An end in sight to Minnesota hiring slowdown?

John Peterson and Mark Engel watch intently as a new laser cutter slices through a large sheet of metal on the production floor of their Minneapolis company, Atlas Manufacturing. Sparks fly, a fitting image for the robust business activity these days for Atlas, which designs and builds custom metal products for industrial, retail and medical markets. The metal sheet is on its way to becoming a coin-changing machine destined for a car wash or laundromat.

"Our backlog is up about 30 percent from last year and has never been higher," said Peterson, who acquired the 50-year-old company with Engel in 2002. It's a welcome change from the fall of 2008 when business "went off a cliff," he said.

Peterson said Atlas didn't lay off workers when business hit a low point in 2009 but let its workforce dwindle through attrition to about 50 employees. So far this year Atlas has hired about 25 people, and Peterson said he's looking to add up to 10 more this year.

The rebound at Atlas is mirrored by figures compiled by the Minnesota Department of Employment and Economic Development, which have shown rising manufacturing employment for four consecutive months. The state lost more than 33,000 manufacturing jobs in 2009, but this year has added 7,800 through the end of April.

Small businesses such as Atlas with fewer than 250 employees make up nearly 60 percent of the state's manufacturing workforce, and they're playing a significant role in the revival. The department will report its job figures for May on Thursday, and even if manufacturing employment dips, people who work for and with small manufacturers say there are more signs that activity is perking up.

"Many of our clients are telling us that their customers are starting to replenish their inventories," said Bob Kill, CEO of Enterprise Minnesota, a nonprofit organization that works with small manufacturers. Some businesses are still reluctant to hire permanent workers but are increasing the work hours of existing employees, he said.

Steve Cremer said he's boosted the workforce of his business, Harmony Enterprises, from 50 to 60 since the start of the year. The company, based in Harmony, Minn., about 130 miles southwest of the Twin Cities, makes large trash compactors and balers for commercial users including big box stores, restaurants, bottling plants, and hospitals.

In addition to improved demand from existing customers, Kill said manufacturers that spent the last several months aggressively courting new business are seeing their efforts pay off.

Atlas, whose metal products include retail displays and computer parts and enclosures, recently redesigned its website to make it more customer-friendly. Its laser cutter is automated and last year replaced two older cutters that had to be tended manually.

"It improves our response time," Engel said of the new $1 million machine that can run all day and night. The ability to fill orders with shorter lead times has become a bigger factor in retaining and attracting customers that are still cautious about building up inventories, Engel said. One new customer previously had used a supplier in China but switched to Atlas because it was taking too long to get products by ship and cost too much to have them sent by air, he said.

Kill said he's heard from other small manufacturers that have grabbed business from overseas competitors. "Transportation costs continue to go up, and that's causing more [customers] to look for regional suppliers," he said.

At the same time, some Minnesota manufacturers are beginning to see their export business revive, said Dave Fiedler, past president and a board member of the Minnesota Precision Manufacturing Association. The organization represents companies that make parts for other manufacturers. Fiedler said some of the demand is coming from Asia, where manufacturers are responding to government incentive programs aimed at stimulating those foreign economies.

Peterson said that at the start of the year he had little trouble finding qualified workers to hire at Atlas because so many were out of work. "I think some of the things we did, like investing in new equipment and reorganizing our manufacturing processes, helped us come back a little sooner than some other firms," he said.

That's less true now. Peterson said one of the biggest challenges these days is finding skilled workers, because they're starting to get snapped up by other companies that also have begun hiring.