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Indiana Manufacturing Aids Economic Rally

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June 21, 2011 by   Leave a Comment

The economic recovery may have stalled in parts of the South and West hit hard by the housing bubble, but Rust Belt states, buoyed by a manufacturing comeback, have seen a steady decline in their jobless rates over the last year.

According to a report from McClatchey Newspapers, of the 10 states where unemployment rates dipped the most from May 2010 to May 2011, Rust Belt states — Michigan, Indiana, Ohio, Pennsylvania and Illinois — account for half, according to Labor Department figures. Indiana is the manufacturing hub for recreational vehicles in the U.S.

Metropolitan areas in the five Rust Belt states accounted for 30 of the top 34 declines in regional unemployment rates since last year, as well.

While these industrial Midwest states and towns have made the biggest strides in reducing their jobless rates, their progress is limited. Many had some of the nation’s highest jobless rates during the recession, so their declines reflect not only more people finding jobs, but also the labor-market loss of older manufacturing workers who gave up the job search.

A recent national survey of 18,000 employers by the work force consulting company ManpowerGroup found that 20% plan to hire in the third quarter of this year, while only 8% expect to cut jobs.

But a whopping 69% expect to make no changes at all in their payrolls, suggesting “a level of caution not seen among employers in the last 30 years of data,” said a statement by Jonas Prising, ManpowerGroup president of the Americas. “This fact, along with many clouds still on the economic horizon, may explain the tepid labor market growth we have seen so far.”

Ironically, it’s the long-troubled manufacturing sector that’s fueling the nation’s anemic economic recovery. For years, industrial decline and globalization eliminated thousands of well-paying manufacturing jobs in the industrial Midwest. The recession doubled the pain as demand for manufactured goods plummeted, driving even more people out of work.

But as America’s auto industry rebounds and export demand for industrial and agricultural equipment remains strong, Rust Belt states are slowly coming back.

“That’s a huge change from ‘06, ‘07 and ‘08, when the automobile industry was in big trouble and shrinking,” said Steven Cochrane, the managing director of Moody’s Analytics in West Chester, Pa.

Cochrane said the excess of factory and building space, a skilled labor force and lower labor costs due to union concessions had made the Rust Belt attractive to companies looking to expand. “It’s no longer a no-brainer to look elsewhere,” he said.

In Elkhart, Ind., where production of recreational vehicles accounts for about half of the area’s economy, unemployment spiked at 18.9% in March 2009.

But over the last year, RV manufacturers and their suppliers began adding workers and hours in Elkhart, which posted the nation’s largest one-year decline in its area jobless rate, going from 14.1% in April 2010 to 10.1% in April 2011.

An electric car manufacturer from Norway, THINK, opened its North American assembly plant in Elkhart last year and plans to build 2,500 vehicles this year. The plant, in a former RV parts factory that went out of business, has more than 100 employees and is expected to create more than 400 area jobs by 2013.

“Elkhart hasn’t fully recovered by any stretch, but the rate of change” is promising, said Jim Diffley, senior director and chief regional economist at IHS Global Insight in Philadelphia.

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