SouthPoint

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The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed’s Regional Economic Information Network and Public Affairs Department.

Postings are weekly.


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05/12/2011


Manufacturing's ups and downs

You don't have to look hard these days to find a feel-good article about the resurgence of the U.S. manufacturing sector, and with reason: manufacturing is the strongest sector of the U.S. economy. While the economy grew 1.8 percent as a whole in the first quarter of this year, manufacturing shipments grew by over 5 percent while orders for manufacturing goods grew over 7 percent in the first quarter. Capital-intensive firms such as Caterpillar, the world's largest maker of earthmoving equipment, recently announced first-quarter earnings far above Wall Street expectations, and General Electric, the largest industrial group in the United States, announced a couple of weeks ago its outlook for growth is "very strong" Atlanta Fed chief Dennis Lockhart recently said the economic recovery was partially attributed to a rebound in manufacturing employment and production.

What's interesting, though, is that this manufacturing recovery is taking shape differently across the nation, with employment returning at varying velocity, differing by region. The Midwest/ Rust Belt is rebounding fastest employment-wise (led by Michigan), while the South mostly continued to shed manufacturing jobs, comparing the first quarter of 2010 to the first quarter of 2011. But the worst area tends to be the Northeast, where states like New York and New Jersey are faring worse in manufacturing employment than they were even in the first quarter of last year.


First, we should not take this chart into consideration solely for a full picture on manufacturing employment. While, yes, Michigan has added 27,400 manufacturing jobs to its payrolls over one year, it's critical to keep that in the context of the total number of jobs lost. (Hint:The losses are way more than this chart shows being added.) In December 2007, when the National Bureau of Economic Research marked the official recession's beginning, there were about 613,000 manufacturing employees in the state of Michigan. That number as of March 2011 is around 488,000. Given Michigan's embedded manufacturing infrastructure and large number of unemployed, skilled workers, it stands to reason that the state would be able to regain jobs faster than other states. It also helps that the big domestic automakers are doing well lately: Ford Motor Company recently announced its highest first-quarter earnings in 13 years.

Back in the Sixth District…
Georgia stands out in the South: it added about 6,400 jobs from the first quarter of 2010 to the first quarter of 2011, and while the gains in Louisiana have been small—500 jobs—at least it's in positive territory. All other Sixth District states are in the red—TN, LA, MS, and AL. What's going on in Georgia? And why are the other Sixth District states seemingly lagging behind in manufacturing employment?

One explanation is faster-than-average job growth along the I-85 corridor through West Point, Ga., and La Grange, Ga.

Kia Motors has definitely brightened the manufacturing employment outlook in southwest/west-central Georgia. Two weeks ago, the firm announced it would be accepting applications for 1,000 new positions as it gears up to begin production on the Optima, a midsize sedan. Production on the model will begin in the third quarter of 2011. These 1,000 new positions will be in addition to the 2,200 employees already at the facility. The Hyundai plant just across the state line in Montgomery, Ala., is also boosting employment for parts suppliers in Georgia. These two auto plants together have resulted in 7,000 indirect jobs in the parts-supplying business.

Feeling the multiplier effect from all of this new capital investment, tax revenues, and additional employment, the southwest/west-central region of Georgia is feeling spin-off growth in other sectors, public and private, including a new Wal-Mart distribution center. Columbus State University is also opening a branch campus in West Point, while Atlanta Christian College has plans to move there next year. West Point's mayor was recently cited as saying that since Kia opened its doors there, 38 new businesses have opened. Another plus for manufacturing employment in Georgia is the Center for Innovation for Manufacturing, based at Lanier Technical College. This center, along with a program called Quick Start, was responsible for retraining laid-off mill workers for production at the West Point Kia plant.

What about the other Sixth District states?
I was particularly surprised to see Tennessee in the red, after having read several headlines that talk of the Volkswagen plant in Chattanooga, new parts suppliers, Nissan's battery production facilities, etc. But as our neighbors at the St. Louis Fed show here, several years of losses in manufacturing employment will take a while, if ever, to be made up in Tennessee. However, if you look at Tennessee employment year over year, you can see the state's beginning to make some net job additions compared to a year ago. Mississippi is not as fortunate to date, as plant closings and downsizings continue to outpace job creation. Manufacturing employment in Mississippi over the first quarter of this year shed in the range of about 2 percent to 2.5 percent each month.

Alabama is down about 300 manufacturing jobs comparing the first quarter of 2011 with the first quarter of 2010, but comparing March 2011 with March 2010, it's actually up about 800 jobs. Alabama is also feeling some of the economic impact of the I-85 corridor expansions and anticipates new positions opening up at its Lincoln, Ala., Honda facility. Within the state, northeast Alabama lost about 1.7 percent of its manufacturing employees over the last 12 months, while southeast Alabama has added about 1.4 percent to its pool of manufacturing workers.

Florida lost about 2.9 percent of its manufacturing jobs from March 2010 to March 2011. Florida's manufacturing sector is based largely on electronics manufacturing, printing and publishing, and fabricated metals manufacturing, industries which have had less-than-desirable employment dynamics over the last year. For a silver lining, Tom Dubin, president of Manufacturers' News, recently had this to say:

"Florida's industrial sectors continue to be affected by the housing bust and the recession. However, losses have slowed considerably, and the state's investments in innovative technologies are helping the recovery take hold."

We'll keep watch for next week's regional employment report for an update.

Photo of Mark CarterBy Mark Carter, an analyst in the Atlanta Fed's research department

May 12, 2011 in Employment, Manufacturing | Permalink

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Well that's the fact in business. It always in up or down. Just continue and be wise.

Posted by: Baldwin Filters | 02/21/2013 at 12:36 AM

Fabrication, when used as an industrial term, applies to the building of machines, structures and other equipment, by cutting, shaping and assembling components made from raw materials.

Posted by: steel fabrication | 09/10/2011 at 03:47 AM

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