Despite continuing uncertainty in the markets and a long-term unemployment problem, Georgia has reasons for optimism thanks to a fracking boom in the Midwest, according to the chief investment strategist for the Ohio-based Fifth Third Bank.
“We have a number of long-term trends that worked against the U.S. economy for decades that are now working for us … and the granddaddy of them all is what’s going on in energy production, and this is the gift that will keep on giving,” said Fifth Third’s Jeff Korzenik, who spoke Wednesday to the monthly meeting of the local CFO Council at the Savannah Golf Club.
The bank opened its first commercial lending office in Savannah in April.
He said this increase in fracking will be a major driver of infrastructure in the country, which will trickle down to port cities like Savannah. Fracking refers to the procedure of creating fractures in rocks and rock formations by injecting fluid into cracks to force them further open. The larger fissures allow more oil and gas to flow out of the formation and into the wellbore, from where it can be extracted.
“We now are big producers of energy, we are actually starting to export crude oil … all this requires a lot of infrastructure: transportation, refineries, port facilities, near and dear, I know, to Savannah,” he said.
“And we have only just seen the start of that infrastructure being built.”
He said the other implication of this expansion is that lowering energy prices will help bring back manufacturing jobs to the United States. Over the last 15 years, he said, wage costs have already narrowed between emerging markets and developed countries.
While the cost of labor is still lower in countries like China and India than the U.S., when factoring in proximity to customers and protecting intellectual property rights, multinational companies will find more reasons to return or expand in North America.
“It doesn’t mean we’re going back to 1950 America, where half of all jobs were in manufacturing … we’re at 15 percent of the workforce today,” said Korzenik.
“But if you can take that 15 percent and hold it steady as part of a growing labor force, or maybe inch it up to 16 or 17 percent, that has dramatic economic consequences,” he said.
He said the benefactor of this narrowing will be states like Georgia, and those from the Midwest through the Southeast, states that, generally speaking, have a vocational-oriented workforce and fewer unions.
Korzenik also discussed the challenges of the long-term unemployed, rising interest rates and global problems like the slowdown in Europe’s economy and emerging threats like the Islamic State group in Iraq and Syria.
“In this balance, either the world economy slows the U.S. or the U.S. economy lifts the global economy,” he said. “We believe the evidence is in place to argue that the U.S. will actually help lead global growth.”