News Column

Manufacturing Surge Powers Ohio Rebound

Jan 30, 2013

Cornelius Frolik

Manufacturing

-After many years of declines, manufacturing is again driving economic expansion, benefiting more than half of Ohio's counties that are heavily dependent on the industry, according to a Dayton Daily News data analysis.

The state's reliance on manufacturing was detrimental during the Great Recession and its aftermath, when more than one-third of Ohio's job losses were in that sector. But manufacturing jobs are returning, and industry payrolls are growing after many years of declines.

Manufacturing is an important source of high-wage jobs, and it also helps commercial innovation. Some manufacturing jobs -- such as those in large automotive plants -- are gone forever, and others will eventually disappear, but manufacturing productivity and capability remain the state's best competitive advantages, industry experts said.

"We are (very) good at it, and you can't build an economy on something you are bad at," said Edward Hill, dean of the Maxine Goodman Levin College of Urban Affairs at Cleveland State University. "We are within 600 miles of 60 percent of the nation's market, which means we have a natural advantage for manufacturing and logistics."

In 2011, Ohio had about 52 out of 88 counties whose economies were heavily dependent on manufacturing, according to the newspaper's analysis of data from the U.S. Bureau of Economic Analysis. Counties are dependent on the manufacturing industry if 20 percent or more of average annual earnings come from the manufacturing sector.

Indiana had the most counties nationally that met this criteria, with 53 out of 92 counties, followed by Ohio.

Manufacturing accounted for about 31 percent of earnings in Preble County, 30 percent in Miami County and 28 percent in Champaign County. Ohio counties that were the most dependent on manufacturing were Shelby County with 48 percent of earnings and Union County with 44 percent. The sector also accounted for 18 percent of earnings in Butler County, 17 percent in Clark County, 16 percent in Warren County, 12 percent in Montgomery County and 5 percent in Greene County.

Ohio also had more workers, 638,400, in manufacturing in 2011 than all but two other states: California with 1,245,800 and Texas with 835,500, according to the U.S. Bureau of Labor Statistics.

Manufacturing's comeback

The state's economic reliance on manufacturing meant it suffered large job losses during the Great Recession. The downturn decimated the sector.

The average durable-goods industry lost about 11 percent of its workforce between December 2007 and June 2009, according to the U.S. Bureau of Labor Statistics. Ohio's economy and the auto industry are intertwined, and many auto-parts companies suffered huge losses or shuttered when total U.S. vehicle sales plummeted 34 percent during the recession.

Among the casualties was the General Motors plant in Moraine, which closed in December 2008, displacing 1,080 workers.

Ohio lost about 341,370 jobs between 2007 and 2011, and about 117,121 of those jobs -- or 34.3 percent -- were in manufacturing, said George Zeller, an economic research analyst in Cleveland.

U.S. manufacturing employment has trended downward since peaking in 1979, and Ohio even lost jobs in the mid-2000s while the country gained them.

But the recession ended in December 2009, and as the economy reversed course, manufacturing finally made a comeback. Between 2010 and 2011, Ohio gained 49,616 net jobs, and 17,388 (35 percent) were in manufacturing, Zeller said.

"Manufacturing is driving the Ohio recovery, particularly since we have such an intense concentration" of jobs in the sector, he said. "Manufacturing is not only important for its high-wage jobs for Ohio workers, but it is also extremely important because of its large ripple effect on the rest of the economy."

U.S. manufacturing is in the midst of a revival because fewer companies are outsourcing jobs to Asia because of rising labor costs in China and other countries, experts said. Some companies are bringing jobs back to the states because of cheaper production costs. Auto sales have rebounded, and the dollar's weakness means American-made goods are cheaper in international markets, so exports have risen.

"With the lower value of the dollar compared to Asia, we aren't seeing the labor-intensive part of manufacturing return to the state, but the higher-skilled stuff has come back," said Hill, with Cleveland State University.

Dayton region among best

The revitalization benefits Ohio because manufacturing accounts for about 17 percent of the state's gross domestic product. The state's strengths are in manufacturing, and they include large and developed supply chains related to the automotive, air craft, and polymer and chemicals industries, Hill said.

Ohio's manufacturing industry has outperformed the nation in the recovery. The state's manufacturing employment has grown 7.6 percent since June 2009, compared to only 2.2 percent growth nationwide, according to the Economic Policy Institute.

Ohio has a competitive advantage in manufacturing because of its tax environment, cost of living, central location, skilled workforce and industrial history, said Greg Knox, board chairman of the Dayton Region Manufacturers Association.

"Just look at Dayton, where we have some of the best manufacturing-capable companies in the world," said Knox, who owns Knox Machinery, a Franklin-based company that sells computerized metal-cutting equipment. "And traditionally, every one manufacturing job has a trickle down effect of providing three to five other jobs."

On average, workers at manufacturing firms in Ohio earned $55,318 in 2011, which is 29 percent higher than the average earnings of all workers in the state.

But U.S. manufacturing is in the middle of a transition from a labor-intensive sector to a capital-intensive one, said Thomas Traynor, professor of economics with Wright State University.

U.S. manufacturing output is growing, but fewer people will work in the industry than have in the past because of growing use of automation and other changes in technology and production, Traynor said.

"In the end, manufacturing production may continue to be common in Ohio, but is likely to employ fewer and fewer workers over the long-run," he said.

The share of Ohio workers who are employed by manufacturing firms continues to fall. Manufacturing's share of the state's GDP has also dropped. Experts said manufacturing contributed more to the GDP than to jobs because of high levels of productivity in the sector. --

Source: U.S. Bureau of Economic Analysis



Source: (c)2013 the Dayton Daily News (Dayton, Ohio). Distributed by MCT Information Services.


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