November 18, 2012

Michael Chriszt: ‘A vibrant spirit of resilience and realism’

Whenever I have the privilege of speaking in public, I do my homework on the area I’ll be visiting. Preparing for the series of speaking engagements I had in Dalton on Nov. 13 was a sobering endeavor. With an employment decline of over 23 percent, no other metro area in the region has suffered more during the recession than Dalton. While the rest of the region has been slowly adding jobs, Dalton saw its total level of employment decline until June of this year. Dalton’s unemployment rate is nearly 4 percentage points above the national rate and home prices were still falling through the second quarter — to levels last seen in 2001.

In the Center for Economic Research and Entrepreneurship’s (CERE) publication “Business Analytics,” Robert Culp wrote:

“The dramatic drop in income in Whitfield County is the result of heavy dependence on flooring companies located in the area. These companies, like any that depend upon the housing market, suffered significant decreases in sales, hitting profits and employees very hard. The area has suffered mass layoffs and little business expansion, resulting in the highest unemployment rate in the state. While it can be hoped that housing prices will recover in Whitfield County, until its manufacturing sector recovers or new businesses locate in the area, indications are that Whitfield County’s home market is years away from recovery.”

Dr. Culp hit the nail on the head. Dalton’s troubles are clearly tied to the decline in housing. With the collapse of new home construction witnessed during the recession, demand for floor coverings — a dominant industry in the “Carpet Capital of the World” — declined substantially.

Just how bad is it? Looking at our “Assuage Gauge,” which compares the percent of employment lost during the economic downturn to the increase in employment during recovery, Dalton has the farthest to go to regain its prerecession employment levels of any metro area in the region.

Unfortunately, the idea that Dalton will regain all the jobs lost in the floorcovering sector is unlikely. As macroblog wrote on Sept. 20:

“The paper ‘The Trend is the Cycle: Job Polarization and Jobless Recoveries’ by Nir Jaimovich and Henry Siu focuses on a related but distinct long-term phenomenon in the U.S. labor market: job polarization. This refers to the fact that the U.S. labor market increasingly consists of low- and high-paying jobs with relatively few middle-income jobs. While this ongoing change has been noted by other researchers, Jaimovich and Siu show that this long-term evolution has not been occurring at a slow and steady rate but rather has been concentrated during aggregate downturns. They argue that the recent phenomenon of jobless recoveries is simply a reflection of the fact that these are the periods in which middle income jobs are disappearing, never to be brought back.’

So, with all this in mind I traveled to Dalton fully expecting to find a city depressed and its people disheartened. What I found was quite the opposite. In discussions with dean of the business school at Dalton State College, Dr. Larry Johnson, and students and professors there as well as business and community leaders from the Dalton area, I found a vibrant spirit of resilience and realism. Businesses were diversifying, community leaders were actively engaged in attracting new business, and Dalton State College was taking critical steps to prepare their students for the future. Along those lines, the college broke ground on a new science building the day before my visit.

Dr. Benjamin Artz put it best in his article in CERE’s “Business Analytics” when he wrote:

“It is clear that, in order to succeed in the new economy that arose in the wake of the Great Recession, the (Dalton) region must at minimum focus on industry diversification and educational attainment. If it does so, the next decade may not be as devastating as the last.”

If we can find such a great spirit in the hardest-hit metro area in the Southeast, there is good reason to be optimistic about the future.

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