Signs of a rebound in Minnesota manufacturing?

Among the bright spots in last week’s Minnesota unemployment report is the state’s manufacturing sector, which gained 1,200 jobs.

Currently, about 300,000 people work in Minnesota’s manufacturing sector. But since the start of the Great Recession at the end of 2007, manufacturing employment here has fallen almost 13 percent — 43,000 jobs lost.  More than one-third of the total jobs lost in Minnesota during that time have come from the manufacturing sector.

But all is not bad news.

Minnesota has seen a pickup in manufacturing employment in recent months. Since a low point in January 2010, the sector has grown by more than 13,000 jobs. And just recently, a Minnesota manufacturing icon, Fairbault Woolen Mill, reopened its doors after a two-year hiatus.

A comeback?
Is manufacturing making a comeback?

Vickie Parks, program manager at the Manufacturers Alliance, a networking organization made up primarily of smaller Minnesota manufacturers, said several member companies are beginning to report strong revenue growth, as much as 30 percent. “Oh my gosh! They’re just flying!” she exclaimed, reporting that sentiment is positive as members “are feeling better” about the economy.

Some companies that had cut back on hours of production employees “are back to where they were before” the recession, she said. The rebound does not appear to be limited to a particular industry or segment, she added, but is seen across several sectors.

 She cited examples of growing companies making display shelving for Target Corp. as well as component suppliers for medical device giants Medtronic and St. Jude Medical.

Parks said several are planning to add employees but face a challenge in finding qualified applicants. The Alliance website currently lists about four-dozen job openings around the state.

Manufacturing sector wages average about $56,000 a year, nearly 20 percent higher than average wages of all workers in Minnesota, according to the Bureau of Labor Statistics. With the earlier job losses in the sector, almost $1.4 billion in annual wages have come out of Minnesota’s economy as a result. 

At the same time, exports of Minnesota manufactured products have set records in recent quarters.

The most recent data from the Minnesota Department of Employment and Economic Development showed that exports of agricultural, mining and manufactured products from Minnesota continue to set records, growing 12 percent to $5.3 billion in Q2. Minnesota’s rate of export growth, however, has consistently lagged the overall growth rate of U.S. exports. This quarter was no exception, with a national export growth rate of 18 percent, 6 points higher than Minnesota.

Two recent national surveys reveal cautious optimism among manufacturing executives at both large and small firms, but with different takes on the U.S. economy and hiring plans.

Accounting firm PWC, which surveyed 60 senior executives at large U.S.-based manufacturers (average revenue of $3.4 billion) in a quarterly survey, found 90 percent expect revenue growth averaging 6.5 percent in the coming year. That’s up from 73 percent of respondents a year ago who expected growth averaging 6 percent.

The executives have mixed views of the overall U.S. economy, though, with 48 percent optimistic, 45 percent uncertain and 7 percent pessimistic. While their level of optimism has eroded since the end of last year, manufacturers’ sentiment is 10 points higher than their take toward the global economy (38 percent optimistic, 55 percent uncertain and 7 percent pessimistic).

Slightly more than half of the companies surveyed by PWC expect to hire additional workers in the coming year, but only modestly so, adding 0.3 percent to the total workforce.

Biggest worry: energy prices
Seventy percent say rising oil and energy prices are the biggest potential barriers to growth, while 60 percent also cite legislative/regulatory pressures and 53 percent taxation policy, all concerns that have increased from the first quarter survey. Forty percent cited “lack of demand” as a risk factor that may block growth, the lowest level over the past year.

In a separate survey, 44 percent of smaller manufacturing company executives describe their business as “thriving and growing,” up from only 9 percent in 2009 and 24 percent last year.  The survey, by the accounting firm RSM McGladrey, reports that only 3 percent describe  their business as “declining,” compared with 39 percent at the depths of the recession in 2009 and 10 percent last year.

Eighty percent of them expect U.S. sales to increase, and 70 percent expect foreign sales growth. Also, 56 percent expect to hire additional workers, increasing their workforce by an average of 7 percent in the coming year.

This comes in spite of 60 percent reporting pessimism about the U.S. economy, up from 38 percent in the spring survey. On the global economy, 64 percent are pessimistic, up from 50 percent in spring.

Major factors cited include the political impasse in Washington over the nation’s fiscal and budget problems, rising commodity prices and concern over the European debt crisis. Only 28 percent are pessimistic about emerging markets, however.

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