Small manufacturers are the key to U.S. economic recovery

I'm betting that RIE Coatings of Eden Valley, Minn., is a proxy for the upticking Minnesota manufacturing sector and the broader U.S. economy.

"It was a struggle to survive last year," said RIE President Chuck Rau. "We had a good 2008, and then we went off a cliff in [early] 2009. Our orders dropped by more than 40 percent. We had to cut back to about 25 employees, from 49. So far this year, thanks to sticking to our strategy and keeping up our sales and marketing efforts last year, we have called back everyone. We just hired our 50th employee and we've got eight job openings."

The recovery has slowed, but we're not falling into a double-dip recession.

The economy is growing at more than 3% on an annual pace, faster than the rebound from the 1991-92 recession. This one feels different because consumers are paying down debt and trying to stay housed amid an unemployment rate that some say could be as high as 15%, counting those who have quit looking for work.

On top of the 2009-10 federal stimulus spending of nearly $800 billion targeted at transportation, energy efficiency and relieving state budget deficits, this nascent recovery is being driven by business spending and manufacturing.

That lays down a much better base than the frothy top of 2005-07 that was driven by burgeoning consumer debt, mounting imports of cheap stuff from China and highly leveraged mortgage and speculation from the Wall Street swanks who became America's biggest welfare recipients.

And rational voices started to prevail amid the market uptick this week.

To get to full-blown recovery, and drive down the official 9.5% unemployment rate, the United States needs to add about 200,000 private-sector jobs per month, compared with 83,000 in June. We've added 600,000 nonfarm jobs this year and the trends are positive.

"We're clearly back in recovery," Jim Paulsen, chief investment strategist at Wells Capital Management said. "It may not be as strong as people would like. But we're creating jobs, corporations are making money, retail sales are rising again, personal consumption is up. We're in a self-sustaining recovery."

Even stock market investors, out of sorts for the last six weeks, started to believe a bit this week, as the market staged a modest rebound.

Goldman Sachs Investment Management recommended to its richest clients that they keep a long-term focus and stay fully invested.

In a report titled "Double Dip or Double Up?" the market-strategy group at Goldman Sachs circulated a report this week to its top brass and best clients that dismissed fears of another recession.

The greed and deception of Goldman and some of America's biggest money changers caused tremendous damage to our belief in the system.

Fortunately, we're resilient in the heartland.

During its toughest days in 2009, and when its nervous banker wouldn't extend credit, RIE Coatings applied for and received a critical $100,000 grant from a $5.5 million emergency pool of loans and grants from the Minnesota Chamber of Commerce's Grow Minnesota program that was funded largely by the Pohlad Family Foundation.

Rau said the grant helped RIE, which makes performance and protective coatings for everything from wind turbines to tiny screws for cellphones, win key contracts.

RIE was one of 91 small Minnesota companies that received emergency assistance last year out of 900 businesses that applied. Altogether, those 91 companies employ 10 more people than they did a year ago. Several businesses were saved. And prospects are improving across the board.

"RIE Coatings is an example of the endurance and perseverance of our state's entrepreneurs," said Bill Blazer, the senior vice president of the chamber who oversees Grow Minnesota and other endeavors.

Meanwhile, Rau says RIE is searching for a lender for $500,000 to buy equipment to meet its growing demand.

Don't expect government-saved Goldman to come to the rescue.

Regardless, I'm betting on RIE and the Main Street economy.