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St. Louis: Still a
Strong Headquarters Town
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By Bryan Bezold,
RCGA Director of Research and Chief Economist
In April, Fortune magazine released it’s famous Fortune 500
list. Several local firms made the 2002 list, including Anheuser-Busch,
Ameren, Charter Communications, Express Scripts, Emerson, Graybar
Electric, May Department Stores, and Premcor. The report may not
be the most accurate assessment of corporate vitality (Enron, for
example, made the top 10), but, like the top 20 polls of college
football teams, it’s a popular portrait of corporate America. The
list and rankings are developed based on revenue reported on individual
firms’ 10k forms, a form that’s part of many firms’ annual reports.
Privately held companies don’t have to file 10k forms, so many don’t.
That means that some influential local firms and good corporate
citizens, such as Edward Jones and Enterprise Rent-A-Car, weren’t
included on the list, but would be in the ranking.
All together, St. Louis has a solid population of headquarters,
and several firms, including Bank of America and Smurfit-Stone Container
Corp. have a strong corporate presence here, even though their headquarters
are elsewhere. Given that we’re the 18th largest metropolitan area,
as per the 2000 Census, but consistently make Fortune’s top 10 list
of headquarters cities, we’re well ahead of the game when it comes
to corporate headquarters.
Headquarters jobs are an important part of this, and any, local
economy. They typically pay above-average wages, and require professional
business services, like accounting or legal work, thus supporting
other high-wage jobs. Corporate headquarters can also provide the
financial resources that endow non-profit cultural institutions,
contributing to a region’s quality of life beyond business. So it’s
reasonable that media attention has been focused on relocations
and mergers that have changed the names and faces of Greater St.
Louis’ business community over the years. But lost in the concern
over the loss of a few big names is the fact that St. Louis is still
a strong headquarters town. Last year, a new headquarters moved
to the region when Andrew F. Puzder, a Washington University graduate
and President of Hardee’s Food Systems, Inc., moved Hardee’s headquarters
from rural North Carolina to St. Louis. The region has many features
that continue to make it an attractive headquarters destination,
including a central location, a hub airport with a strong hub airline,
and favorable costs relative to many other regions.
At the same time we’re aware of the importance of large firms to
the regions’ economy, we shouldn’t forget about the contributions
that smaller businesses make. While large firms capture, appropriately,
media attention, smaller firms make large contributions to employment
and economic growth. In greater St. Louis, firms with revenue exceeding
$500 million comprise about 32 percent of metro area employment.
Firms with revenue less than $50 million, however, comprise approximately
53 percent of area employment. So smaller, defined by revenue, firms
are actually responsible for a majority share of employment in the
region. It is also important to keep in mind that large companies
start out as small ones; we may in fact be growing future Fortune
500 companies from the vibrant community of small, growing businesses
right here in St. Louis.
Manufacturing Rebound
The recession of 2001 appears to be ending, both nationally and
here in St. Louis. The manufacturing sector, the first to begin
to suffer in late 2000, appears to have recovered. The Institute
of Supply Management’s (ISM) National Manufac-turing Index rose
above 50, indicating expansion, for the first time in over a year
in February, and increased again in March. Professor Ernest Goss
at Creighton University conducts the ISM survey for the midwest,
and the survey results for St. Louis also suggest a manufacturing
recovery. Beginning in January, local manufacturing performance
increased for three consecutive months, rising to a score of 63
in March. The new orders subset of the index is particularly encouraging
for St. Louis, as it rose from 55.4 in February to 71.4 in March.
The emerging recovery in the local and national manufacturing sectors
has been part of the reason why economists have revised upward their
forecasts for growth in 2002. According to the April issue of Blue
Chip Economic Indicators, a survey of top economic forecasters,
the consensus US GDP forecast is for growth of 2.6 percent in 2002,
and 3.5 percent in 2003. Interestingly, the consensus forecast for
2002 has been revised upwards for three consecutive months. If these
forecasts turn out to be correct, then the recession of 2001 will
have been the mildest postwar recession on record, and in fact many
economists suspect that we may not have experienced a recession
at all. To a certain extent, though, these debates are academic.
Americans and St. Louisans who lost their jobs or saw their investment
portfolios decline precipitously will be skeptical of economists
who believe 2001 was not a particularly challenging year. But the
fact remains that the economy is on the mend, and both labor and
securities markets should be healthier in 2002 than they were in
2001.
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