the NCRLA Foundation’s recently launched a $1.1 million hospitality and tourism workforce training program and online portal, along with a $5 million grant for a recruitment campaign for the industry funded by federal American Rescue Plan dollars allocated to North Carolina.
Minges did note the Outer Banks is seeing that crunch more than just about any other part of the state, which was shared with the NCRLA at one of their nine regional forums held with owners in the industry.
“90 percent of the people we interviewed business owners said that recruiting and retention was much worse than pre pandemic, or significantly worse,” Minges said. “That was one of the highest ratings we saw.”
She shared anecdotes from a number of industry members on how inflation has impacted their business models, the lack of workers leading to major hotels in big cities to reduce their available rooms, and restaurants not serving lunch or closing on select days of the week.
She also related stories about people who have taken jobs in the hospitality industry that have been able to raise their family out of poverty.
“I read a report last night that hotel, the average hotel wage in America is $27 an hour. Wages have never been higher. And opportunities, flexibility, scheduling, flexibility has never been better,” Minges said.
“Many hotels in our state are using temporary labor that they’re getting through apps. So they have some housekeeping staff, but then maybe 70 percent of their staff are temp workers,” Minges said during a Q-and-A session.
Among legislative issues the NCRLA is following closely is proposals to eliminate the state’s school calendar law to give local systems more flexibility to start the year earlier in August.
Andy Ellen, President and General Counsel for the N.C. Retail Merchants Association, said that despite narratives that brick-and-mortar stores are failing, that’s not the case at all.
“Now you have some that were teetering on the edge before COVID, maybe a Stein Mart that went out of business, it wasn’t COVID as sort of put them out of business, they were already teetering, they just sort of pushed him over the cliff,” Ellen said. “But for the first time since 2016, we had more stores open in 2022 than closed.”
“Online shopping continues to grow. We’ve seen a blending of the physical store, blending into online commerce,” Ellen said. “But certainly you’ve seen the online companies moving into the brick and mortar space because they need to be closer to the consumer.”
Ellen said about one in four jobs in North Carolina are somehow tied to the retail industry, and the lack of workers in one specific demographic has been most concerning.
“We lost a whole class of kids (due to the pandemic),” Ellen said. “Usually the child gets their first job at a restaurant as the hostess or as a grocery store as a bag boy, we’re working at the boutique.
“Parents were afraid of their child going and working in a public facing area where they were afraid of their child having to enforce a mask mandate,” Ellen said. “And so those kids didn’t come and we didn’t get them for the next summer. And we didn’t get it for the next year.”
“So we’ve been working with a program from the National Retail Federation called Rise up, we’ve got a grant to the General Assembly that will allow be done in getting retailers in front of students, from high schools to the community college system,” Ellen said.
“And we’re also sponsoring some individual programs, such as with the Boys and Girls Clubs, to help less fortunate folks have an opportunity to get some soft skills and some retail skills that will translate not only in our industry, but in other industries as well,” Ellen said.
He said and that 2023 has started out stronger than previously forecast for retail after 2022 sales tax receipts were projected to be up 5.8 percent higher than forecast.
But he qualified that with the higher number being another factor of inflation.
And Ellen expressed concern for the future, now that supplementary SNAP benefits stemming from COVID-19 were eliminated on March 1, with an anticipated drop of $1.9 billion that will not flow into the economy.
“It really is going to put a hamper on low income individuals who are going to spend more of their own money on food to feed their families than they were previously,” Ellen said.
Other factors that are impacting retail prices are supply chain issues, even a lack of CDL drivers and the price of shipping containers for products coming from Asia.
Ellen said the Retail Merchants Association worked with the Restaurant and Lodging Association and N.C. Chamber on legislation to raise penalties for those caught trying to fence items stolen by organized crime raiding stores, along with recent and possible future changes in the state’s liquor laws.
Finally, Ellen complimented the Outer Banks Chamber of Commerce and President & CEO Karen Brown’s work on an affiliated workers compensation company called First Benefits insurance.
“We have 62 endorsing Chambers of Commerce (in the program). The Outer Banks remains is our number one chamber for that program for access to workers compensation insurance.
“Gary and I have worked very hard on getting workers comp rates down in North Carolina the last 10 years, and we hope we offer a very competitive product,” Ellen said.
“So our competitive set for manufacturing deals is primarily other southeastern states, South Carolina, Tennessee, Georgia, for sure,” Christopher Chung said.
“Virginia sometimes, although Virginia struggles to get recognized as a manufacturing state because their perception is dominated so much by how people associate Northern Virginia with the DC market, the tech sector defense contracting, etc.,” Chung said.
Texas, of course, hard to dismiss, they have a lot of the same things they can boast about in terms of fast growing population that North Carolina can, and they’d love to talk about 0% income tax,” Chung said.
Another attendee asked about how the workplace has shifted so dramatically, and how Greater Outer Banks businesses can get a handle on the future.
“Because different company cultures are attacking this very differently…it’s going to take some time to wash out,” Salamido said. “I think for us, we have to listen a lot begin to determine what our infrastructure needs are going to have to be by community, and that the state is going to have to give the locality some of that flexibility.”
“Whatever your business mix is in your community and your region, is what you’re going to have to be agile to accommodate, because I don’t think it’s going to trend out one way or another for a little while,” Salamido said. “I think it’s gonna take some time to sort out.
“Frankly, it’s usually the top executive who’s going to determine whether he or she wants people in the office for how long,” Chung said before sharing how a Saint Louis-based firm was planning an East Coast headquarters in Charlotte in 2020 with 3,000 new employees.
Chung said the company’s CEO who believed in a five-day-suit-and-tie work week died, and their successor decided to shift to a distributed work model that is ideal for people who want to relocate to places like the Outer Banks. And they abandoned the Charlotte project.
“It’s not a good time to be long on office real estate investment, especially in class B, older-type stuff that doesn’t have the modern amenities,” Chung said. “You can get people back into an office right now, if you can give them like a cool space or space that’s in a vibrant part of town.”
“If you’re looking at an older generation, suburban office building that’s out in the middle of nowhere. Good luck. That’s the hardest kind of office space to fill right now,” Chung said.
The panel also explained state and local incentives that are offered in recruiting new businesses to the state, while also delving deeper into the decline in the available workforce for the hospitality industry.
“We have fewer immigrants, we have an aging workforce, people retiring sooner, because they kind of got fed up with it during private and they just left their work,” Minges said.
“We have…students who are delayed entering the workforce later, their parents are saying oh, don’t worry about working through college, you know that this used to be a source of jobs. They’re now saying just focus on your studies and, and then you graduate from college, and a lot of them are coming back home to live and so they don’t really have to go right into the workforce,” Minges said.
“So many of the workers we talked with are saying, it’s not that you don’t pay me a high enough hourly rate is that I’m uncertain about what my income is going to be,” Minges said. “And that’s a big concern among a lot of people who work in the industry.”
And there’s also the affordable housing issue that has reached a critical level in the region.
“Whether it’s a firefighter, a school teacher, a policeman, or the people that’s working in a restaurant or a retail store, if they are pushed further and further out, you have additional challenges, you have the price of gas and other things,” Ellen said.
Premium Sponsors of the summit were TowneBank/Town Insurance and Atlantic Realty; Strategic Sponsors: Centurion Security/Big Blue Services, Harrell & Associates, SAGA Realty & Construction, and Vacasa Vacation Home Management; and Growth Sponsors: Carolina Designs Realty, Dominion Energy NC, and East Albemarle District.