Economic Outlook - May 2006

The East, with the least, remains much the same.

Eastern North Carolina has done little to improve its economy in the past five years, according to a report from the North Carolina Center for Public Policy Research, a Raleigh think tank. Just 12.9% of the regionís work force is in manufacturing, which offers the highest-paying jobs, compared with 15.6% for the state. And both percentages are shrinking. Mike McLaughlin is editor of North Carolina Insight, the centerís journal.

BNC: Why does the East keep lagging?

McLaughlin:One big issue is the education level of the work force. As a region, these 41 counties, most of them east of Interstate 95, have higher dropout rates, lower percentages of college graduates and lower per capita income than the rest of the state.

What industries thrive in the East?

Agriculture still drives the economy. It really is the breadbasket of North Carolina. The military has survived this latest round of base closures. There is some concern, though, about a major mobilization. Will that cause an economic hiccup?

Your study says only 2% of the workers are in agriculture. How is it the driver?

That wonít include anybody in the farmerís family who works on the farm and migrant workers. You also need to look at meat-processing plants and feed-and-seed businesses, which are tied to the agriculture economy.

The public sector employs nearly a quarter of the workers.

The private sector is just not as large in the East. The economy is not as diversified as it needs to be if the school system or a hospital is the largest employer.

How have things improved since 2001?

Thereís more broadband Internet availability, and natural gas is more available in some regions. Weíve seen some strategic initiatives such as biotechnology. We see ethanol being looked at as a new driver of demand for crops. We see some things building on the regionís strength, such as a new egg-processing plant. Weíre seeing some boat manufacturers.

Why are the Eastís problems the stateís?

For the rest of the state, there is cost when a region struggles. Some of these counties have very high Medicaid expenses and have trouble supporting their school systems. Tom Lambeth, the former director of the Z. Smith Reynolds Foundation, said it best when he said if youíre in a boat and one end springs a leak, you all go down together.

How can the state help?

Policies that will help small business. The East is unusual in that most people work in small businesses. Education is a responsibility of the state as well. The number of low-performing schools has been higher in that part of the state, so hopefully more funds flow that way.

How did the rest of the state get ahead?

In the early 20th century, industrialization was moving into the Piedmont to take advantage of the road construction. In the East, they relied more on agriculture and lower-skilled manufacturing. Today, agriculture is a troubled sector in many ways. Farmers are getting older, and some farms are going out of farming and into other uses. While the East has some success in attracting industry, the pace of industry leaving is accelerating. It is a one-step-forward-and-two-steps-back proposition.

What can the East do to catch up?

Itís going to take multiple strategies. They need to think in terms of singles and doubles and not the home run like Research Triangle Park or the projected home run of the Global TransPark. People have high hopes for the international port at Southport, but the jury is still out. The East needs to build on its strengths, whether itís tourism or history. It needs to develop and retain small and medium-sized businesses. Itís going to take a sustained, long-term effort to bring this region up to the level of the rest of the state.

How far can it get through tourism?

Tourism can be lucrative for some people and part of a multifaceted strategy. Look at Asheville. People want to move their firms there just because they like it. People like to retire to a place that they enjoy visiting, and retirees who migrate to an area bring more resources.

What kinds of small and midsize businesses would work well in the East?

The ones that come out of the fabric of that community. Duplin County is a good example with the winery ó and the nutrition supplements made from the hulls of the grapes ó and the agribusiness developing around livestock. If you start to develop some niche, it starts to feed on itself, and then you start to get wholesale suppliers in that area.

Why has the region struggled to attract manufacturers?

Itís not just education but also a critical mass of population so a manufacturer will have a large enough work force. Nucor steel was successful in Hertford County, but those jobs are so high-paying that people will drive several counties for them. When itís a job paying just marginally living wage, youíre not sure you can get the work force that you need.

The East fell behind a long time ago. How quickly can it catch up?

With a sustained effort, progress could be made in 10 years.