Dr. Michael Shires and Joel Kotkin on Where Manufacturing is Thriving | Forbes
Where Manufacturing Is Thriving In The U.S.
By Michael Shires & Joel Kotkin | June 12, 2017 | Forbes
Throughout the dismal presidential campaign, the plight of America’s manufacturing sector played a central role. Yet despite all the concerns raised about factory jobs leaving the country, all but 18 of the country’s 70 largest metropolitan regions have seen an uptick in industrial employment since 2011. And despite the slowdown in car sales, the job count continues to expand, albeit more slowly.
Although the share of industrial jobs has shrunken from 10.5% of all nonfarm employment in 2005 to 8.5% today, manufacturing continues to have an outsized influence on regional economies, as is spelled out in the latest paper from the Center for Opportunity Urbanism. This stems in large part from the industrial sector’s productivity gains since 2001 -- almost twice as much as the economy-wide average, according to the Bureau of Labor Statistics -- and it has a far higher multiplier effect (the boost it provides to local job and wealth creation) than virtually any other sector. Manufacturing generates $1.40 in economic activity for every dollar put in, according to the U.S. Bureau of Economic Analysis, far greater than the multiplier generated by business services, information, retail trade or finance.
To determine the places where manufacturing growth is the strongest, we looked at employment in the sector over time, assessing short-, medium- and long-term trends going back to 2005 and adding in variables for persistence and momentum as well. The results of these trends, based on three-month averages, are normalized and each MSA is assigned a score based on its relative position in each area. (For a more detailed description of the methodology, click here.) The rankings this year produced some surprising results, as well as some familiar stories.
Red States And The Rust Belt Win
Nine of this year’s top 10 regions for manufacturing job growth are in red states, led by top-ranked Louisville-Jefferson County, which straddles the border between Kentucky and Indiana. Since 2011, manufacturing employment in the metropolitan area has expanded 30.2% to a total of 83,300 jobs, led by a resurgent auto industry that accounts for 27,000 jobs in the area. Due to a slowdown in auto sales, the job count may be peaking, but the hub of the Bluegrass State has had a pretty good ride.
Louisville is no outlier in the old Rust Belt. Second-ranked Grand Rapids-Wyoming, Mich., has logged a 22% gain in industrial jobs over the same span, spread across a range of sectors including aerospace, advanced metals, automotive, office furniture and medical device manufacturing. In the longtime furniture-making center, 20% of jobs are in manufacturing, the highest proportion among the nation’s largest metro areas.
Our ranking features several other Midwestern cities on the industrial upswing: No. 4 Kansas City, Mo., No. 5 Warren-Troy-Farmington Hills, Mich., and No. 10 Detroit-Dearborn-Livonia. Taken together the latter two Michigan metro areas are now home to over 245,000 manufacturing jobs, up dramatically from the 205,500 manufacturing jobs they accounted for in 2011 and just below the 252,300 jobs they tallied a decade ago, before the Great Recession hit.
Among the other red state winners are Florida with third place West Palm Beach-Boca Raton-Delray Beach, where the industrial job count has grown 27.67% since 2011, in part from older industries such as food as well as technology, and No. 8 Orlando-Kissimmee-Sanford, where manufacturing growth is tied to the burgeoning aerospace sector. And then there’s the Beehive State’s economically buzzing capital of Salt Lake City in ninth place, where manufacturing job growth is spread along many industries, including aerospace, construction materials, metals and oil and gas-related manufacturing.
Blue State Surprises
Only one region outside the red states made it to the top 10: seventh-place Albany-Schenectady, N.Y. In a state and region that has been losing industrial jobs since the late 1960s, Albany has bucked the trend with a 17.6% gain in manufacturing jobs from 2011 to 2016 to to 25,800 positions. The area boasts factories that produce steam and gas turbines, computer chips and medical supplies --- an impressive and diverse collection of cutting-edge industries. Meanwhile the industrial workforce in once-mighty New York City continues to whither. In 1950 the city had nearly a million manufacturing workers; now there are 74,100 after 4.7% shrinkage in 2016. New York ranks second to last in our survey among the 70 largest metro areas in the U.S.
Even in heavily regulated California, which has been continuously shedding industrial jobs since 1988 (about 800,000 manufacturing jobs lost to date), some areas are showing surprising new strength. Take Oakland-Hayward-Berkeley, which has seen a 12.7% jump in industrial jobs to 89,600 since 2011, ranking it 13th on our list. The big player here appears to be Tesla, whose Fremont factory employs 6,500. The Fremont area has become something of a hotspot, with morethan 900 manufacturing companies including AlterG and LAM Research.
Some believe it’s a byproduct of the Valley’s attempt to lay claim to “the Internet of things,” but other parts of the Bay Area are showing some signs of an industrial renaissance, including No. 18 San Francisco-Redwood City-South San Francisco and 22nd-ranked San Jose-Sunnyvale-Santa Clara. One big problem in some of these areas is attracting enough skilled workers given ultra-high housing prices.
Industrial Players In Decline
Many of the largest industrial areas are not doing so well. Houston, the nation’s third-largest manufacturing center, has seen industrial employment drop since 2011 by 5.49% to 220,900 jobs amid the skid in energy prices. Other oil patch economies have lost industrial jobs, including No. 57 Oklahoma City and No. 64 New Orleans-Metairie, La. Hopefully improved conditions for energy companies, particularly under President Trump, may improve prospects there as well.
It’s somewhat harder to find much hope for the nation’s two largest industrial regions. The Chicago-Arlington-Naperville region ranks 56th, having lost 1.85% of its industrial jobs since 2011, continuing decades of decline. Manufacturing in the City of Broad Shoulders has slumped from just under a million jobs in 1966 to 520,000 in 1990, 465,000 in 2000 and 281,000 today.
Even worse is the performance of Los Angeles-Glendale-Long Beach, which still has the most industrial jobs in the nation, some 356,000. Since 2011, the region has lost 3.47% of its industrial jobs, and 2.10% last year alone. On paper the L.A. region should be benefiting from hosting the headquarters of Elon Musk’s SpaceX and buzzy startups like Hyperloop and AIO Robotics. But whatever is being gained by way of these companies has been more than canceled out by downsizing, outsourcing and automation across the sector, as well as continuing losses in the aerospace and apparel industries.
Ultimately the future of high-cost metro areas like L.A. and the Bay Area may rest to a surprising extent on their ability to link up with cutting-edge tech industries. Elsewhere lower-cost regions should experience some continued growth as the current presidential administration seeks to encourage more on-shoring of basic production.