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Economy: A Focus On Columbus

 

Last year’s optimism for Columbus was based primarily on the fact that the area had so many projects in the economic development pipeline. Events of the past year as well as in-coming economic data support that optimism. 

Since last January, Kia Motors added the Optima production line at its West Point plant, and we witnessed the massive move of the Armor School and the arrival of the families related to its relocation.

For 2012, I expect the Columbus MSA to add 1,400 jobs. Fort Benning continues to underpin my outlook, but the news at the base will be mixed. On the plus side: Multiplier effects of recent growth at the base will get bigger, generating new off-base jobs. Defense contractors gradually will move to Columbus to be near their major customers. On the minus side: Massive federal budget cuts are looming, and they will not spare the defense budget. Many temporary jobs associated with the move of the Armor School and the base’s expansion will be gone.

I expect the Kia plant and its suppliers to provide an even bigger economic boost to the regional economy, and the economic impacts of many of the projects announced over the last couple of years will increase. In some cases that’s because the projects are still building out.

But there is a more subtle force at work: The multiplier effects associated with the direct jobs that have already been created will rise over the next couple of years as these new projects gradually become more fully integrated into the fabric of the local economy. Essentially, more and more things will be sourced locally as the economy adjusts to the presence of new employers and major expansions by existing employers.

The Kia plant employs about 3,000 workers. About 1,250 jobs were created at the plant in 2009, and in 2010 the plant added about 600 more jobs, bringing the total to nearly 2,000. The Optima line added 1,000 more. Kia suppliers continue to move here; the multiplier effects of the Kia plant are unusually large. I ran a simulation based on 3,000 jobs at the Kia plant, and the results show that the employment impact will be 16,500 jobs in Georgia. 

According to the U.S. Army’s revised estimates, the number of military personnel, civilians and contractors working at Fort Benning grew by about 9,000. The multiplier effects associated with spending by people who landed these new jobs should create about 5,000 more jobs in the off-base economy. So the growth should generate about 14,000 civilian and military jobs.

Columbus will continue to benefit from a slew of projects announced over the last three years, the largest of which is the NCR project. NCR initially announced that it would add 870 production jobs at its ATM production, research and development facility. A simulation I ran for the Columbus chamber showed that those jobs will create a total economic impact of 1,300 jobs.

Other recent projects include Pratt & Whitney’s decision early last year to expand operations at its existing Columbus Engine Center. The initial announcement indicated that 180 net new jobs would be created. On top of all that, both the national and the statewide economies will be recovering, providing tailwinds to the region’s economic growth. 

Home prices are holding up better in Columbus than at either the state or national level. More stable home values mean that less damage has been inflicted on households’ wealth, which bodes well for the recovery of consumer spending locally.

Housing will contribute to growth. The free-fall in new single-family home construction in the Columbus MSA began in 2006 and ended in 2010. The peak-to-trough decline in single family housing permits was about 50 percent in Colum-bus, yet the plunge was much steeper for the state, which reported a nearly 90 percent drop.

Immediate prospects for the Columbus area in 2012 are good, but I have some concerns. The push from Fort Benning’s planned expansion is nearly complete, and I worry about how the bursting of the federal spending bubble will impact defense spending at the base. My concern also reflects the downstream negative multiplier effects of some of the layoffs we saw in 2011 and the uncertainty about the ultimate fate of the Eastman Kodak Co., and more specifically its operations in Columbus. 

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