Is Charlotte too dependent on banking?
Likely job losses bring urgency to recruiting new businesses. A fifth of county's private payroll comes from financial sector.
10/05/2008 12:00 AM
10/05/2008 6:46 AM
The industry that dominates Charlotte's skyline also writes the fattest paycheck.
Banks and their financial service colleagues accounted for more than one-fifth of Mecklenburg private sector wages paid last year, a whopping $5.6 billion.
That's more than double the 1990 level.
No other employer even comes close.
Now Wachovia, one of two major leaders of that growth, is plunged into a battle between two would-be buyers. Either deal would almost certainly mean wrenching job losses at the troubled bank and the many businesses that thrive on bank wages.
For the first time, Charlotte must confront a major threat to the industry that put the city on the map, making it the nation's No. 2 banking center. The coming losses will test the resilience of an economy accustomed to banking fortunes and likely force discussion about whether the city has become too dependent on a single industry.
“In the white-collar work force we have … less diversity than we would like to have,” said Kenny McDonald, executive vice president of the Charlotte Regional Partnership. That said, the city would welcome thousands more banking jobs. “Love it while you've got it, but obviously you have to be doing other things.”
To be sure, nearly 80 percent of private Mecklenburg wages came last year from a range of other industries, although some are closely linked to the finance world. Government paychecks added $2.9 billion to the county payroll.
Mecklenburg has seen rising wages in manufacturing and big growth in healthcare, warehousing and transportation as well as retail, restaurant and hotel jobs.
Still, finance employment is so big that even when spread to a five-county region, it remains the biggest wage producer.
The area has seen big new investments, such as the ambitious biotech campus on the grounds of a former mill in Kannapolis. In July, McDonald's group, which recruits business for a 16-county area, said it will focus recruiting on three broad new sectors – none specifically financial services.
The likely loss of Wachovia jobs brings a new urgency to the mission.
“It's wrong to say the whole Charlotte economy is going to go down,” said Douglas Woodward, an economics professor at the University of South Carolina Moore School of Business.
However, he said, “That is not a very diverse economy when you have that much concentrated in the financial sector.”
The scary ‘what if'
City leaders have long bristled at suggestions that Charlotte has everything riding on its banktown status, but there has also been a whispered fear.
“Everybody says, ‘what if a bank leaves?'” McDonald said.
Last Monday, the unthinkable happened.
Citigroup said it would buy Wachovia in a rushed, government-brokered deal that would carve up the bank. Early Friday, capping a week of frenzy and worry, Wachovia made the surprising announcement it had agreed to sell itself to Wells Fargo in a deal that offers shareholders more. Wells has made clear it would be the surviving name. Citi has said it will fight the Wells deal.
Either deal probably costs the city a Fortune 500 headquarters. And Wachovia's stunningly swift fall is a stark contrast to the long, painful decline of traditional industries such as textiles and furniture.
“It kind of knocks the wind out of you when a company you deeply respect that cares so much about our community goes through such a quick change,” said Pat McCrory, Charlotte's longtime mayor and the state's Republican candidate for governor. “It came with little or no warning.”
City, regional and state leaders, including members of the regional partnership and Charlotte Chamber, have been huddled in meetings and telephone conferences all week. They started with Citi, trying to figure what might induce the big New York bank to save jobs in Charlotte. Now they're playing catch-up with San Francisco suitor Wells Fargo. On Saturday, McCrory wouldn't provide details of any discussions.
“We have to try to adapt and plan for the change as quickly as possible,” McCrory said. “We're going to rebound from this hit in the gut because that's the Charlotte way.”
Before any hint of Wachovia's woes, he said, diversification had been a goal and recruiting a constant.
“Our greatest danger was always taking our success for granted, and I don't think we ever have,” he said. He points to the third parallel runway under construction at the city's airport as an example of long-range diversification planning.
“There will always be an airline industry,” he said. “We want them to come here.”
Despite diversification efforts, the city's dependence on financial wages has grown dramatically in the past 20 years. New York and San Francisco, other big financial centers, also depend heavily on those paychecks.
“When you do have such a large sector, you are somewhat vulnerable,” said Mike Walden, an economics professor at N.C. State University. However, “regions, like people, tend to specialize….Charlotte has a collection of other industries which will serve Charlotte well.”
Jobs of the future
Next week, the regional partnership leads a Charlotte area delegation to Solar Power International in San Diego.
McDonald calls the trade show “the super bowl of the solar industry.” The partnership is attending to learn more about the industry and generate interest in the Charlotte region as a place to do business.
The solar quest is part of a partnership focus, laid out in July, to target business growth in three broad areas: energy/environment, health/life sciences and defense/security.
“We're looking at where are the jobs of the future,” McDonald said. “Where is wealth going to be created in the future?”
In Charlotte, Carolinas HealthCare System is the largest employer, already helping lead growth in that burgeoning field.
Wachovia's 20,000 Charlotte workers make it the city's second largest employer. In total, the county has nearly 54,000 workers in finance and insurance, a broad arena that includes mortgage brokers, credit cards and investment banking. The city has landed nonbank players in the financial world, including the University-area campus of investment heavyweight TIAA-CREF, opened in 2001.
Some skills learned in banking – like security for handling huge financial transactions – are likely transferable to other industries. Those skills are valuable for recruiting. For example, mutual fund giant Vanguard opened a big service center in Charlotte in 1997 in part because the company believed the banks attracted high quality workers.
Queries continue coming from companies looking at the area, even from the battered financial services industry.
“Even this week,” McDonald said.
Twenty years ago, Duke Power stunned Charlotte with word it would lay off as many as 2,000 people, slashing jobs that for generations were coveted lifetime posts.
Then, Duke was the city's largest employer, with 9,200 workers. Duke's merger with Houston's PanEnergy, announced in 1996, brought years of rumors and worry that the headquarters would leave Charlotte. That never happened and, at 5,200 workers, Duke Energy remains one of the county's largest employers.
Charlotte also survived layoffs hitting businesses ranging from call centers to US Airways, its dominant airline. The big banks have shed jobs many times over the years, although they kept growing through acquisitions. Wachovia recently announced 10,000 job cuts, the bulk outside of Charlotte. Bank of America's $50 billion deal last month for brokerage Merrill Lynch puts at risk some Charlotte jobs, such as investment banking.
“We've weathered that,” McCrory said of past layoffs.
One “major recruitment success,” he said, was the General Dynamics division that moved to Charlotte from Vermont in 2004. The Virginia defense contractor sought a more central East Coast location for ease of travel and recruiting workers. The company has about 260 workers in Charlotte, including about 160 at a plant that makes detection systems for chemical and biological warfare agents, such as nerve gas.
The factory is part of Mecklenburg's manufacturing sector with total wages of $2.1 billion, making it the fifth largest private paycheck. In 1990, it was No. 1 in employment and wages, accounting for almost 17 percent of county pay.
The region, like the nation, has seen factory jobs disappear because of automation, changing tastes, economic stresses and lower wages abroad. McDonald, with the partnership, ticks off big ones: Mass layoffs at former textile giant Pillowtex. Cuts at Freightliner truck plants. The loss of the Philip Morris cigarette plant in Cabarrus County. Over the years, those losses already put pressure on business recruiters.
“We're in a competitive, global community,” McDonald said. “People are trying to beat our pants off. It's our job to go get our piece of the pie.”
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