Lynchburg Business

Economic Study shows regional economy trending towards high growth industries

Issue: August 2010 by Johanna Calfee in Inside The Magazine, Technology

The economic and employment future is looking bright for Region 2000, especially when it comes to growing and attracting existing and new high-growth, high-paying jobs, according to two new reports.

The first is a study by Richmond-based Mangum Economic Consulting, LLC. It concluded, among other positive growth indicators, that from 2001 to 2009, the region gained 8,656 jobs in the sectors of healthcare, professional services, accommodation and food service, education and wholesale trade, and projections that these industries will continue to grow in the area are strong.

The study comes as encouraging news to the leaders of Region 2000, who have been working to create positive changes in the workforce throughout the past decade, especially through enhanced programs in science, technology, engineering, and math (STEM) education.

“The local leadership recognized that this is the future that holds the greatest promise for the region,” Bryan David, Economic Development Director with Virginia’s Region 2000 Partnership said. “Our STEM education efforts, and efforts to try to grow our own engineers and so on, are meant to support the growth of these industries.”

Further support of this growth comes from a report released in mid-June by the Federal Reserve Bank of Richmond’s Fifth District, showing that while the state’s unemployment rate went from 6.9 percent in January to 7.2 percent in April (the latest data available at press time), Lynchburg’s unemployment rate decreased from 8.7 percent to 7.5 percent during the same time period. These numbers fall in line with the Mangum report’s observation that “Region 2000’s economy is evolving,” especially when it comes to the manufacturing industry.

Mangum’s study indicates that Region 2000 is moving away from an over-dependence on the manufacturing sector and toward the high-wage/high-growth sectors of healthcare and professional, scientific and technical services. Between the third quarters of 2001 and 2009, the area lost 7,231 (32.7 percent) manufacturing jobs, shifting that sector as a whole from 22.3 percent of the area’s total employment in 2001 to 15.1 percent in 2009.

The shift away from traditional manufacturing is also significant in terms of local household income. At an average weekly wage of $917, the manufacturing industry was Region 2000’s 5th highest ranked sector in terms of relative wages during the third quarter of 2009. These losses were offset, however, by significant gains in other areas like healthcare and professional, scientific and technical services—a trend that Mangum found hopeful.

“This is an important trend that has not only had an immediate positive impact on Region 2000’s economy in terms of wage and employment growth, but is also better positioning it for future long-term economic growth,” the report stated.

Still, despite the trend away from the manufacturing sector, David says it is not being pushed out of the region altogether, but rather, is being redefined.

“Manufacturing has certainly been the region’s biggest job sector in the last century with our history with shoes and so on, and we are still a manufacturing region, but now it’s in the sense that we are migrating towards advanced manufacturing, where you need very skilled people to operate the manufacturing equipment,” he said. “So there is traditional manufacturing and advanced, and we are moving away from the traditional and heading towards the advanced.”

As for the industries that had the most significant gains in the area from 2001 to 2009, the study showed that healthcare sector saw the largest overall increase in employment, growing by 3,364 jobs (27.2 percent), growing its share of regional employment from 12.5 percent to 16.0 percent.

From a paycheck standpoint, this growth meant that “real wages” increased by 5.5 percent over the 8-year period, making healthcare the region’s 11^th highest paying sector in the third quarter of 2009.

Meanwhile, the professional, scientific, and technical services sector saw the second largest increase in employment, growing by 2,245 jobs, or 75 percent, according to Mangum.

“The real surprise [in this report] was the growth in professional and technical services,” David said. “I think everyone knew it intuitively, but now, with this report, it’s affirmation that we are going in the right direction.”

The employment growth in this sector also translated into the highest growth in real wages (32.2 percent), making it the highest paying sector in Region 2000 as of the third quarter of 2009.

David attributes the success of these industries to local leaders like Genworth, AREVA and the Babcock and Wilcox Company (B&W), as well as smaller wireless technology companies, like the locally-grown Innovative Wireless Technologies (IWT) and Advanced Manufacturing Technology, Inc. (AMTI).

Most recently, B&W’s announced last month that it was awarded a $2.4 million grant by the Virginia Tobacco Commission, and as a result, will locate its B&W mPower™ Integrated System Test (IST) facility in Bedford County at the Center for Advanced Engineering and Research (CAER). The IST facility, which is expected to be operational in 2011, will include a scaled prototype of the B&W mPower reactor that will undergo extensive testing during a three-year initiative.

“This is exactly the type of opportunity we had in mind when we created the CAER,” Bob Bailey, Executive Director of the CAER, said. “Our research facility is designed to support innovation in our region’s industries and strengthen the role of science and technology in our economy. B&W’s decision to locate their IST facility here fits this objective like a glove.”

The IST program is also expected to create a number of construction jobs and a minimum of 10 permanent, full-time positions during the testing phase. Once testing concludes, B&W anticipates using the facility for on-going training of utility professionals who would be operating B&W mPower reactors, according to Jud Simmons, Public Relations Manager for B&W.

This news comes on the heels of an earlier July announcement from B&W that its subsidiary group, Babcock & Wilcox Nuclear Energy, Inc., and Bechtel Power Corporation have entered into a formal alliance (known as Generation mPower) to design, license and deploy the world’s first commercially viable Generation III++ small modular nuclear power plant. Simmons says that this alliance will also result in new employment locally.

“The program has already resulted in our leasing a new facility in Lynchburg that can house as many as 200 design, engineering and support personnel,” Simmons said. “We believe that hundreds of other manufacturing positions will be added across our facilities in Lynchburg, Ohio, Indiana and Canada as things move forward, but it’s too soon to know the final numbers at each location.”

Last year, Simmons said that B&W hired about 150 people locally, though some of those hires were to replace positions left by retirees or those who moved onto other work. Meanwhile, AREVA hired about 200 people in 2009, though some of those hires were also replacements, according to Denise Woernle, Director of HR Marketing. She says that future local growth of the company relies somewhat on the supply and demand of the market, as well as the national economic situation.

“We have a few pending opportunities that have the potential to create significant employment growth in our U.S. operations, including those in Lynchburg,” she said. “In the meantime, we continue to work on deployment of the U.S. EPR™ technology and servicing of the existing fleet of nuclear energy reactors, as well as new and exciting work in the rapidly-growing solar market.”

While it did not experience growth to the same level as the professional, scientific, and technical services sector, three other sectors also saw employment gains during this same time period. The accommodation and food service sector grew by 1,203 jobs or 18.5 percent, while educational services added 962 jobs (12.1 percent) and the wholesale trade sector saw a 31.2 percent increase, adding 882 jobs.

In the eyes of the Region 2000 Partnership, all of this data points to one conclusion: By moving away from its dependence on manufacturing jobs and towards high-wage/high-growth sectors, the area is better positioning itself for long-term growth, while reducing the impact of any future economic downturns.

“We are making policies that are in line with our strengths and assets,” David said. “That’s what a good business does and that’s what the region is aiming to do. Have we created an atmosphere for growth? Yes, I think so.”

he economic and employment future is looking bright for Region 2000, especially when it comes to growing and attracting existing and new high-growth, high-paying jobs, according to two new reports.

The first is a study by Richmond-based Mangum Economic Consulting, LLC. It concluded, among other positive growth indicators, that from 2001 to 2009, the region gained 8,656 jobs in the sectors of healthcare, professional services, accommodation and food service, education and wholesale trade, and projections that these industries will continue to grow in the area are strong.

The study comes as encouraging news to the leaders of Region 2000, who have been working to create positive changes in the workforce throughout the past decade, especially through enhanced programs in science, technology, engineering, and math (STEM) education.

“The local leadership recognized that this is the future that holds the greatest promise for the region,” Bryan David, Economic Development Director with Virginia’s Region 2000 Partnership said. “Our STEM education efforts, and efforts to try to grow our own engineers and so on, are meant to support the growth of these industries.”

Further support of this growth comes from a report released in mid-June by the Federal Reserve Bank of Richmond’s Fifth District, showing that while the state’s unemployment rate went from 6.9 percent in January to 7.2 percent in April (the latest data available at press time), Lynchburg’s unemployment rate decreased from 8.7 percent to 7.5 percent during the same time period. These numbers fall in line with the Mangum report’s observation that “Region 2000’s economy is evolving,” especially when it comes to the manufacturing industry.

Mangum’s study indicates that Region 2000 is moving away from an over-dependence on the manufacturing sector and toward the high-wage/high-growth sectors of healthcare and professional, scientific and technical services. Between the third quarters of 2001 and 2009, the area lost 7,231 (32.7 percent) manufacturing jobs, shifting that sector as a whole from 22.3 percent of the area’s total employment in 2001 to 15.1 percent in 2009.

The shift away from traditional manufacturing is also significant in terms of local household income. At an average weekly wage of $917, the manufacturing industry was Region 2000’s 5th highest ranked sector in terms of relative wages during the third quarter of 2009. These losses were offset, however, by significant gains in other areas like healthcare and professional, scientific and technical services—a trend that Mangum found hopeful.

“This is an important trend that has not only had an immediate positive impact on Region 2000’s economy in terms of wage and employment growth, but is also better positioning it for future long-term economic growth,” the report stated.

Still, despite the trend away from the manufacturing sector, David says it is not being pushed out of the region altogether, but rather, is being redefined.

“Manufacturing has certainly been the region’s biggest job sector in the last century with our history with shoes and so on, and we are still a manufacturing region, but now it’s in the sense that we are migrating towards advanced manufacturing, where you need very skilled people to operate the manufacturing equipment,” he said. “So there is traditional manufacturing and advanced, and we are moving away from the traditional and heading towards the advanced.”

As for the industries that had the most significant gains in the area from 2001 to 2009, the study showed that healthcare sector saw the largest overall increase in employment, growing by 3,364 jobs (27.2 percent), growing its share of regional employment from 12.5 percent to 16.0 percent.

From a paycheck standpoint, this growth meant that “real wages” increased by 5.5 percent over the 8-year period, making healthcare the region’s 11^th highest paying sector in the third quarter of 2009.

Meanwhile, the professional, scientific, and technical services sector saw the second largest increase in employment, growing by 2,245 jobs, or 75 percent, according to Mangum.

“The real surprise [in this report] was the growth in professional and technical services,” David said. “I think everyone knew it intuitively, but now, with this report, it’s affirmation that we are going in the right direction.”

The employment growth in this sector also translated into the highest growth in real wages (32.2 percent), making it the highest paying sector in Region 2000 as of the third quarter of 2009.

David attributes the success of these industries to local leaders like Genworth, AREVA and the Babcock and Wilcox Company (B&W), as well as smaller wireless technology companies, like the locally-grown Innovative Wireless Technologies (IWT) and Advanced Manufacturing Technology, Inc. (AMTI).

Most recently, B&W’s announced last month that it was awarded a $2.4 million grant by the Virginia Tobacco Commission, and as a result, will locate its B&W mPower™ Integrated System Test (IST) facility in Bedford County at the Center for Advanced Engineering and Research (CAER). The IST facility, which is expected to be operational in 2011, will include a scaled prototype of the B&W mPower reactor that will undergo extensive testing during a three-year initiative.

“This is exactly the type of opportunity we had in mind when we created the CAER,” Bob Bailey, Executive Director of the CAER, said. “Our research facility is designed to support innovation in our region’s industries and strengthen the role of science and technology in our economy. B&W’s decision to locate their IST facility here fits this objective like a glove.”

The IST program is also expected to create a number of construction jobs and a minimum of 10 permanent, full-time positions during the testing phase. Once testing concludes, B&W anticipates using the facility for on-going training of utility professionals who would be operating B&W mPower reactors, according to Jud Simmons, Public Relations Manager for B&W.

This news comes on the heels of an earlier July announcement from B&W that its subsidiary group, Babcock & Wilcox Nuclear Energy, Inc., and Bechtel Power Corporation have entered into a formal alliance (known as Generation mPower) to design, license and deploy the world’s first commercially viable Generation III++ small modular nuclear power plant. Simmons says that this alliance will also result in new employment locally.

“The program has already resulted in our leasing a new facility in Lynchburg that can house as many as 200 design, engineering and support personnel,” Simmons said. “We believe that hundreds of other manufacturing positions will be added across our facilities in Lynchburg, Ohio, Indiana and Canada as things move forward, but it’s too soon to know the final numbers at each location.”

Last year, Simmons said that B&W hired about 150 people locally, though some of those hires were to replace positions left by retirees or those who moved onto other work. Meanwhile, AREVA hired about 200 people in 2009, though some of those hires were also replacements, according to Denise Woernle, Director of HR Marketing. She says that future local growth of the company relies somewhat on the supply and demand of the market, as well as the national economic situation.

“We have a few pending opportunities that have the potential to create significant employment growth in our U.S. operations, including those in Lynchburg,” she said. “In the meantime, we continue to work on deployment of the U.S. EPR™ technology and servicing of the existing fleet of nuclear energy reactors, as well as new and exciting work in the rapidly-growing solar market.”

While it did not experience growth to the same level as the professional, scientific, and technical services sector, three other sectors also saw employment gains during this same time period. The accommodation and food service sector grew by 1,203 jobs or 18.5 percent, while educational services added 962 jobs (12.1 percent) and the wholesale trade sector saw a 31.2 percent increase, adding 882 jobs.

In the eyes of the Region 2000 Partnership, all of this data points to one conclusion: By moving away from its dependence on manufacturing jobs and towards high-wage/high-growth sectors, the area is better positioning itself for long-term growth, while reducing the impact of any future economic downturns.

“We are making policies that are in line with our strengths and assets,” David said. “That’s what a good business does and that’s what the region is aiming to do. Have we created an atmosphere for growth? Yes, I think so.”