A $100 billion wealth migration tilts US economy’s center of gravity south

July 24th, 2023

By Michael Sasso and Alexandre Tanzi - Bloomberg

Drive along the 240-mile stretch of the Atlantic coast from Charleston, South Carolina, through the grassy marsh land of southern Georgia and down into northern Florida, and you’ll see one of the most profound economic shifts in the U.S. today.

Welcome to the New New South.

Electric-vehicle factories and battery plants are overtaking pine forests in this region of antebellum architecture and shrimp and grits. More broadly, the entire South from here, north to Kentucky and west to Texas is where businesses are moving to, jobs are being created and homes are being bought. The uplift isn’t happening equally everywhere, or equally for everyone. But the implications for the entire country are enormous.

The numbers tell the story. For the first time, six fast-growing states in the South — Florida, Texas, Georgia, the Carolinas and Tennessee — are contributing more to the national GDP than the Northeast, with its Washington-New York-Boston corridor, in government figures going back to the 1990s. The switch happened during the pandemic and shows no signs of reverting.

A flood of transplants helped steer about $100 billion in new income to the Southeast in 2020 and 2021 alone, while the Northeast bled out about $60 billion, based on an analysis of recently published Internal Revenue Service data.

The Southeast accounted for more than two-thirds of all job growth across the U.S. since early 2020, almost doubling its pre-pandemic share. And it was home to 10 of the 15 fastest-growing American large cities.

Corporations are also flocking there, with a record number of firms moving south after the pandemic, Census Bureau data show.

Dun & Bradstreet was one of them.

The company, founded 182 years ago by abolitionist Lewis Tappan, was until recently headquartered in Short Hills, New Jersey, its location a major plus for a financial-information firm with close ties to Wall Street.

But in 2021, the company decamped for Jacksonville, Florida, on the southern edge of that 240-mile coastal band.

Jacksonville lacks the money and star-power of Gable Estates, Fisher Island and other elite South Florida enclaves. Part of downtown is vacant and lifeless. Surrounding Duval County suffers from the state’s highest crime rate. And, despite locals’ fondness for steel-truss bridges, they and the big seaport give Jacksonville an industrial feel not found in Florida’s more glamorous cities.

What Jacksonville does have is a powerful lure for companies and people looking to work for them. In Dun & Bradstreet’s case, that included a $100 million package of cash and tax incentives.

Chief Financial Officer Bryan Hipsher said the firm would’ve gladly stayed in the New York area. But the offer in Florida was too good to refuse.

“You feel very wanted, right?’’ Hipsher said in an interview from the new palm-fringed headquarters, minutes from the beach. “You feel very welcomed, clearly.”

The average employee here has an annual salary of $77,000, 25% above the national level, and well outstripping most local salaries. Still, many roles pay roughly 15% below the average at the former New Jersey headquarters.

Jacksonville grew so fast that it surpassed San Jose in population last year. Good schools, including University of Florida an hour and a half away, help provide a high-quality employee base, Hipsher said. Today the firm is still busy hiring — it’s a little less than halfway to its goal of 500 workers.

Not far away, the Jacksonville branch of the Mayo Clinic, the world-famous medical center based in Rochester, Minnesota, is growing along with the city. A new oncology building is going up and last year, it added 2,400 employees, bringing the total here to 9,000.

The company’s move highlights the forces that have sent 2.2 million people migrating to Florida and across the Southeast in the past two years — roughly the size of Houston.

The term “New South” was coined after the Civil War during a time of economic transition for the formerly slave-owning region. “The South has always been reinventing itself,” said Gavin Wright, an economic historian who studies the southern economy. “Every generation seems to have its ‘New South.’ ”

In recent decades, the warmer weather, lower taxes, looser regulation and cheaper housing lured companies and retirees. But this pandemic-era Sun Belt economic upswing is wider in scope.

“You could throw a dart anywhere at a map of the South and hit somewhere booming,” said Mark Vitner, a retired longtime economist for Wells Fargo who now heads his own economic consultancy, Piedmont Crescent Capital, in Charlotte, North Carolina.

Nashville, where the asset-management firm AllianceBernstein relocated a few years ago, has become the country’s top real estate “supernova” in surveys by PricewaterhouseCoopers and the Urban Land Institute. Houston, Atlanta and Charlotte, longtime home of Bank of America Corp., rank among the top 10 moving destinations nationwide by Penske Truck Rental — all ahead of boomtown Austin.

And no one beats Fort Worth, Texas, near Dallas, the country’s fastest-growing big city in the latest Census Bureau data.

“We now have more employees in Texas than New York state. It shouldn’t have been that way,” JPMorgan Chase & Co. CEO Jamie Dimon said to Bloomberg TV on a swing through the South earlier this year.

Back on the South Atlantic coast, signs of the explosive growth are everywhere along the Interstate 26 corridor that leads to Charleston, South Carolina, a 150,000-resident city with a rich, 350-year history. On this vital link to the port, sandwiched between sensitive environmental lands, electric-vehicles plants and master-planned communities are replacing the forests managed by timber companies for decades.

On a March Friday evening, a couple dozen empty-nesters sipped chardonnay and bourbon at a newcomers club party in the Charleston suburb town of Mount Pleasant. Almost everyone seemed to be from New Jersey.

Beth Woods, 47, and her husband were eager to escape the COVID-19 shutdowns and shuttered stores up north, so they started making bi-weekly trips from Mount Olive, New Jersey, soon after the pandemic struck. Before long, they decided to make the move permanent.

“You could get your hair done, your nails done, you could basically live your life. And it has lower property taxes here, too,” Woods said.

A few feet away, Rosemary Taibi, 59, concurred. She and her husband slashed their property taxes to $2,000 from $16,000 after moving from Randolph, New Jersey: “It’s a big difference.”

Northeasterners are moving here, but, more surprisingly, so are Californians. Employment in the Charleston metro area grew by 5.9% last year, twice as fast as the U.S. average. A Nevada company, Redwood Materials, is building a $3.5 billion EV-components plant 40 minutes northwest of Charleston, following a Volvo plant that opened five years ago.

Whether the growing conservative tilt on issues including reproductive rights could chip away at the influx of people willing to move to some southern states remains to be seen. There’s no evidence that it has slowed the flow of migration.

For now, more people translate into more congressional seats and more political power on the national scene. Over the past five decades, 12 states in the Southeast including Texas collectively added 33 more congressional seats, roughly the same number that the Northeast and Midwest each lost over the same period.

And Southerners now chair 11 of the 21 most important committees in the U.S. House, according to an analysis by Bloomberg Government.

At the 2022 midterm elections, Republican governors handily defeated nationally known Democratic opponents in Florida, Georgia and Texas, a blow to Democrats hoping that a more diverse mix of people moving south would turn the region purple, if not blue. That may still happen over the long term because shifting politics in states as big as Florida and Texas can take 10 or 20 years, said James Gimpel, government professor at the University of Maryland.

It’s not surprising, Gimpel said, that so many top Republican candidates are based in the South, including former President Donald Trump and Florida Governor Ron DeSantis, as well as Nikki Haley and Tim Scott, both in South Carolina.

For now, though, Maurice Washington, who recently stepped down as chairman of the Charleston County Republican Party, likes what he sees. Over coffee and croissants in Charleston’s historic district, he said followers on his party’s social media sites jumped from 4,700 before the pandemic to almost 26,000, and he attributes much of it to all the transplants flooding here.

“They don’t want raise their kids in places like New York and California. You get a lot of that,” Washington said.

Exacerbating Inequalities

For a century and a half, the South has struggled to overcome its position as America’s economic backwater. Even now, despite pockets of new prosperity, life across much of this region tends to be poorer and shorter than in most other parts of the country. Nowhere arguably does the legacy of slavery and segregation run deeper.

Washington has seen the changes — good and bad — up close.

The transplant-driven gentrification is pushing rents and home prices out of reach for many and hallowing out Charleston’s Black community, said Washington, who is African American. When he first joined the City Council in 1990, Blacks made up 42% of the population. It’s since been halved to 20%, according to Census Bureau data.

Across the Cooper River from downtown Charleston, African Americans of Gullah descent recently hauled a 119-year-old schoolhouse for African Americans to a spot two miles from Boone Hall Plantation, the still-operating plantation where some of their enslaved ancestors once labored. They’re preserving a bit of history lest it get bulldozed for a new highway. It hopefully will open to the public next year after extensive fixes, said John Wright, president of the African American Settlement Community Historic Commission.

“If you live in a community void of your culture and your history, then you’re no longer a community,” said Fred Lincoln, a board member on the commission.

In Nocatee, Florida, just south of Jacksonville, the inequalities and poverty still so prevalent in the South were hard to spot. The median sale price of a single-family home here has climbed 62% to $773,500 in three years, according to housing marketplace Redfin. Schools are considered tops in the state, and golf carts are so ubiquitous on local streets that a Publix supermarket has parking spaces for them.

Steven Hertzberg, a tech entrepreneur, moved from Sonoma County, California, with his family 15 months ago and now works out of The Link, a tech-oriented co-working space in St. Johns County that offers dance classes and yoga for families.

“Just drive around the neighborhoods here. It feels like you’re in Disneyland,” Hertzberg said. “You see teenagers winging around in golf carts, electric scooters.”

(With assistance from Amanda L Gordon, Kyle Kim, Andre Tartar and Reade Pickert.)

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