COLUMN ONE : New South Rides Out the Slump : For cities such as Charlotte, N.C., the recession ended an unprecedented boom. But low costs and pro-business laws are keeping economic growth alive.

This Sun Belt city, whose rapid growth and gleaming downtown made it a shining symbol of a surging South during the 1980s, has long been known for its can-do spirit. But municipal boosterism may have reached a peak earlier this year with the appearance of a series of billboards around town.

“We’ve heard they’re having a recession,” declared the signs, which were designed and donated by a local billboard company. “We decided not to participate.”

“It’s trying to get people to be upbeat,” said Vivian Hunsicker, market scheduler for Adams Outdoor of Charlotte.

Harmless bravado? Not in the view of Kim Hoffman, an unemployed office manager for a medical equipment company.

“It’s a smack in the face,” said the 28-year-old mother. “I’ve been out of work for eight weeks, and that’s a long time to sit home and think there’s something wrong with me because there’s no recession.”

Recession or not, even Charlotte’s most ardent backers acknowledge that the superheated economy of the ‘80s has cooled. Still, the very fact that there’s a debate over terminology is evidence that Charlotte’s, and the South’s, economic slump is not nearly as bad as that afflicting some other areas of the country.

Moreover, the prospects remain bright throughout the South--for Charlotte and Atlanta; Nashville and Richmond, Va.; Jacksonville, Fla., and Durham, N.C.--although economists say that the huge spurt in employment, income, housing and consumption that characterized the region’s last decade is unlikely to recur.

“Charlotte’s economy has the mix of old and new that has come to exemplify what we call ‘the New South,’ ” said Stacy Kottman, a regional economist at Georgia State University in Atlanta. “It is a regional business service center, very strong in banking and other financial services, that still derives 30% of its jobs from such old-line manufacturing industries as textiles and furniture.”

Like the rest of the New South, today’s Charlotte is also much more closely tied to the fate of the nation’s--and the world’s--economy. As economic growth in other parts of the country stagnates, Charlotte suffers too.

In the North Carolina Employment Security Commission office here, for example, laid-off workers are filing claims for unemployment insurance at about twice the rate of a year ago. Still, officials there--with some justification--remain reluctant to use the ‘R’ word. “Don’t quote me using the word ‘recession,’ ” said Bob Burns, the commission’s local labor market analyst. “It’s a slowdown, a downturn, a cumulative unwinding.”

Whatever it is, the current economic climate is a far cry from the superheated ‘80s. That was when, in the words of Charlotte banker Hugh McColl Jr., cheap land and labor and the gentle climate fueled such a boom that the local economy began to resemble West Germany’s in its reliance on “guest workers” from neighboring states.

Construction worker Jason Pugh, 34, remembers those times with nostalgia. “Two years ago, I quit my $10-an-hour construction job at the Omni Hotel and got another job at the NCNB Tower the same afternoon for $11,” he recalled recently while waiting in line to file an unemployment claim. “That was when things were really popping. You could do that until up to a year ago.”

Poor blacks are being especially hard hit. “It used to be very easy for our kids to get fast-food or hotel-type jobs,” said Clarence Johnson, executive director of the St. Francis Jobs Program, which helps inner-city youths find work. “Now, even that kind of work is hard to come by.”

Economists say the boom times are unlikely to return, in part because they expect the national economic recovery to be sluggish and in part because the South’s relative cost advantage over other regions has waned.

“The gap between the South and other regions of the country is narrowing,” said Georgia State’s Kottman. “We expect growth in the ‘90s but not a booming economy. The industrial Midwest and the Northeast have undergone or are undergoing painful restructurings, allowing them to retain businesses and better compete with the South.”

For example, Charlotte’s average manufacturing wage in 1990 was $9.38 an hour, compared to $10.84 an hour nationwide, said labor market analyst Burns. A mere three years earlier, the gap was 25% wider.

Prices for prime industrial land, which were 60% of the national average in the ‘60s, are now 85% to 90% of the national average, adds David Orr, economist for First Union Corp., a regional banking company. “The cost advantages are waning, but the advantage is still astronomical compared to, say, California.”

“The South is being mainstreamed, not only in terms of manner, dialect and food, but also in economic terms,” said Alfred W. Stuart, a geographer at the University of North Carolina/Charlotte.

No longer a sleepy mill town dependent upon the fortunes of the surrounding textile and furniture industries, Charlotte exemplifies the trend. Today’s Charlotte is a dynamic financial, manufacturing and transportation center that serves as home to two of the nation’s largest banking concerns, NCNB Corp. and First Union, a huge IBM Corp. facility employing 5,000 people and the southeastern regional hub of USAir.

Its strategic location between Atlanta and Washington, D.C., has transformed it into a regional headquarters and distribution center for the Piedmont Plateau, a natural corridor between the coastal plain to the east and the Blue Ridge Mountains to the west.

Moreover, its status as the largest city in the Carolinas, along with relatively low land and labor costs and pro-business right-to-work laws, put it on the short list for foreign manufacturers seeking a U.S. base. For the past three years, North and South Carolina have ranked among the top five states in the nation in terms of new industrial plant investment.

As a result, Charlotte, like many of the mid-sized cities in the Southeast, continues to boast an unemployment rate that would be the envy of most other regions. As such, it frequently touts itself as “the next Atlanta”--a paradigm for many of the New South’s growing mid-sized cities, such as Richmond and Nashville.

Such cities are “fresh, they’re new, they’re growing up,” said John P. Byrne, a Royal Insurance Co. vice president who orchestrated the company’s move from New York’s financial district to Charlotte five years ago.

“It was economics, pure and simple, that drove the move, but most of the people who came with us are happy with the lifestyle,” he said. “In New York City, if you worked for Royal, you couldn’t afford to go to three-quarters of the things that were going on--the shows, the operas, the ballets. In Charlotte, you can go to anything--and get front-row seats.”

The unemployment rate in Mecklenburg County, which largely coincides with the city of Charlotte, was 3.8% in March. That’s up from a 3.0% average unemployment rate during 1990 and 2.9% in 1989. The Charlotte metropolitan area, which includes proportionately more blue-collar jobs and is thus more susceptible to the national recession, had an unemployment rate of 4.8% in March. By contrast, in March, the seasonally adjusted unemployment rate for the nation was 6.8%.

By most accounts, Charlotte and the Southeast will likely continue to outpace the nation, siphoning office and manufacturing jobs from the struggling Northeast and winning factories and other industrial facilities from Japanese and European investors. Just this month, for example, United Parcel Service said it would move its headquarters--and over 1,000 jobs--from Stamford, Conn., to Atlanta in search of lower housing costs.

The UPS relocation can be viewed as a continuation of the trend that fueled the Southeast’s growth in the 1980s. “It is, basically, the story of in-migration,” said First Union’s Orr. The five-state region consisting of the Carolinas, Georgia, Florida and Tennessee gained 3.7 million new residents during the decade, enough to fill nearly eight cities the size of Charlotte.

“That’s just huge,” Orr said. “And, by coincidence, the Midwest lost exactly the same number of people during the same period.”

The in-migration fueled a huge building boom for housing, schools, shopping centers, offices and factories.

To be sure, it took more than a cost advantage to ignite the South’s growth. Observers generally trace the South’s economic ascent to two things that happened in the 1960s: the civil rights movement and, to a lesser extent, the wider affordability of air conditioning.

“ ‘Separate but equal’ had a very high cost to it, both financially and in psychological terms,” said McColl, chairman of regional banking giant NCNB. “It was a diversion of our energies and talent.”

But McColl acknowledged that another sad legacy from the Old South, unless addressed quickly, could choke off the Southeast’s rapid growth in the ‘90s. “Education is our No. 1, No. 2, No. 3 and No. 4 problem,” he said. “You can’t get by just on sweat and a strong back anymore. The second half of the (‘90s) could really slow down if we run out of our (trained) labor supply.”

Ruth Shaw, president of Central Piedmont Community College in Charlotte, echoes his concern. “The central issue now is how to get people who are unemployed and unemployable up to par,” she said. “The nature of manufacturing has changed, and the result is that there is now a demand for a different type of work force than the South is known for.”

As in many other areas, the office building is replacing the factory as the place of work in Charlotte. And that change is reflected in the city’s skyline.

Between 1970 and 1990, the city experienced a ninefold increase in office space, to 18 million square feet. Currently under construction is NCNB’s new $300-million, 60-story headquarters tower, which will cap the city’s skyline and be part of a complex that includes a $40-million performing arts center.

Office jobs aren’t the only source of growth. High-tech manufacturing jobs requiring a skilled work force are also growing. Okuma America, a unit of Oguchi, Japan-based Okuma Machinery Works Ltd., is a good example of the new type of manufacturer setting up shop here.

Okuma began testing the U.S. market by opening a sales office in Hauppauge, N.Y., in 1984. But when the firm decided in 1988 it also wanted to manufacture sophisticated computer-controlled machine tools in the United States, “that was the signal to get out of New York,” said Vice President John Hendrick.

“When we were in New York, it was extremely tough to recruit a machine-tool person from Cincinnati,” Hendrick recalled. “It’s much easier here in Charlotte,” in large part because the housing dollar stretches so much further.

Okuma, which now employs 300 people, was also “pleasantly surprised” with the indigenous work force, Hendrick said. “We found a lot of people who were underemployed but very trainable,” he said. “And the work ethic is very good.”

Okuma production worker Walt Bolin, 21, symbolizes the changes that have been taking place in the Carolinas and the New South in recent years. After growing up in Clover, S.C., and working on a dairy farm up to 80 hours a week after graduating from high school at the age of 17, Bolin welcomes the shorter hours and higher pay at Okuma.

Another Okuna employee, Garden City, Long Island, native Anne DiBella represents another kind of worker who has fueled the growth of the New South. DiBella and her husband, Leonard, an engineer with the U.S. Postal Service, moved to Charlotte in 1985.

“When I moved here, all my relatives started appearing to see where poor Ann and Len had moved,” DiBella recalled. “Within six months, my mother and father had moved here. And then my brother quit his job and moved here too.

“Within a month, he had a job, and within three months, he bought a house he could never have afforded in New York. Now he can say to his kids: ‘I own a house.’ That’s a very basic need.”

Indeed, despite 20% to 30% declines in the value of housing in the Northeast, housing remains a relative bargain in the South. Five years ago, Royal Insurance executive Steven P. Frey bought a 2,200-square-foot, four-bedroom, 2 1/2-bath home with a two-car garage in a desirable Charlotte neighborhood for $90,000--and even today such a home could be bought for around $120,000.

“My current mortgage payment is less than I paid for renting a small apartment in New York 10 years ago,” Frey said.