Officials take the long view

Major construction projects on the horizon in Springfield represent a nearly $1 billion bolster to the economy. But outside factors such as a continuing labor shortage and the fallout from the subprime mortgage market could dampen the rosy outlook of several economic sectors.

Partly sunny

Greg Williams, economic development director for the Springfield Area Chamber of Commerce, said the development environment is strong, due in part to the chamber’s work to lock up new businesses and expansions at the Partnership Industrial Center West in northwest Springfield.

“Typically, the fourth quarter of any given year shows some sort of a lull in prospect or project volume, but our group has been as busy this quarter as we have been in a long time,” Williams said. “There are two or three other deals coming down the pike to closure in the next several weeks.”

That growth follows on the heels of three announcements of new PIC West tenants in the last half of 2007. Two Springfield companies, Crossland Construction Products and Green Seed Co., are relocating existing facilities to the center, while California-based nutritional supplement manufacturer Seltzer Cos. is slated to open a new facility in the center by mid-2008. Those facilities will add a combined 75 jobs and $3 million in infrastructure investment.

The positive outlook, Williams added, goes well beyond PIC West.

“I have visited recently with a number of developers and general contractors, and they echo our experiences in project volume,” he said. “One said to me that they’re as busy as they’ve ever been.”

The list of new projects scheduled to start or finish in the area next year is extensive, including the redeveloped Heer’s building, the new Embassy Suites hotel from developer John Q. Hammons, JQH Arena, the Springfield-Branson National Airport midfield terminal and the City Utilities southwest power plant expansion.

Those projects have a combined value of nearly $950 million, based on previous Springfield Business Journal reports.

“There are a lot of things to keep us moving in the right direction,” Williams said.

Partly cloudy

Several factors in the overall economy, however, could slow the growth – even in a historically insulated market such as Springfield.

Steve Mullins, Drury University economics professor, thinks there are two major issues that will have an economic impact.

“Energy prices are at historic highs, even if you adjust for inflation, and that could have an impact. But more pressing right now is the fallout from the housing bubble,” Mullins said. “The (Federal Reserve) has to make a decision which of those two threats to the economy it thinks is more important: the inflation caused by higher energy costs or the risk of recession because of the housing market bubble popping and the impact of foreclosures on consumer spending.”

He said the Fed is more worried about a possible recession, as evidenced by the Dec. 11 cut in the federal funds rate to 4.25 percent, the third cut since September.

“Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending,” according to a Dec. 11 Federal Reserve news release.

The local housing market should benefit from the rate cuts, according to Scott Rose, president of the Greater Springfield Board of Realtors.

He said that 2008’s sales numbers may not match the record levels of 2005 and 2006 – but that’s not a bad thing.

“We’re seeing, on a whole, that our sales are on the same level that they were in 2004, which was before they started loosening up the lending restrictions,” Rose said.

“There was a whole lot of money out there in 2005 and 2006 to people that shouldn’t have been able to get it. I think in 2008, we’re going to see a more steady market.” Through November, Springfield home sales totaled 6,966, compared to 7,048 through November of 2004.

Rose said that because the market did not see the rapid appreciation of other parts of the country, the drop has not been as dramatic.

He added that with rapid population growth in Greene County – recent estimates show the population growing by nearly 10 percent to 300,000 by 2010 – real estate is an even better long-term investment.

The impending storm

Unemployment in the Springfield Metropolitan Statistical Area was at 4.3 percent in October – the latest month for which data is available from the U.S. Bureau of Labor Statistics – up from 3.8 percent for the same month in 2006.

A lack of qualified workers is expected to have a continued effect on multiple industries, including manufacturing.

“Nationally, there are about 14 million manufacturing workers in America, and as many as 7 million will be retiring in the next five years,” said Rita Needham, executive director of the Southwest Area Manufacturers Association.

“Those are the people with the years of experience and skill, and we don’t have the people coming in to replace them.”

Needham said her organization will spend much of the coming year working to raise the visibility of the industry and encouraging students to consider manufacturing careers.

She’ll have competition, though, from other sectors.

“With the perfect storm of construction projects in the Springfield region, there is a tremendous gap that developers and builders are experiencing in labor,” the chamber’s Williams said. “We’ve been below 5 percent in unemployment in this market for 10 years, and that’s a good economic indicator for a community,” he added.

“But it’s still posing big challenges for employers, and I don’t see that subsiding in 2008 or beyond.”

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