Photo courtesy of Sam St. John/Flythecoast.com
The business community in Mobile struggled under the COVID-19 pandemic and the effects of tropical weather in 2020, according to participants in the Mobile Area Chamber of Commerce’s 2020 State of the Economy address last week, but it also demonstrated resilience and general optimism for a rebound next year.
Chamber President and CEO Bill Sisson shared the results of an annual survey gauging expectations for the current business environment and projections for growth. Forty-five percent of respondents to the survey believe Mobile’s economy will be in better shape in 2021, but just 34 percent feel the same way about the national economy.
“The biggest challenges are recovering from the pandemic, attracting and retaining qualified workers, global market positions, poor sales, cost of employee benefits and regulatory burdens,” Sisson reported.
During the year, Mobile County’s non-farm employment rate decreased by 8,000 jobs, primarily in education and health services, manufacturing, and food and drink services. Meanwhile, the average worker in Mobile County earned annual wages of $47,876 as of the second quarter of 2020, while wages “continue to increase in Mobile and have increased 3.2 percent over the previous four quarters,” he said.
Sisson added some of the best news is the “rapid growth of the local [gross domestic product (GDP)].” As of 2019, the Mobile Metropolitan Statistical Area reported a GDP of $20.7 billion, with manufacturing contributing the largest portion of $4.5 billion.
Other results of the survey indicated 23 percent of companies plan to enter or expand into “a new domestic market” in 2021. Meanwhile, 27 percent plan to introduce a new product or service, 8 percent plan to acquire or buy another company, 49 percent plan to purchase new software or equipment, 30 percent plan to pursue a new consumer or business segment, 12 percent plan to expand their physical plant or operations in Mobile and 25 percent have no plans to change.
“With the progress Mobile is making, even with the challenges brought on by the pandemic this year, continuing expansions and new company announcements in a number of industries, it’s really not surprising that we’re optimistic about our economy here locally,” he said.
During the address, the chamber invited four members to speak on behalf of their own business or industries. In regards to health care, USA Health CEO and Senior Associate Vice President for Medical Affairs Owen Bailey said 2020 “has been like nothing we can remember.” The day before, USA Health administered its first COVID-19 vaccines, but Bailey warned challenges from the pandemic are far from over.
“We’ve been forced to think differently about a lot of things,” he said. “Telehealth and virtual visits, something I would have thought would have taken years to do, actually just took a couple months. But there is also drive-thru COVID testing and new pre-admission procedures, disparities of care with minority populations, taking care of our caregivers, the community approach, adjusting the supply chain, cross-training, vaccination strategy and mobilization.”
Health care is Mobile’s largest industry, Bailey said, employing 27,215 people or roughly 15 percent of the city’s workforce. Among health care providers in the county, Mobile Infirmary has the largest market share with 35 percent, followed by USA Health with 28 percent, Ascension/Providence Hospital with 21 percent and Springhill Medical Center with 17 percent. Bailey noted those numbers do not include public health providers, post-acute or clinical services. Together, about 1,358 physicians are employed in Mobile County, which he called “a very healthy supply.”
Yet, “One of the major issues facing us nationally and locally … rural health is in a crisis in Alabama,” he said. “The rural hospital is often the economic engine in a community and we’ve had at least 13 close in the past few years and there are more that might go. Medicaid expansion is one tool in the arsenal of ideas to improve and protect the delivery of rural health care and we’re very concerned about that.”
Other potential problems facing health care in 2021 include costs and price transparency, staffing, quality, cybersecurity and privacy, payment models, opioid management and external market disruption.
Bailey said traditional models of health care are changing rapidly and while it’s difficult to predict where it’s going, “new players are very aggressive and have an intent to have a presence in the health care picture.” Specifically, Bailey named forces such as Amazon, Walmart, CVS and Walgreens.
Speaking on behalf of Austal USA, President Craig Perciavalle said his shipyard, which employs roughly 3,500 people in Mobile and supports 850-plus suppliers across the nation including 250 in South Alabama, remains crucial to the U.S. Navy’s mission.
“Mobile has come through challenges and continues to work through challenges,” he said.
Austal USA recently delivered LCS-26, the USS Mobile, and continues to deliver both Littoral Combat Ships and Expeditionary Fast Transport vessels “on schedule and under budget,” he said. Meanwhile, the Navy’s recent 30-year shipbuilding plan is “very encouraging,” as it has plans to increase the size of the fleet from 300 ships to 400 ships by 2045, with a particular eye toward “unmanned surface vessels” or essentially, drone ships.
“We’re positioning ourselves well to support those solutions,” Perciavalle said.
Austal, an aluminum shipbuilder, is also adapting its capabilities to produce steel hulls and increase its role in servicing existing ships.
“When you think of Austal USA 15 or 10 years ago, we were still proving ourselves and we were still trying to be a very critical part of the industrial base for the [Department of Defense] and now, we’re there,” he said. “We’ve created an incredible workforce here — very mature — and the industrial base is very strong and the Navy sees that as critical to its mission going forward.”
Speaking on behalf of businesses with fewer than 500 employees, Beth Morrissette of M2 Solutions said “there has never been a more important time than this one to support small businesses.”
Small businesses comprise 99.4 percent of businesses in the state and employ 47.5 percent of Alabama’s workforce, she said, but “this year have struggled as a result of COVID.”
M2 Solutions distributes and provides support for technologically advanced products for the construction, industry and manufacturing sectors. For example, Morrissette said M2 ran statistical analysis for the engineers of the new Lodge at Gulf State Park to find solutions to extend the service life of the facility. But it also works with clients as diverse as Ready Mix USA, Power South Energy Cooperative, General Electric and the Mississippi Aquarium.
“It’s important work. We matter — we have tremendous economic impact and you can help in thousands of different ways,” she said. “Our economy cannot function without small business and we are all stronger when small business thrives.”
Abe Harper of Harper Technologies runs his own small business and represented the technology industry at the address.
“We keep hearing the word ‘unprecedented,’ and it describes this year to a ‘T,’” he said. “There’s never a good year to have a pandemic, but I don’t think there has been a worse year in the world of IT.”
Harper Technologies was founded in 2002 after brothers Abe and Carl found a niche to service customers and “provide solutions for things that plague people on a day-to-day basis,” he said, describing it as a “concierge culture company” with infrastructure services, managed services and data services, employing between 11 and 15 people, depending on the job.
During the first spike of the pandemic in May, Harper reported the IT industry had anticipated an 8 percent decrease in spending, after a 13 percent growth in 2019. As more employees have worked remotely, worldwide IT spending dropped off 5.4 percent, he said. Despite growth in the service sector, a disruption in the supply chain of a single element key to the industry has had ripple effects.
“The semiconductor market has slowed down production, distribution has stopped and the process of acquiring a new device can take weeks if not months,” he said. “So what we’ve come to find out as this year trended on, is the segment shrunk, the market decreased in growth not necessarily because of the pandemic, but because of the availability of semiconductors. It’s a very granular component that slowed everything down.”
Still, Harper said the “biggest obstacle” for the industry in 2021 is workforce development.
“It can’t be understated that IT is threaded through every facet of life,” he said.
At the conclusion of the address, Dr. Jerry D. Parrish, chief economist and director of research for the Florida Chamber Foundation, said his state lost 1.1 million jobs during the pandemic and is currently focused on recovery. Alabama, he said, is recovering lost jobs faster than the national average, but “low wage jobs have taken the brunt of the hit.”
“That’s a big issue,” he said. “A lot of these are service-oriented and people-contact kind of jobs. They are less likely to be able to work from home, more likely to be laid off, and that’s happening around the country.”
Parrish said he often thinks about the economy decades in advance, and his organization has a blueprint to halve child poverty by 2030. But he claims a recent ballot measure there to increase the minimum wage to $15 will have the opposite effect, as companies move entry-level jobs to states where such restrictions do not exist.
The federal threshold defining poverty for one person in a household is just $12,760. The minimum wage of $7.25, last increased in 2009, provides a person working full time an annual income of $15,080. Comparatively, a worker earning $15 per hour would earn $31,200 per year.
“The state of Florida just gave, especially to South Alabama, some big opportunities,” he said. “When we get to $15 per hour it’s going to be more than double Alabama and Georgia both … and you’ll see companies relocate across the state line.”
Parrish predicts $15 per hour will also discourage high school graduates from pursuing higher education and as a result, “Florida will become less educated and less globally competitive.”
Further, he believes the state will lose three jobs for every one person who gets out of poverty due to a higher minimum wage.
One highlight of the pandemic has been “reshoring of manufacturing” in the United States, or bringing jobs that were previously sent overseas back home, Parrish said.
“People don’t want to be dependent on other countries for personal protective equipment, drugs and vaccines, but you’re also going to see a shift for other products,” he said. While it remains to be seen whether the commercial real estate market will suffer long term, Parrish predicts a population shift to rural areas, driving demand for new residential real estate and services in areas that have experienced net population decreases in previous years.
Overall, he believes growth in the Southeast U.S. is strong.
“You have a lot of folks really looking at their tax bills, businesses are moving to the Southeast — I love what Alabama is doing offering manufacturing training at any of its community colleges — but I believe we are nearing the end of the worst of it and this time next year, there will be a lot more positive outlook,” Parrish said. “There is going to be this pent-up demand for travel that is going to be released and when people are more comfortable traveling, you’ll see a more normal growth rate.”
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