Monday, August 23, 2010

Stockton, CA Homicide Rate Almost as High as Washington, DC's

The recession has done little to stop the declining homicide rate in Washington, DC. In 1991, the city recorded 479 homicides, a rate of over 80 per 100,000. This year it's recorded 75, is on pace for about 115, a rate of just under 20 per 100,000. The city's murder rate is very likely to come in at a 47 year low for all of 2010.

But on the other side of the country, where there are few Federal jobs to prop up the economy, Stockton, CA is seeing a surge in homicides, reporting 33 this year, nearly double the total of last year. With 290,000 people, Stockton's year-to-date homicide rate of 11.5 per 100,000 is almost as high as the 12.5 per 100,000 in the city formerly known as the nation's murder capital.

Stockton was crushed by the housing bust, and now relies on the usual local government/hospital jobs seen in other cities. Interestingly, larger, out-of-state, cities that were also hurt badly by the housing crash, notably Phoenix, are still seeing declines in violent crime. Meanwhile, Fresno also saw a large increase in homicides earlier this year. While I can't say exactly why Stockton's crime is so bad, Phoenix, Reno, and Las Vegas don't have to deal with the high tax burdens and huge pension liabilities Stockton shares with the rest of California. And without the tech or movie industries to prop it up, Stockton and Fresno don't have the non-health, non-government employment base of San Francisco or LA. Essentially, working class Central Valley residents are being forced to subsidize pensions for public workers who live in LA and San Francisco. That's no way to build a foundation for an economic recovery.

Saturday, August 14, 2010

Caterpillar Coming to North Carolina, But Nearly $1 Million Capex Per Job

Caterpillar is expanding production capacity across the world right now. And it's bypassing its usual midwestern locations for the south and Texas. However, like many other manufacturers, it is now spending close to a million dollars for every new job created.

Its new axle facility in Winston-Salem, NC will require $426 million of capex, and is expected to produce 500 jobs across the 850,000 square foot site. Average wages are expected to be $40,500 plus benefits once the facility opens in 2012. This means about $22 million in new non-benefit wages a year. Therefore, with inflation it will likely take at least 15 years until the company's outlays for manufacturing wages match what it will spend building the plant.

Wednesday, August 4, 2010

Michigan Factory Employment Down 450,000 Over the Last 10 Years

While Obama, Biden, and the Queen of Economic Disaster Jennifer Granholm attend ribbon cutting ceremonies for factories that will employ a few hundred, Michigan has lost manufacturing jobs by the hundreds of thousands. An interesting article at highlights how many of the new "advanced manufacturing" jobs are simply coming in a too slow a pace to dent the unemployment rate. Rick Haglund, the author of the story, writes:

While advanced manufacturing is important to Michigan's economy, it's not likely to produce more than about 10 percent of the state's total jobs.

This is tied to the challenge I've written about here of capex per job created rising faster than inflation. It wasn't in Michigan, but when Toyota built its Princeton, Indiana plant in 1998, it needed $350,000 in up front capital outlays per operating job created. But it's new Prius plant in Blue Springs, Mississippi will need $650,000 of capital investment per job created.

The solution is not some clever educational program or to attract "creative" workers. But rather to cultivate industries, like wind turbine production, where manufacturing is far more labor-intensive, and requires less than $200,000 in capex per operating job created.