S HOME TO MUCH OF THE NATION’S MANUFAC-
turing capacity, the states in the NAED South Central Region—and the electrical distributors that sell there—have a lot at stake under the new regime in Washington. Decisions about trade, immigration, infrastructure spending, and healthcare policies will potentially make a huge differ- ence in how 2017 turns out for these distributors.
Even before taking office, Donald Trump tried to influ- ence manufacturers in Indiana, Kentucky, and elsewhere in the region to keep production in the United States instead of transferring it to Mexico. As a candidate, he railed against the
North American Free Trade Agreement
and the proposed
. Although it remains to be seen what steps he will take as president, any actions are likely to have multiple consequences. Most of the nation’s automobile and truck (light and heavy) manufacturing occurs in the Southeast and Midwest. How- ever, many of these plants depend on engines and other parts from Mexico and Canada, and thus may not benefit from more “protection.” The ports of Vir- ginia, South Carolina, Georgia, Florida, Alabama, and Louisiana would all suffer if inbound freight diminishes. Major exporters—such as Caterpillar and Deere plants in Illinois and Iowa or agricultural exporters in those states and Indiana—may find their competitiveness reduced.
A tougher stance on immigration and on the treatment of those immigrants already in the Unites States, whether legally or not, also poses risks for electrical distributors and their customers. Many companies have already been struggling to fill open positions, with the U.S. unemploy- ment rate having dropped to 4.6% by November 2016. The rate was even closer to full employment in Iowa ( 3.8%), Arkansas (4%), Wisconsin ( 4.1%), and Indiana and Virginia ( 4.2% each). Although Florida’s 4.9% unem- ployment rate was a bit higher than the national average, 20% of the state’s population is foreign, as are high per- centages of its property investors and visitors. These facts put Florida on the list of states in the region that could be adversely affected by restrictive policies toward foreign- born residents. One industry that has had difficulty for several years in finding qualified workers is construction—a key market for many electrical distributors. In a survey of more than 1,200 member companies that the Associated General Contrac- tors of America released in early January, 73% reported having a hard time finding salaried or craft professionals. If able-bodied workers are either forced to leave the country or feel sufficiently unwelcome or threatened that they decide to leave, contractors may be unable to complete as many projects. That would mean fewer orders for their electrical (and other) suppliers. There are no timely government data on the volume of construction spending, but changes in construction employment are a good proxy. From November 2015 to November 2016, U.S. construction employment increased by 2.4%—compared with the 1.6% growth rate for total nonfarm payroll employment. Within the NAED South Central Region, growth was especially strong in Iowa (10%), South Carolina (8%), and Michigan and North Caro- lina (6% each).
• Infrastructure spending
Trump has promised large increases in infrastructure investment—as much as $1 trillion over 10 years—in a paper by Wilbur Ross and Peter Navarro, both of whom he has included in his administration. It is unclear whether such investment would be focused solely on highways or might also in- clude airports, waterways and ports, transit, or nontrans- portation infrastructure. The NAED South Central Region accounts for much of the nation’s inland waterways—from the Great Lakes through the Ohio, Mississippi, and Ten- nessee valleys—as well as South Atlantic and Gulf Coast ports. And the need for upgrading and safeguarding water supplies is apparent not only in Flint, Mich., but also in many of the region’s older cities. Thus, the region could receive a disproportionate share of nonhighway infrastruc- ture funds. The Ross-Navarro proposal emphasized private invest- ment in infrastructure, incentivized by generous tax cred- its. States in the NAED South Central Region have more extensive experience with privately operated (and partially financed) highways than any other part of the country, starting with deals involving the Chicago Skyway and In- diana Toll Road. More recent projects include numerous facilities in Virginia, Florida, and North Carolina. These states may have a head start in snagging new infrastructure dollars that depend on private investment. Addressing any of these needs would entail greater busi- ness for some electrical distributors in the region. How- ever, members of both parties and houses of Congress have expressed skepticism or opposition to that level of addi- tional spending, especially at a time of low unemployment. Thus, uncertainty reigns in this realm as well.
• Healthcare policies
Electrical distributors that serve hospitals, either directly or through their construction spending, are at risk of a de-
• Feb. 17
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