Reshoring creating small business boom in South and Midwest

Part of this is due to fiscal stimulus, including the $1.2 trillion bipartisan infrastructure deal in 2021 or billions of dollars in additional investment mobilized by the CHIPS and Inflation Reduction Acts. Intel’s new semiconductor plants in Chandler, Ariz., worth a combined $30 billion, or Samsung’s $17 billion foundry in Texas are the types of projects that might come to mind.

Now, a new report from Bank of America economist Taylor Bowley suggests this investment is also spilling over to small businesses, particularly in the South and Midwest. That’s a big deal, she told me, because small business employ nearly half of the U.S. workforce. Understanding how billions of dollars aimed at creating American jobs affects smaller firms, she said, may be just as vital as examining the effects of, say, a rate cut from the Fed.

“We’re able to utilize our small business data and find that manufacturing and construction firms are experiencing growth,” Bowley said, “and also potentially [a] boost in employment that is tied to this booming investment from this fiscal stimulus.”

BofA Global Research has previously determined that every $10 billion of manufacturing revenue that is moved back to the U.S. generates an estimated $3.8 billion increase in capex spending overall. That’s good news not just for Fortune 500 companies but also for smaller construction firms across the U.S. Bowley’s report found the latter’s cash inflow-to-outflow ratio, used as a proxy for profits, reached historic highs in August.

“More profits means growth,” she said, “which is, of course, a positive for these regional economies.”

Reshoring and foreign direct investment have accounted for two million additional manufacturing jobs since 2010, according to the Reshoring Initiative, a 1.4% boost to the sector’s labor force. Sixty percent of those positions have gone to the South, the report notes, with the Midwest receiving a 22% chunk.

While manufacturing payroll growth has been strongest in the South, it’s fallen significantly in the Midwest. It’s a different story in construction, however, with payrolls up 13.5% year-over-year in the heartland, nearly…