For quite some time now, experts have been predicting a turn in the economy. While various factors have led to a global recession during the past couple of years, the public perception continues to remain optimistic about a turnaround.

While the downturn is a global phenomenon, the United States remains in a unique position for a number of reasons, including the terrorist attacks of a year ago and our position as a leader in the global economy.

It has been said many times that our industry is one of the key economic indicators on how the global economy is performing. Looking at the overall national picture on what types of projects economic development officials are working on gives us a sense of not only if the job base is expanding or contracting, but also what sectors of the economy are growing, and in which direction compensation levels are headed.

The point of this article, I hope, is not to point out the obvious. For example, another terrorist attack on the United States would obviously have a negative effect on the economy. Rather, what I hope to do is to give a bit of insight into the site selection industry and how the trends we encounter are setting the tone for the economy of tomorrow.

Here are some experiences our peers have encountered, with some analysis on what it means for the economy.

Reasons why the economy is poised for growth in 2003

Site selection consulting firms and state economic development organizations are seeing an increase in the number of expansion and new construction projects.

"I have always considered our industry to be a leading- edge indicator on how the economy will perform in the near future," said Penny Whiteheart, vice president of the Piedmont Triad Partnership in Greensboro, N.C.

Firms across the United States have seen a dramatic increase in the number of projects related to new construction and expansion of existing companies during the past few months.

"We have been in contact with a number of consultants, and all have indicated that the phone has been ringing off the hook ever since Labor Day," Whiteheart said.

During the past couple of years, most of the projects that consultants got called on were aimed at helping companies cut costs by reducing square footage and headcounts, including facility closures and consolidations.

Companies with expansion plans were forced to place those projects on hold because of the unstable marketplace and uncertainty of where the economy was headed. For the past six months or so, many of these companies have revealed projects relating to facility expansions and new construction.

"Just within the last two months, Clark County, Nev., has seen 11 new companies locate there, creating [more than] 1,000 jobs," said Jody Mack, vice president of economic development with the Nevada Development Corp.

Additionally, some of those earlier projects placed on the backburner are beginning to resurface. These projects create new jobs, new investment and a generally positive ancillary effect on the surrounding economy. With the consolidations of the past two years, available industrial space and availability of skilled labor to fill these vacant buildings present the perfect climate for growth.

On the Verge of Growth

Economic development officials have also seen an increase in projects related to emerging technologies.

Patrick McKeehan, vice president of business development for the Saint Louis RCGA, which services counties in the Saint Louis metro area in Missouri and Illinois, has seen such increases.

"Within the last nine months, St. Louis has responded to three RFIs for biopharma projects," he said. "We expect many more in the coming months as the human genome research from the last five years is translated to biopharmaceutical development and production."

These new technologies could prove to facilitate the expansion boom the information technology industry created a few years ago - hopefully without the downturn.

"Biotech firms will need large quantities of high-quality production space," McKeehan said. "Many communities, including St. Louis, will experience an increase in prospect activity related to this conversion of applied research to consumables. Other communities should see an increase in the demand of biotech materials and supplies, such as processing tanks, engineering services and control systems."

With these expanding technologies, it is apparent that this sector of the economy is on the verge of an expansion explosion.

Restocking Necessary

Inventories have been reduced to the point where we need to start to restock. One of the most documented contributing factors to the economic downturn was that inventories had reached an alarmingly high level, forcing OEMs to cut supplier orders, sending a rippling effect of negativity throughout the economy.

Today, these inventory levels have come back to reality, and some have even reached the point of being dangerously low. Suppliers have seen increases in customer orders, allowing them to hire back some of the employees they previously displaced, and forcing them to upgrade their technology to keep up with the demand for products.

Despite the overall downturn in the economy, certain large industries have had certain aspects of success. The automobile industry, for example, while having to cut prices and offer incentives, still has not seen as sharp of a decline in sales as could have been expected given the state of the economy.

While production of new vehicles slowed because of the exceptionally high inventories being reported by the large automakers, steady sales numbers quickly reduced inventory to manageable levels.

Post-9/11

Post-Sept. 11 security concerns will mean an increase in technology investments and increases to the manufacturing base in the United States.

The attacks spawned a whole new security industry. The dollars being spent on security have created a good number of jobs, and technology companies are now focusing on how their emerging products may help secure airports, buildings and cities. The dollars being spent on such research will generate even more jobs and technology that will help the economy in the long run.

Additionally, the increased security measures have affected the way many manufacturing companies who rely on outside suppliers conduct their business. When the North American Free Trade Agreement further opened our borders, many manufacturing operations fled the United States for the cheaper costs associated with operations in Mexico and other countries.

Many just-in-time manufacturers relied on component parts from these foreign suppliers to be provided on an as-needed basis. For the most part, these aggressive production and distribution schedules were met during periods of time where our borders were readily accessible.

In today's heightened security environment, many of these cross border shipments cannot simply be expected to arrive as previously scheduled.

Many of the manufacturing operations relying on these foreign-made components have been forced to shift some or all of their orders to U.S. manufacturers to avoid the potential border entrance problems because of heightened security. Many companies who sought the higher profit margins of cheaper labor are now being forced to consider production in the United States.

Alternatively, at the very least, they are being forced to increase their product inventories and warehousing operations within the United States to compensate for the fear of not being able to meet delivery schedules. Whatever the individual company decision, the results of this will inevitably be an increase in investment into the U.S. markets.

Reasons why the economy may not rebound quickly

Accounting Woes

Accounting problems, while publicized extensively, are viewed as a company problem, not an industry problem. The stories are well documented. Two of the largest corporate scandals in recent U.S. history involved one auditor, Arthur Andersen.

So everyone has been quick to assume that the problem was with the auditing firm, being that both Enron and WorldCom were clients of Andersen.

However, this is an industry laced with problems and conflicts of interest. Recent legislative changes indicate a desire to control the accounting industry. While some may argue that the government is being proactive and trying to avoid another similar situation, I believe that they are just responding to an issue that has been festering for some time.

So what does this mean for the economy? For the most part, the majority of the people in the United States do not fully understand the problem or government's response to it. All they know is that one company seemed to be doing some underhanded things and the government has responded and "taken care of the problem."

What happens if there is another accounting scandal? Furthermore, what happens if the auditor turns out to be a firm other than Andersen? If people were to fully understand that this is a widespread industry problem - and one that is not as easily correctable as it appears - it may send the economy further into a recession because of declining consumer confidence.

State Budget Woes

State budgets are still running deficits. Many states have documented troubles with their financial situations during the past 12 months. As these states continue to struggle, they will look for ways to increase their revenue base.

Unfortunately, many state governments will take the approach to try and squeeze even more out of their existing industries, rather than investing dollars to recruit new tax base to the state.

Two of the biggest targets when a state looks to cut its budget include economic development funding and business incentives.

New Jersey, for example, is in the process of strengthening its tax laws, forcing companies to pay more, or as Gov. James E. McGreevey calls it, "their fair share." This approach only adds additional cost to doing business and could result in companies spending more to comply with more rigorous taxing requirements, and less on new investment.

The economy is positioned for growth during 2003. However, it also demonstrates how unstable things really are. Favorable signs are all around us. While we sit in a good position from a fundamental standpoint, there are many factors that could set the growth trend back considerably.

The one thing that remains constant is that our industry continues to be on the leading edge of the economy. Not only from predicting a growth or a recession period, but also about what technologies are driving the economy forward.

Brian Corde is director of location strategies for Mintax's Corporate Location Division, which specializes in site selection and government incentives for new and expanding businesses. The East Brunswick, N.J.,-based company can be reached at (732) 723-9000.