Manufacturing has been one of the true bright spots in the state and national economy during the past year.
U.S. manufacturers have added more than 200,000 jobs since December 2009. These represent the largest national increase in manufacturing employment since 1997.
Minnesotans have even more reason to cheer. Exports of state manufactured goods reached an all-time high during the last quarter of 2010, and nearly half of the 16,300 new, nonfarm jobs added in the past 12 months were in manufacturing. In February, the percentage of Minnesotans working in the manufacturing sector rose to 11.2 percent, the first monthly increase in more than a decade.
Almost any way you slice it, this is good news. Manufacturing jobs, on average, pay higher wages, offer better benefits and create a bigger economic spillover or multiplier effect in their surrounding communities. Unfortunately, it's way too early to say that Minnesota's manufacturing sector is on the verge of regaining anything close to the tens of thousands of jobs lost over the past decade.
"The real story is a little more sobering than you might think," said Fred Zimmerman, a former manufacturing executive, professor and co-author of the book "Manufacturing Works." "It's a little early to break out the champagne."
Minnesota's recent manufacturing history can be told in two chapters, one happy, one sad.
In the 1990s, we added manufacturing jobs while the nation as a whole lost them. At the beginning of the decade, 343,600 Minnesotans worked in manufacturing, and that total peaked at just under 399,000 in May 1998. Manufacturing's share of the state labor force fell slightly throughout this period, but only because the total labor force itself grew so quickly.
In the 2000s, Minnesota became a net loser of manufacturing jobs. By January 2010, manufacturing employment had bottomed out at 288,000.
These numbers, which are compiled by the state, have some shortcomings. If a Minnesota company decides to build a new factory elsewhere, for example, that doesn't show up in these totals. But they are useful for capturing net gains and losses of jobs.
So, what to make of the most recent rebound in manufacturing jobs?
Some of it represents a correction of sorts from the deep cuts -- 50,000 jobs in 24 months -- that Minnesota manufacturers made in the wake of the Great Recession.
The numbers also look good partly because Minnesota's other job numbers are so weak. The retail and construction sectors have recovered few if any of the jobs shed during the past two years, and the labor force itself has shrunk by nearly 130,000 people in the same period. This, more than anything, helps account for manufacturing's higher share of the total workforce.
It would be a mistake to assume we've reached a turning point in the fortunes of our manufacturing sector.
The new owners of the former ADC plant in Shakopee, for example, plan to lay off 248 workers and ship some of the plastic molding and sheet-metal fabricating and painting to Juarez, Mexico. Hutchinson Technology has announced that it will lay off 600 workers in its namesake city and shift some of that production to a new facility under construction in Thailand. And 515 people in Osceola, Wis., will lose their jobs as Polaris shifts manufacturing to Monterey, Mexico, during the coming year.
Sure, the cost advantage of shifting manufacturing abroad has shrunk. Hourly labor rates in China doubled between 2002 and 2008, the value of its currency is rising and the cost of shipping goods is once again surging.
Still, the occasional instances of companies deciding not to expand abroad or, even rarer, choosing to repatriate some of their manufacturing operations, do not a trend make. China, South Korea and India are becoming technological leaders in the manufacturing of precision components.
"When you get a whole bunch of component parts that are made elsewhere, then the end product can quite conceivably be built anywhere," Zimmerman said.
Maybe the best we can hope for is an equilibrium of sorts, where foreign labor costs and taxation become secondary considerations to quality, innovation and strategic goals, such as being closer to customers and markets. Minnesota and the United States need to be making the investments now that will allow us to win our fair share of those fights in the coming years.
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