Editorial: Recovery takes hold among manufacturers

Star Tribune Editorial

Even during the recession's darkest periods, Minnesota's manufacturers remained cautiously optimistic about the economy.

This year, many are downright bullish.

While more prominent headlines typically focus on plant shutdowns and large layoffs -- such as this week's decision by growth-challenged Medtronic to cut 2,000 of its 41,000 jobs worldwide -- there's a steady resurgence underway among the state's manufacturers.

Minnesotans hungry for positive economic news should be heartened by the results of the third annual State of Manufacturing survey released Tuesday by Enterprise Minnesota, a nonprofit consulting organization.

The random survey of 400 decisionmakers with mostly small- to medium-sized firms across the state found greater confidence that the economy is expanding, that sales are rising and that profits will increase this year.

More firms also anticipate higher levels of capital spending in 2011, and about half say wages will increase over the next two years.

The positive outlook for 2011 is "grounded" in deeper confidence about business conditions, Autry told several hundred manufacturers who gathered in Minneapolis to hear the results of the survey.

Only 8 percent of the respondents to the first State of Manufacturing survey predicted economic expansion in 2009, while 40 percent expect growth in 2011.

About 23 percent of those surveyed in 2008 expected higher sales in 2009, compared with 51 percent who project better performance this year. And 39 percent say profits will increase in 2011, compared with 17 percent in 2009.

In the first survey, 56 percent of respondents predicted a recession in 2009; that number dropped to 9 percent for 2011.

The more positive outlook is critically important in Minnesota, where more than 8,000 manufacturers account for 15 percent of the state's jobs and 18 percent of wages, said Robert Kill, president and CEO of Enterprise Minnesota.

Optimism is wonderful, he acknowledged in an interview, but the projected rebound in capital expenditures after a significant slowdown two years ago is a real sign that firms are planning more hiring.

For some, especially in low-unemployment areas of the state such as Mankato and Alexandria, it's becoming increasingly difficult to find workers with adequate skills and experience.

That challenge will not grow any easier given the state's aging workforce -- a demographic fact of business life that too few manufacturers are addressing.

For example, despite improved business conditions, only 18 percent of respondents said they would invest more in employee development in 2011, while 8 percent said they would spend less.

Not surprisingly, health care remains the top area of concern for manufacturers. Costs keep rising, and there's widespread confusion about the impact of federal health care reform, according to the survey.

Still, the number of firms offering health care plans is stagnant at 56 percent, and only 34 percent offer wellness or other health-related activities to employees -- a disappointingly low number considering mounting evidence that those programs can have a dramatic impact on employee health and employer costs.

More firms should take a proactive approach.

As Minnesota manufacturers continue their own healthy recovery from the Great Recession, competition for qualified workers will only grow.