Economics Group. Special Commentary. February 16, The Palmetto State has generally enjoyed robust growth in recent years.

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1 Economics Group Special Commentary Mark Vitner, Senior Economist (704) South Carolina in the Spotlight: February 2016 Primary Focuses Attention on the Palmetto State s Economy As host of one of the earliest presidential primaries, South Carolina and its economy have received a great deal of attention. The Palmetto State has generally enjoyed robust growth in recent years, with nonfarm employment rising 3.3 percent in 2015 and the unemployment rate falling 1.1 percentage points to 5.5 percent (Figures 1 and 2). The economic good fortune is largely due to an astonishing run of economic development that helped draw thousands of high-paying manufacturing jobs to the state. Much of this industrial development has come from overseas. The latest data from the International Trade Administration show that overseas firms employ 115,900 South Carolinians, accounting for 7.6 percent of private-sector employment, which is the second-highest share in the nation. Exports have also become more important to the state. South Carolina s success at recruiting international investment and the state s growing export business comes at a time where trade deals have come under increased scrutiny. The growth of international investment and exports has resulted from a concerted effort by political leaders and business leaders to diversify the state s economy away from its historic dependence upon textiles. The remake began in the 1970s when the state landed a major investment from Michelin. The French tire-maker opened its first South Carolina tire plant in 1981 and now operates 10 plants in the state, as well as its North American headquarters located in Greenville. Michelin s initial investment and the success that the firm has achieved have helped pave the way for other firms to set up facilities in South Carolina. Tire manufacturing has become a major industry in the state, with Bridgestone investing more than $1.2 billion to build two massive facilities near Aiken and Continental Tire building a 1-million square foot plant near Sumter and moving its North American headquarters to Fort Mill, located just outside Charlotte. Singapore-based Giti Tire, which also has its North American headquarters in Fort Mill, began construction on a $560-million tire manufacturing plant in Chester County. In addition, Trelleborg A.B. recently opened a 460,000-square-foot agricultural equipment tire manufacturing plant in Spartanburg. South Carolina now ranks as the number one state for tire manufacturing and tire exports. The Palmetto State has generally enjoyed robust growth in recent years. Figure 1 Figure South Carolina Unemployment Rate Seasonally Adjusted South Carolina: 5.5% 12-Month Moving Average: QCEW: Yr/Yr Pct. Change: 2.5% Nonfarm: Yr/Yr Pct. Change: 2.9% - Household: Yr/Yr Pct. Change: 3.3% Source: U.S. Department of Labor and Wells Fargo Securities, LLC This report is available on wellsfargo.com/economics and on Bloomberg WFRE.

2 South Carolina s automotive industry is also set to grow in a major way. A Treasure Trove of Manufacturers Now Call South Carolina Home Economic development extends well beyond the tire industry. Three of South Carolina s more momentous industrial investments include General Electric, which began manufacturing power turbines in Greenville in 1968; BMW, which began assembling automobiles near Spartanburg in 1994; and Boeing, which began assembling its 787 Dreamliner at a new plant in Charleston in All three firms have repeatedly expanded their operations substantially since opening their first facilities and all three firms rank among the state s top exporters. South Carolina s merchandise exports grew 4.2 percent in 2015, led by a 180 percent surge in aircraft and related parts with shipments of new Boeing commercial jets accounting for the bulk of that increase. Exports of motor vehicles grew 7.8 percent in Nearly all of that increase came from BMW, which recently announced that it exported $9.8 billion worth of vehicles through the Port of Charleston in 2015 and was the nation s leading exporter of motor vehicles by value for the second consecutive year. BMW exports more than 70 percent of the vehicles assembled at its Greer factory. Exports of tires, South Carolina s third-largest export (Figure 3), fell 11.5 percent in The drop likely reflects the effect from the stronger U.S. dollar, as well as slower global growth, particularly in the mining sector, which is a big market for earth-moving equipment tires. While tire exports fell this past year, the industry s continued growth in the state should propel shipments to new highs in coming years, as additional capacity at new and existing plants comes online. South Carolina s automotive industry is also set to grow in a major way. Two new assembly plants were announced this past year in the Charleston area. Mercedes Benz announced plans to build a $500 million factory to build Sprinter vans in North Charleston. Construction of the assembly plant is expected to begin this year and the facility is expected to employ 1,300 workers when it is fully operational. Volvo is also building a plant in the Charleston area. The firm broke ground on a $500 million assembly plant in Ridgeville, located about 30 miles north of Charleston along I-26. Volvo expects to begin producing cars in 2018 and should ultimately employ 2,000 workers when the plant reaches full production. The effect of South Carolina s growing automotive industry is not limited to assembly plants, however. The state has also seen a huge influx of suppliers in recent years. South Carolina has also made a concerted effort to move up the value chain in automotive research and development. One of the biggest steps was the establishment of the International Center for Automotive Research along I-85 in Greenville and the Advanced Materials Research Laboratory in Anderson. Both facilities are affiliated with Clemson University and the benefits of their research, particularly in advanced materials, extend well beyond the Automotive sector. While many of South Carolina s marquee industrial announcements have been in Charleston or the Upstate, many of the state s rural areas, including part of the Pee Dee region, have also benefitted. The Pee Dee region, encompassing Florence, Darlington, Dillon, Marion, Bennettsville and Cheraw counties, has long had one of the highest unemployment rates in the state. The past few years have seen a significant influx of new investment, however, including expansions at Honda s ATV plant in Florence and Schaeffer s engine components plant in Cheraw. Job growth in the Pee Dee region during 2015 was the strongest that it has been in eight years and the unemployment rate has fallen to its lowest level since February 2001 (Figure 4). Figure 3 Figure 4 South Carolina Exports In Billions of Dollars, 2015 Motor Cars & Vehicles 1 1 Unemployment Rates Seasonally Adjusted 1 1 Civilian Aircraft, Engines & Parts Tires Motor Vehicle Parts Turbojets, Turbopropellers & Other Gas Turbines $0 $2 $4 $6 $8 $10 South Carolina: 5.5% Pee Dee Region: 6.9% Source: International Trade Administration, U.S. Department of Labor and Wells Fargo Securities, LLC 2

3 South Carolina Employment Conditions South Carolina Employment Growth By Industry - - Construction Month Annual Rate: 3.7% - Nonfarm: Yr/Yr Pct. Change: 2.9% - Household: Yr/Yr Pct. Change: 3.3% South Carolina Unemployment & Labor Force Percent, Thousands of Workers, Seasonally Adjusted Unemployed: 124.0K (Right Axis) Employed: 2,147.6K (Right Axis) South Carolina: 5.5% (Left Axis) - - 3,000 2, % 6-3% - -1% 1% 3% 5% 7% Labor Force Participation Rate, Seasonally Adjusted 7 67% 6 1,800 61% 61% 1, South Carolina: 59.1% United States: % 55% Year-over-Year Percent Change Year-over-Year Percent Change Office Employment: 4. Non-office Employment: Employment: -0. Non-: Source: U.S. Department of Labor and Wells Fargo Securities, LLC

4 South Carolina Economic Conditions South Carolina MSA Unemployment Rates, Seasonally Adjusted Sumter Florence South Carolina MSA Population Growth Population Growth , in Thousands Charleston 4. Spartanburg 7.7 Greenville 4. Columbia 30.8 Columbia 5. Greenville 36.7 Spartanburg 5. Myrtle Beach 39.0 Florence 6. Charleston Sumter 6. 1 South Carolina's Top 5 Export Industries 2015, In Millions of Dollars South Carolina's Top 5 Export Markets 2015, In Millions of Dollars Fabricated Metal Products $1,180 Mexico $2,447 Plastics & Rubber $2,356 United Kingdom $2,843 Chemicals $2,701 Canada $3,667 Machinery $2,706 Germany $3,908 Transportation Equipment $15,511 $0 $5,000 $10,000 $15,000 $20,000 China $4,396 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 2 Core Logic HPI: SC vs. U.S. Year-over-Year Percent Change South Carolina Housing Permits Thousands of Permits, Annual Rate Single-Family: 22,152 Single-Family, 12-MMA: 23,711 Multifamily, 12-MMA: 6,726 Single-Family Average ( ): 26, United States: 6.3% -1 South Carolina: Source: U.S. Dept. of Labor, U.S. Dept. of Commerce, International Trade Administration, CoreLogic and Wells Fargo Securities, LLC 4

5 South Carolina MSAs Charleston MSA Employment Growth By Industry Charleston MSA Nonfarm Employment QCEW: Yr/Yr Pct. Change: 2. - Nonfarm: Yr/Yr Pct. Change: 2.5% Household: Yr/Yr Pct. Change: Columbia MSA Employment Growth By Industry Columbia MSA Nonfarm Employment QCEW: Yr/Yr Pct. Change: 2.5% - Nonfarm: Yr/Yr Pct. Change: 3. Household: Yr/Yr Pct. Change: Greenville MSA Employment Growth By Industry 1 Greenville MSA Nonfarm Employment QCEW: Yr/Yr Pct. Change: 2.9% -1 Nonfarm: Yr/Yr Pct. Change: 2.7% Household: Yr/Yr Pct. Change: Source: U.S. Department of Labor and Wells Fargo Securities, LLC 5

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