NCEDA Research Committee Blog: Four Take-Aways From How NC’s
Developers Are Navigating Pandemic Recovery
Four Take-Aways From How NC’s Developers Are Navigating Pandemic Recovery
Written by Jamie McCall and Jonathan Morgan, NCEDA Research Committee Members
Jamie R. McCall is Vice President for Economic Development Policy at Carolina Small Business Development Fund.
Jonathan Q. Morgan is the Albert and Gladys Coates Distinguished Term Professor of Public Administration and Government at the University of North Carolina at Chapel Hill’s School of Government.
Newly released survey research offers insights on how local economic development organizations are managing the seemingly ever-shifting set of barriers to recovery from the COVID-19 pandemic. Read the full report here.
When you ask community and economic development professionals to describe the past few years, you hear now oft-repeated adjectives like “unprecedented.” From a research perspective, that’s also a good way to describe the inherent challenges we face in understanding how to navigate the recovery process. There is no question that the pandemic’s initial fallout caused a cascade of changes to North Carolina’s economy. In response to those changes, North Carolina’s local economic development organizations enacted a variety of response and recovery strategies. These strategies were often funded in part by a historical level of financial support from both the state and federal government.
In October and November 2021, the UNC School of Government and Carolina Small Business Development Fund conducted a survey of North Carolina economic and community development organizations (EDOs) on their pandemic recovery activities. A survey invitation was sent to 290 economic development staff across the state, utilizing a list that combined School of Government contacts with those from the Economic Development Partnership of North Carolina. There were 129 partial and complete responses, equivalent to a 44% response rate. Respondents self-identified as having a municipal (26.4%, n = 34), county (56.6%, n = 73), regional (8.5%, n = 11) or other (6.2%, n = 8) service area. We think the results highlight several key takeaways for North Carolina’s economic and community development professionals.
#1 While the pandemic has taken on an omnipresent quality in development practice, COVID-19 is not “over” – the economic damage has been substantial and enduring.
Where we are in terms of a COVID-19 recovery depends on where you sit. Overall, EDOs with municipal service areas tend to view the pandemic’s negative effects as lasting longer versus their counterparts with county service areas. For example, 17% of municipalities anticipated negative impacts to linger for more than two years, compared to just 5% of EDOs with county service areas. This difference is likely influenced by local EDO perceptions of economic activity. Municipalities were more likely to report that their region’s economic activity was still below its pre-pandemic level. Following the official end of the pandemic-induced recession in April 2020, the economic recovery has been swift – but also uneven. The tepid recovery observed in some places has largely failed to reach historically marginalized populations and lower-income communities.
In recent months progress has been further marred by a rising tide of macroeconomic concerns. As temporary supply chain shortages have become endemic and inflation levels breached historic highs, keeping momentum behind the recovery has become increasingly difficult. Recent data show the nation’s gross domestic product declined 0.4% and 0.2%, respectively, in the first two quarters of 2022. As a point of comparison, North Carolina’s GDP contracted 1.4% during the first quarter of the year (second quarter state-level data are not yet available). Economists have long debated whether two quarters of GDP signal a recession, especially given historically low levels of unemployment. Nevertheless, the trend is certainly concerning and worthy of note.
#2 While labor-related challenges are a top concern, North Carolina’s communities are facing a wide swath of other challenges that will need a holistic and inclusive approach.
The shocks induced by COVID-19 are very different than other periods of economic turmoil. In comparison to the 2008 financial crisis, where a small subsector of the economy caused a systematic contagion, the economic damage caused by the pandemic was broad and without comparison. In our survey, labor-related issues – both in terms of acute shortages as well as longer-term problems around how the pandemic may have aggravated existing skill mismatches – were cited as a top challenge for almost all EDOs. This concern is also echoed by the North Carolina Department of Commerce via its recently released strategic plan, which highlights the importance of the state maintaining a competitive advantage in workforce development.
But nearly 1 in 3 respondents also noted a top issue that was not asked about. These other issues included supply chain shortages, rapidly increasing raw material prices, and a lack of affordable housing. We think this illustrates the inherent complexities of long-term recovery and provides evidence of the need for holistic policy responses. For example, the pandemic placed a greater emphasis on certain technology skillsets, many of which can be taught remotely. Yet some workers can’t participate in such training as they live in rural parts of the state and lack broadband internet access.
#3 EDOs largely report their post-pandemic priorities remain unchanged from what they were before. But for the minority of entities expecting a realignment, a dramatic shift is occurring.
It is expected that an EDO’s short-term priorities would change in the context of a burgeoning public health crisis and economic disaster. Most initiatives launched in the past few years were designed to address short-term acute needs – for example, utility payment assistance programs for consumers. But what is less clear is whether approaches to community and economic development might be altered by the pandemic over the longer term. Small businesses, for example, enjoyed renewed attention as communities banded together to buy locally and provide support for their entrepreneurial ecosystems.
The most frequently cited priorities before the pandemic by EDOs are not surprising. They reflect traditional approaches to development that emphasize business recruitment and capital investment. Most respondents (79%) said their development approaches would largely remain the same. However, the remainder (21%) indicated a notable shift, with a clear emphasis on promoting economic inclusion and holistic development.
#4 Cross-sectoral partnerships for pandemic response and recovery were perceived as being useful and effective. There are opportunities to build on these collaborations for long-term goals.
The pandemic created new opportunities for collaboration across both the nonprofit and private sectors. Most of the state’s EDOs (64%) listed at least one type of nonprofit or community organization as a top 5 partner. And almost 1 in 10 also noted private sector banks or financial institutions as a top collaborator. In open-ended responses, these private sector partnerships included initiatives like working with local bank representatives to create referral hubs for small businesses seeking pandemic recovery aid.
One example of innovation-driven development collaboration comes from Live Oak Bank, headquartered in Wilmington. Live Oak has worked to supplement services provided by EDOs and nonprofits both in Wilmington and across the region to lessen some of the small business inequities the pandemic brought into stark contrast. Those efforts include the launch of Channel in November 2021, a space developed specifically to build community and resources for minority-owned small businesses. This hub of collaboration offers free training, networking opportunities, flex office space, and access to business banking products. Channel patrons and Live Oak customers receive referrals to nonprofit lenders like Carolina Small Business Development Fund to grow and expand their ventures when traditional banking products aren’t an appropriate solution.
While there are many similar examples of strong partnerships in the context of COVID-19 recovery, the goal in all cases is similar. EDOs and their partners worked toward a common goal of ensuring their communities would rebound from the depths of the pandemic’s economic fallout. Of course, as we move forward, meaningful partnerships can be difficult to maintain. But much research shows the value and importance of collaboration for economic and community development organizations. Effective collaborations, especially those that leverage organizational social capital, have been shown to increase an EDO’s adaptive and programmatic capacity. As EDOs begin to shift their orientation toward longer-term priorities, we believe maintaining and building on these types of initiatives will be critical for the success of ongoing recovery efforts.
The above findings highlight just a few of the interesting trends revealed by the survey data. To get more details, please see the full report.