March 14, 2014
After being pummeled by the worst recession since the Great Depression, manufacturing is on the rebound in Ohio.
The sector has added 54,000 jobs in the state over the past four years, the best gain in the past 20 years in such a period, according to state employment figures.
It is a similar story nationally, with the U.S. adding about 600,000 jobs in the same time.
“Ohio is going to be in the epicenter of something pretty good,” Jim Russell, U.S. Bank’s regional investment director, said recently at the Ohio Bankers League’s annual economic summit.
Such optimism is rooted in several trends that are brightening the outlook for an area of the economy that has withstood its share of darker days. Consider the following:
Newly developed energy sources are expected to provide manufacturers a cheaper, more-abundant supply of natural gas, which is used in most factories.
Higher wages and concerns about quality in places such as China have eroded some of the advantage of production abroad, prompting employers to move jobs back to the U.S., where manufacturing wages have been flat.
The U.S. employs technology — including computer software — in manufacturing that is superior to that in other countries.
Manufacturers are looking to keep suppliers close by to improve stability and efficiency, also spurring a return of jobs.
The recent recession also spurred changes, as manufacturers reacted by putting more emphasis on investing in technology and product development, said Eric Burkland, president of the Ohio Manufacturers Association.
“Coming out of the last deep recession, when all the cuts were made in budgets and head counts and some of the plants, there was tremendous caution about hiring,” he said.
“That’s gone now. People are hiring. There’s a great deal of confidence generally because of the competitive conditions in Ohio.”
Manufacturing employment is important to Ohio because it makes up a greater share of the state’s economy than the nation’s, and the jobs tend to provide higher pay.
Russell said 17 percent of Ohio’s economy is powered by manufacturing, compared with 12.5 percent of the U.S. economy, and 12.8 percent of the state’s workforce is in manufacturing, the sixth most in the nation.
You don’t have to look far to find evidence that manufacturers are hiring again.
Jim Waterman, operations manager for Samuel, Son & Co.’s plant in Heath, said the steel-band manufacturer has been expanding. That’s because demand continues to climb for the company’s products, especially in the energy, automotive and pipeline industries.
During the darkest days of the recession, the company had cut about 90 percent of its workers, he said. Now, the plant has 105 workers, more than before the recession.
“We produce our products competitively,” Waterman said.
Ohio and the country were losing manufacturing jobs well before the recession.
The state had 1 million manufacturing jobs as recently as 2000. The number of manufacturing jobs in the country has been falling steadily since peaking in 1979 at 19.4 million, employment data show.
With the gains in recent years, the number of manufacturing jobs in Ohio was 668,600 as of January, while the number of manufacturing workers nationwide was 12.1 million.
“The ongoing current recovery is wonderful, but at the slow rate of recovery that we are seeing, it will take nearly 17 years for Ohio to recover the manufacturing jobs that it lost just since 2007,” Cleveland-area economist George Zeller said. “To recover the manufacturing jobs that Ohio lost since 2001, at the current growth rate, it will take a stunning 45 years.”
Even with the comeback of manufacturing jobs, Burkland said that some kinds of manufacturing jobs probably have been lost for good. Examples are those involved in the making of shoes and bicycles.
“High-skilled, highly automated, highly designed products is our sweet spot,” he said. Those sectors include autos, engines, appliances and advanced materials.
A Boston Consulting Group study released in August found that U.S. competitiveness has improved so much that the nation could add 2.5 million to 5 million factory and related jobs by 2020.
A survey that the group did in September found that more than half of U.S.-based manufacturing executives at companies with sales exceeding $1 billion plan to bring production back to the U.S. from China or are considering it. That compares with 37 percent in February 2012.
“This feels like it’s sort of the third or fourth inning,” said Justin Rose, a Boston Consulting partner and a co-author of the report. “This is action that makes sense for our people in the next couple of years.”
After years of manufacturers reducing staffs, one of the biggest problems they face is recruiting, Burkland said.
“The biggest issue we hear is that we don’t have the people,” he said. “It’s in every corner of the state and every type of manufacturing.”
Manufacturing, he said, has an image problem among parents and others because they might see it as being unstable, remembering the past job cuts.
“There’s continued uncertainties of markets globally and uncertainty coming out of Washington,” Burkland said. “Uncertainty does not breed confidence. The underlying health, dynamism and productivity of Ohio manufacturing and Midwest manufacturing in general is tremendous.
“If economic conditions grow a little bit, we will see employment growth in Ohio. Watch out, it will be a great time.”