Minnesota manufacturers upbeat about 2010, but worries over tight credit growing

Minnesota’s manufacturers are more optimistic about the economy than last year, with 44 percent looking for revenue growth in 2010, up significantly from 23 percent who were optimistic a year ago. But tight credit markets hurt 37 percent of manufacturers in 2009; a threefold increase from13 percent who reported tight credit hindered them in 2008.

These are some of the conclusions from “State of Manufacturing,” a survey of 500 manufacturers sponsored by Enterprise Minnesota and partners. 

More than a quarter of manufacturing executives (26 percent) anticipate economic expansion in 2010 and 19 percent foresee a continued recession. Compared to a year ago, that represents an 18 percent jump in executives predicting growth and a 37 percent decline in those who project a continued recession.

“Manufacturers faced a tough year in 2009, but we’re seeing optimistic attitudes again in 2010,” said Enterprise Minnesota President and CEO Bob Kill in a statement accompanying the report. “Many manufacturers might say that this recession has made them better. It’s focused their business, changed how they operate, and drove them to innovation. They’ve seen the worst, worked their way through it, and are on better footing today to drive business growth and ultimately job growth throughout the state.”

Minnesota’s 336,000 manufacturing workers across approximately 8,000 companies accounted for 12.6 percent of the total state workforce in 2008. But manufacturing employment has taken a drubbing in the current recession and is expected to continue to decline, according to the most recent employment projections from the Bureau of Labor Statistics.

While the recent survey did not specifically ask about hiring intentions, participants in several focus groups around the state made some observations about hiring that hold out little hope for improvement.

A manufacturer in Marshall related that “in 2005 our local plant… employed 126 people. We were working pretty much around the clock, six days a week sometimes. Today we have 50 employees and we’re probably going to get down to the lowest [production hours] ever this year and last.”

One St. Paul manufacturer is holding back on fear of the unknown. “Our fear is that something happens somewhere in the world or in the U.S. and it’s going to send it right back where we’ve come from. So for our company we’re really asking the people to do more rather than going out and hiring more people because we’re fearful that something’s going to happen that’ll make it tough.”

Another St. Paul employer observed that “companies hoping for the best but planning for the worst [are] using temp employees to get the work done because they’re not yet willing to hire people. So, business is up, they’re working full-time again, but they’re not hiring yet.”

But an employer in Wilmar sees the current recession as an opportunity to beef up its talent pool. “We’ve been able to pick up some exceptional people that we might not have been able to previously. Because we are in the growth phase, it’s been a blessing in disguise.”

Other survey highlights reported by Enterprise Minnesota include:

• While 82 percent of Minnesota manufacturers ship their products to domestic markets outside the state, only 42 percent sell products outside the United States and only 12 percent reported that international exports make up at least 10 percent of their sales. The Obama administration has targeted small business to increase their exports to meet the administration’s goal of doubling exports in the next five years.

• 54 percent of manufacturing executives believe that the state is on the wrong track, identical to results in last year’s survey when 55 percent of executives said that more can be done at the state level to make Minnesota a more competitive business location.

• 68 percent of respondents list health care costs as the highest concern, four points higher than last year’s survey results. Under the stress of rising costs, the number of executives that say their company offers some variety of health care plan dropped 11 percent.

• 50 percent of respondents say that environmentally friendly practices are important to their business but they are skeptical that it adds value for their employees (24 percent) or customers (26 percent). Fifty-four percent of executives say that the most important reason to go green is for their business to do its part protecting the environment, while government incentives ranked very low (3 percent).

• 45 percent of manufacturers expect wages to increase over the next two years; 27 percent of those who expect the recession to last through 2010 project wages will increase during that period.

About the survey

Washington D.C. -based Public Opinion Strategies conducted phone interviews with 500 manufacturing executives, representing a geographically proportional cross section of Minnesota, over two weeks in January.  The poll has an error rate of +/- 4 percent.  The research was complemented by 13 focus groups of manufacturing executives conducted throughout Minnesota.  Statewide sponsors for the “State of Manufacturing” include the Center for Rural Policy and Development, Granite Equity Partners, LarsonAllen LLP, and RJF Agencies. Regional sponsors include the Blandin Foundation, Iron Range Resources and the Southwest Initiative Foundation.

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