Jobless numbers rare good news for manufacturing

The Minnesota Department of Employment and Economic Development said today the state's unemployment rate dropped by 0.3 percent from June to 8.1 percent in July. For the first time in more than a year, the state's important manufacturing sector gained jobs.

According to the agency's seasonally adjusted figures, employers added 1,700 manufacturing jobs from June to July.

Manufacturing joined leisure and hospitality, government, professional and business services and education and health service as industry sectors that gained employment over that same period. In all, Minnesota employers added 10,300 jobs, the report said.

Manufacturers have been key to the region's economic health. They buy a lot of materials and services from local suppliers, they tend to pay their workers more than average, and have large payrolls. But those payrolls have been shrinking.

Until this month, things were looking bad for the state's manufacturing industry. Earlier this decade, in mid-2000, the sector employed about 400,000 people -- more than the population of Minneapolis. But by the same time this year, the state's manufacturers had 100,000 fewer jobs.

A good chunk of those losses, nearly 39,000, occurred over the past year.

"Manufacturing certainly is not performing well," said state economist Tom Stinson. "This has been, and continues to be, a very tough job market for the firms that make things."

"Manufacturing certainly is not performing well."

Stinson said manufacturing has suffered a serious blow from the residential and commercial real estate downturns. Companies that make materials used in buildings, like wood products or windows, have taken a big hit. So have auto industry suppliers.

Stinson expects business for those suppliers will pick up as the big automakers respond to increased demand, especially from the Cash for Clunkers program. But a lot of the manufacturing sector will still struggle -- worse than the rest of the state's economy.

If there's any consolation, Stinson said, it's that Minnesota's manufacturing sector is not performing quite as miserably as the nation's. U.S. manufacturers' job rolls were down 12.1 percent on average between July 2008 and this year; whereas Minnesota's were down 11.4 percent.

But Toby Madden, an economist at the Federal Reserve Bank of Minneapolis, said business is likely to continue to pick up for manufacturers.

"The outlook is somewhat positive in that we're somewhat near the bottom now and should be recovering," Madden said.

Madden said companies like retailers are running out of the inventories they've been carrying. That means they'll have to tap manufacturers to make more merchandise.

Overall, Madden said he's very bullish on the manufacturing sector's prospects for recovery -- if you gauge recovery on the basis of productivity, which he said is an important economic measure.

"If you take a look at what really matters, which is people's consumption of goods and services and leisure time, productivity is the key," he said. "It's hard to measure and it's not reported as vibrantly as job numbers are, which are easy to obtain, yet maybe not as important as the overall increase in productivity and output of goods and services."

Madden said many manufacturing jobs simply will not come back, as companies do more with fewer people. Bob Kill, president of Enterprise Minnesota, agreed.

Enterprise Minnesota is an organization that works with small and medium-sized manufacturers. Kill said while employee counts may remain depressed, workers could see other benefits increase.

"Those companies that continue to invest in their people are taking the people up to the next level," Kill said. "I think a lot of the displaced worker investment the state is doing is to try to train people on more use of the tools and technology that is available. So the trend will continue, but the jobs tend to be going up in pay scale."

That would be good news for Mary Kroyer-Davis. Last September, she lost her job at Rockwell Automation in Eden Prairie. The company makes motors. Kroyer-Davis has been doing some retraining, taking computer classes, but so far she hasn't found a job.

"It's been really hard," Kroyer-Davis said. "I've applied for quite a few jobs with no answer that they received my resume."

Kroyer-Davis runs out of unemployment benefits next month. She and her husband, who's retired, worry they'll lose their house. At this point, she said she's open to any job, though her heart is still in manufacturing.

"It's what I've been looking at because I worked in that sector for over 20 years," she said. "So that's basically what I know."

Kroyer-Davis said there are some manufacturing jobs out there and she hopes she'll eventually get one of them.

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