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January 5th, 2012
Depending on the analyst and the statistic, the Midwest economy is on the mend or still in trouble or somewhere in between.
Getting By, a year-end special from Changing Gears, went beyond the experts and numbers.
Senior editor Micki Maynard and WBEZ’s Steve Edwards gathered at a dining room table with eight Illinois residents from different places and different points of view to discuss the economy’s real world impact on their lives.
We talked about how the recession is affecting everyone, from veterans to business owners, single mothers to people struggling to find work.
Listen to Getting By here and see more photos of the people who took part.
Many of our participants came to us through our PIN network, and we’re always looking for people who can lend their insight. If you’d like to become a source for us, click here.
CHICAGO – The Midwest may have just 13 percent of the country’s population, but we still produces more than a third of the nation’s cars, steel and the lion’s share of heavy machinery. And, the rise in manufacturing meant good news for the Midwest economy last year. Here, a perspective on why things went so well for manufacturers last year – and what challenges lie ahead.
Just before you get to the factory floor of Chicago White Metal Casting, there’s a grainy, mural-sized picture of what the floor used to look like in the 1930s, when the business started by CEO Eric Treiber’s grandfather.
Back then, it was on the second floor of Chicago’s Fulton Street Fish Market. Today, the family-owned company operates further north of the city, just west of O’Hare International Airport. Chicago White Metal makes aluminum, zinc and magnesium die casting for a variety of industries, from automotive sector to health care. Die casting involves creating small metal parts – in this case, everything from the rearview mirror mount for cars to components for inside a MRI machine or a tractor.
Treiber said he’s happy that 2011 was brought much more stability for the company. With revenue growth of about four percent, it’s an improvement over 2010.
As measured by the Chicago Fed, Midwest manufacturing output has had 28 months of growth – at an annualized rate of six percent. That’s much better than the rest of the economy.
But there are a few caveats about these good manufacturing numbers. Strauss likes to use a tennis ball as an analogy, helping to explain that the growth numbers look so good because things were so bad before. In other words, the ball bounced pretty low before it went back up.
Now, Strauss said we’re seeing “great demand” at manufacturers, especially for machinery made right here in the Midwest – and not just automobiles.
“Whether it’s from Caterpillar, Deere, or Case New Holland, they are doing extremely well, especially for Caterpillar with those heavy mining equipment that they sell,” Strauss said, adding that demand especially from Canada and Russia is very strong.
Heavy mining equipment – some of which weigh more than 1 million pounds – in turn requires a lot of steel. That helps that industry, too, Strauss said.
In all, Strauss says about 60 percent of the manufacturing output lost during the downturn has come back.
So why don’t the job numbers add up?
One out of every four jobs lost during the recession was in manufacturing – that’s 2.3 million jobs. As of last November, we’ve added back just 308,000 of those jobs.
Remember the mantra “produce more with less?”. Many manufacturers practically perfected that during this recession.
Take Chicago White Metal Casting. Trieber says it had to be focused on productivity in order to stay competitive with business that was moving out of the country. By focusing on training workers, improving machine efficiency and updating equipment, he estimates they’ve had a 29 percent productivity increase between 2008 and 2010. And Treiber is actually hiring. But he’s looking for a few people, such as die cast machinists, especially repair men.
And that, in a crux, is the labor market problem right now with manufacturing – the need is for workers who are much more skilled. So why can’t you hire back those 2 million people out of work?
Strauss said it seems that many of those 2 million people who worked in manufacturing lack the skills that employers now want. He’s also quite optimistic about the future of manufacturing this coming year – as long as there are workers.
I’ll be reporting more on the skills gap later. In the meantime, if you were one of those 2 million people who were laid off, what are you doing now? Feel free to weigh in the comments section.
Pete Bigelow · Midwest Memo: Detroit’s Financial Troubles Examined, Chicago’s Unemployment Rate Worsens
December 23rd, 2011
Three stories making news across the Midwest today:
1. Detroit’s finances a long-term problem. In the past 45 years, the city of Detroit has recorded 19 budget surpluses and 26 budget deficits, according to the Detroit Free Press. Experts tell the newspaper the city’s debt is now so high that the city could default on unpaid bonds soon, a prelude to bankruptcy. State officials will begin a formal review of Detroit’s finances in January, which could lead to the appointment of an emergency manager. Gov. Rick Snyder said the city faces both a short-term cash-flow shortage and a longer-term structural deficit. “We can’t continue this process because Detroit has been in a financial crisis of some fashion for decades,” he tells the newspaper. “We need a long-term solution.”
2. 2011′s dubious housing distinction. The year 2011 will likely be the worst in history for new home sales. The Commerce Department said it expects the adjusted annual number to reach 315,000 by the close of this month, fewer than the 323,000 sold last year, the worst year on record dating to 1963. That’s less than half the 700,000 new homes economists tell the Associated Press are necessary to sustain a healthy market. The projection comes even as new-home sales rose 1.6 percent in November. December would need to mark its best monthly sales total in four years to avert the dubious finish.
3. Unemployment up in Chicago area. Chicago’s unemployment rate rose in November to 9.8 percent, according to the Chicago Sun-Times. The rate ticked upward one-tenth of a percentage point from 9.7 percent in October, and was up 0.9 percent year over year. The unemployment rate dropped in nine of Illinois’ 12 metro areas in November compared to 2010. Chicago’s rate remains slightly lower than the state’s overall 10.0 percent unemployment rate, which has remained nearly flat for three consecutive months. The state’s lowest unemployment rate was found in the Bloomington/Normal area, at 6.8 percent, according to the newspaper.
Pete Bigelow · U.S. Workers Rank 14th On List That Measures Hourly Compensation For Manufacturing Employees
December 22nd, 2011
How much do employees in the U.S. manufacturing industry make compared to their counterparts in other countries?
A new study released by the U.S. Labor Department says Americans receive an average of $34.74 per hour, the 14th highest hourly compensation among countries measured. Norway topped the chart at $57.53 per hour, followed by Switzerland and Belgium.
Canada ranked one spot ahead of the United States, averaging $35.67 per hour. Mexico ranked 33rd among the 34 countries measured at $6.23.
China and India were notably absent from the list. The Bureau of Labor Statistics said there were data gaps and deviations from international standards that made it difficult to forge accurate measures of manufacturing wages and overall compensation.
Pete Bigelow · Midwest Memo: Detroit Suburbs Seek Spurned Transit Money, Wisconsin May Revisit Controversial Case
December 22nd, 2011
Three stories making news across the Midwest today:
1. Contenders seek spurned transit funding. The city of Troy, Michigan rejected federal funds to build a mass-transit center. Now other suburban Detroit municipalities are lining up in hopes of claiming part of the $8.5 million. A U.S. Congressman pledged to have the money allocated to Royal Oak and Pontiac. The Detroit Free Press reports today a high-speed “turnaround area” for buses could be built in Pontiac while a rail facility could be built in Royal Oak. Meanwhile, Troy has faced a backlash for its decision. Gov. Rick Snyder wrote a letter saying he was “disappointed” in the decision, and Magna International, which employs more than 1,000 in Troy, said it will no longer seek expansion or job creation in the city.
2. Wisconsin fight not over yet? The Wisconsin Supreme Court could be asked to reopen a controversial case about collective bargaining legislation because a justice who presided in the original hearing received free legal service from an attorney involved in the case. The Milwaukee Journal Sentinel reports Dane County district attorney Ismael Ozanne is “taking a hard look” at asking the Supreme Court to reopen the case. Supreme Court Justice Michael Gableman cast the deciding vote in a ruling that said state legislators had not violated the open meetings law when mulling the controversial legislation, which allowed a decision to limit collective bargaining for public workers to stand.
3. EPA mandates could cost Ohio. Many utilities in Ohio and elsewhere must cut 90 percent of the mercury emitted from their power plants under toughened air pollution limits announced Wednesday by the U.S. Environmental Protection Agency. “This is a great victory for public health, especially the health of our children,” said an EPA spokesperson. Industry representatives say the new rules mean more expensive electricity for customers and job losses because older plants may shut down rather than overhaul. The Columbus Dispatch says Ohio typically ranks No. 1 in the nation for the amount of toxic pollutants emitted by industry, largely because of power plants that burn coal.
December 22nd, 2011
Natural gas extracted from shale rock, some say, is the most positive development in the nation’s energy outlook in 50 years. Ohio sits atop some of the largest deposits.
Big name oil and gas companies are flocking to the Buckeye State in a frenzy of preparation for “fracking” – that’s the innovative and controversial technology used to drill through and “fracture” the shale. It un-traps natural gas that lies within large layers of rock.
Ohio John Kasich is one of the industry’s biggest cheerleaders, saying it could be a real “game changer” for the state’s economy. This week he also said tough, new regulations are needed to make sure “fracking” doesn’t harm the environment. From our Changing Gears project, Mhari Saito and Dan Bobkoff have this overview on the new “natural gas economy.”
The national unemployment rate fell 0.4 percent in November to 8.6 percent. Michigan led the downward charge.
No state in the nation experienced a bigger drop. Michigan’s unemployment rate fell 0.8 percent in the month to 9.8 percent. It’s the first time in three years the state’s unemployment rate was less than 10 percent. Overall, 43 states reported unemployment declines in November.
The Midwest’s monthly unemployment rate edged downward 0.3 percent in November to 8.2 percent, the second-lowest of the nation’s four regions. Every state in the region experienced a decline in unemployment rate except Indiana, which saw its rate hold steady at 9.0 percent.
The West North Central sub-region, defined by the U.S. Labor Department as North Dakota, South Dakota, Minnesota, Nebraska, Iowa, Kansas and Missouri, held the nation’s lowest sub-regional unemployment rate, at 6.3 percent.
Here’s a state-by-state look at the November unemployment numbers for each Midwest state:
State Oct. 2011 Nov. 2011 Change
Michigan 10.6 9.8 -0.8 percent
Minnesota 6.5 5.9 -0.6 percent
Ohio 9.0 8.5 -0.5 percent
Wisconsin 7.7 7.3 -0.4 percent
Iowa 6.0 5.7 -0.3 percent
Pennsylvania 8.1 7.9 -0.2 percent
Illinois 10.1 10.0 -0.1 percent
Indiana 9.0 9.0 0 percent
Pete Bigelow · With Twin Cities Assembly Plant Now Closed, St. Paul Ponders Future Of Shuttered Site
December 19th, 2011
Employees crowded around, took photos and cheered as the last Ford Ranger pickup truck rolled off the assembly line Friday in St. Paul, Minn.
At least one worker was bewildered by the reaction.
“I could not understand why there were cheering for the last vehicle,” Mike Montie, who worked at the Twin Cities Assembly Plant for 28 years, told the Associated Press. “You cheer for the first one, not the last one. I was like, ‘What the hell?’ I didn’t want it to end, you know?”
He was one of 800 employees who lost their jobs when the Twin Cities Assembly Plant closed Friday. The plant, located along the banks of the Mississippi River, has produced more than 6 million cars during an 86-year history. But sales of the Ranger have slackened since the 1990s, and Ford decided to concentrate on larger, more profitable pickups.
A multimillion dollar cleanup of the 122-acre site will begin early next year.
Local officials are hopeful the site can be repurposed. According to the St. Paul Star Tribune, locals are considering a lot of possibilities, including a green manufacturing complex, a densely populated transit village, a park, an office campus and a middle-class neighborhood.
A study conducted by the Center for Automotive Research released last week showed that nearly 49 percent of the 263 auto plants that have closed over the past three decades have found a new purpose. The study from the Ann Arbor, Mich.-based research center also noted the rate of repurposing has accelerated in the past three years.
“It’s a premier piece of land,” Cecile Bedor, the city’s planning director, tells the newspaper. “There’s nothing like it anywhere in the region. It is an incredible opportunity for the city, but it does come on the heels of devastating news for many families.”
Pete Bigelow · Midwest Memo: Groupon Gets Mixed Reviews, GM Stymies Saab, Harley-Davidson Begins Wisconsin Layoffs
December 19th, 2011
Three stories making news across the Midwest today:
1. Groupon gets mixed reviews. Three investment banks that sold Groupon’s initial public offering in November have mixed views of the company’s stock. Credit Suisse analysts rated the stock “neutral” in research reports released today. Morgan Stanley advised its clients to wait to buy shares of the Chicago-based company until the stock price fell, according to our partner station, WBEZ. Only Goldman Sachs rated the stock a “buy.” Banks that lead an IPO traditionally deliver favorable ratings. Shares were sold to the public at $20 each in the IPO, and traded at $22.20 this morning.
2. Saab files for bankruptcy. Concerned that its technology could land in the hands of Chinese competitors, General Motors blocked a sale of Saab, which subsequently filed for bankruptcy. Experts tell the Detroit Free Press that the 60-year-old company will likely be sold off in parts. Saab CEO Victor Muller purchased the company from GM in 2010 intent on restoring it. But GM still owned some technology licenses for the car, and feared that reorganizing the company through Chinese and Russian financing could mean the technology would be used by competitors. Saab filed the bankruptcy in southwestern Sweden.
3. Harley-Davison layoffs begin. Harley-Davidson Inc. has started sending layoff notices to hourly workers in its Milwaukee-area manufacturing facilities as part of its plan to reduce its headcount by 26 percent, according to the Chicago Tribune. The company plans to lay off approximately 250 of its 950 union workers, and then will hire 150 to 250 temporary employees to handle seasonal production increases. The company expects to save $50 million per year. The move comes as part of CEO Keith Wandell’s push to make the company and its workforce more flexible while courting a wider set of buyers.
December 16th, 2011
For years, Indiana’s Republican governor, Mitch Daniels, has resisted efforts by fellow Republican lawmakers to implement Right to Work legislation. But now, Daniels is making a Right to Work law one of his legislative priorities for 2012.
Right to Work laws mean employees do not have to join a union, if it is formed in their workplace, nor do they have to pay union dues. (To see Right to Work states, click here.)
Under “closed shop” laws in effect in Michigan, and other northern states, employees must either join a union when one is certified, or pay dues. Some people say that forces them to become union members against their will, since they must pay dues anyway.
Daniels, in a presentation Thursday laying out his goals for the new year, said Indiana needs the law because he believes it will lead to increased job opportunities. Daniels said the nation’s 22 Right to Work states enjoy faster job and income growth, and have lower unemployment rates.
“After a year of study and reflection, I have come to agree that it is time for Indiana to join the 22 states which have enacted right to work laws,” Daniels said in a statement Thursday.
But a poll by Ball State University shows state residents haven’t made up their minds. About half said they were undecided, 27 percent supported the idea and 24 percent opposed it, according to Bloomberg.
Indiana, which has aggressively sought economic development, has a record of leading other Midwest states on job-related issues. The state eliminated collective bargaining for state employees six years ago, well before the furor that surrounded similar moves in Ohio and Wisconsin.
Daniels’ call for a Right to Work law in Indiana could fuel tepid moves in other Midwest states. Organizers have begun the ground work in Michigan in hopes of winning approval there, although Right to Work has not been a priority for its Republican governor, Rick Snyder. Our Kate Davidson took a look at the Michigan effort in March.
Daniels, in his presentation, said workers’ right to organize would remain unchanged, but workers would have the ability to decide whether to pay union dues. Union organizers say it depletes their influence in the workplace if workers do not have to contribute.
Should Indiana and other Midwest states implement Right to Work laws? How have they worked in your state?