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Manufacturing jobs rebound nationally, not so much in Ohio - Business - The Columbus Dispatch


Despite recent trade wars,Ohio’s manufacturing sector has added jobs under President Trump – but at a slower rate than the rest of the nation.

The manufacturing industry was in recession and dragging Ohio’s economy with it in 2016 when Trump narrowly seized his election win. His successful campaign relied partly on the pledge to restore Rust Belt factory jobs.

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After Trump’s election, a surge of factory activity ensued and growth in Ohio resumed – until late 2018 and 2019 as the president’s trade wars kicked into high gear, rattling the state dependence on exports.

Still, America’s factories added 507,000 jobs on Trump’s watch.

But while factory jobs might be rebounding nationally, the uptick in manufacturing positions in Ohio is weak – growing at about half the U.S. pace and lagging Sun Belt states.

Ohio manufacturing jobs are up just 2.1% since the end of 2016 – that’s less than 15,000 new positions in 36 months. That’s also just a 3% share of the national gain for the No. 3 state in factory employment.

It’s a poor showing for one of the states hardest-hit by jobs lost to the rising globalization of the last two decades. New jobs in the sector are also lagging in other swing states key to the next presidential election.

Trump’s job performance on job creation will be on Ohio voters’ minds next Tuesday as they head to the polls in the state primaries.

Debashis Pal, head of the University of Cincinnati Economics Department, said Ohio’s job gains lag the nation but aren’t entirely surprising given the state’s dependence on autos, auto parts, metal products and exports overseas.

“It’s expected given the trade war and the strong dollar – that hurts products made in Ohio,” Pal said.

Pal added, along with other economists, that even Ohio’s modest job gains could slip away if the current coronavirus outbreak further disrupts business and beats down stocks leading to a broader recession.

“The recession risks have increased with the stock market (drop since late February),” Pal said.

Meanwhile, California has added twice as many factory jobs as Ohio and Texas has added five times. With nearly 77,000 new factory jobs in three years, Texas alone has added more manufacturing jobs than the Rust Belt states combined.

And Florida, Arizona and Nevada – states more associated with tourism than industrial production, have each added more factory jobs than Ohio since the 2016 election.

Ohio factories: recession, rebound, restlessness

Ohio’s manufacturing industry needed a boost by Election Day 2016. The sector had been in recession seven of the previous 10 quarters due to a slumping worldwide economy and soaring U.S. dollar that killed overseas demand and a worldwide oil glut that threatened the fracking industry.

After he was elected, Trump delivered on his threats to levy tariffs and wage a trade war. The effects hit Ohio immediately.

Marlon Bailey, president of Fairfield’s Art Metals Group, said tariffs on steel and aluminum raised the costs of his raw materials 20 to 40%.

While his factory uses mostly American-produced steel, domestic suppliers also raised their prices during the escalating trade war. Bailey, whose plant makes components and subassemblies for the auto and other industries, had to boost his prices and he lost some business from customers that turned elsewhere.

“That’s hard for a small company – we’ve been scrambling,” Bailey said, adding he had to let four of his 35 plant workers go.

Bailey predicts his business will rebound in 2020 after Trump lifted the tariffs last year.

The National Association of Manufacturers echos that sentiment. While the trade group is watching the unfolding coronavirus outbreak for its potential to disrupt supply chains – and the ongoing stock turmoil that could affect the broader economy, the association currently remains optimistic about the industry’s growth prospects.

“We anticipate confidence will creep up,” said the trade group’s CEO Jay Timmons told The Enquirer, adding the United States-Mexico-Canada Agreement (which replaces NAFTA) and cooling of China tensions have added “regulatory certainty” for manufacturers.

Manufacturing has rebounded to growth territory in the first two months of 2020, according to The ISM manufacturing Purchasing Manager Index. While the latest reading is down to 50.1 from 50.9, any reading above 50 is considered a sign of continued growth.

During the last five months of 2019, the closely-watched index had indicated American manufacturing was in a recession.

Timmons blamed the lower February reading on the outbreak of the coronavirus.

Still, some economists are not as optimistic, noting the coronavirus that has roiled the stock market and signs of slowing in the broader economy. If the U.S. economy slows, it will cut demand for production.

“Things are looking dicier – it’s quite possible we could enter a recession in the next two to three months,” said Gary Clayton, the chair of the Economics and Finance Department at Northern Kentucky University.

Clayton said that while the U.S. notched 2.1% economic growth at the end of 2019, he noted the biggest contributor to growth, personal consumption (consumer spending) had slowed to 1.7% growth and that the third-largest contributor, private domestic investment (business spending) shrank 6%.

“The consumer is turning cautious and businesses are cutting back,” Clayton said, adding that only government spending was on the rise.

Joel Elvery, a policy economist at the Federal Reserve Bank of Cleveland, said Ohio’s factories, which rely on international exports, are already under pressure by a waning worldwide economy outside of the U.S.

“The economies of our trading partners are slowing in Mexico, Brazil, Europe and China,” Elvery said.

He added a surge for the manufacturing sector in 2017 and 2018 that goosed the economy might not have reflected a rebound, but a “pull-ahead” effect as those businesses prepared for the trade wars threatened by the new president.

“People were building up inventories before the trade war,” Elvery said, adding that the slowdown in manufacturing activity in 2019 might have looked worse as a result of the comparison.

Ohio lost jobs as China exports took off

As bad a rap as the North American Free Trade Agreement (NAFTA) got, manufacturing jobs in the U.S. (and Ohio) were steady throughout the 1990s. While Trump made bashing the old trade pact with Canada and Mexico that took effect in 1994 a cornerstone of his campaign, American manufacturing jobs remained about 17 million jobs by 2000.

But a third of manufacturing jobs – more than 5 million – swiftly evaporated after China entered the World Trade Organization in 2001, flooding the U.S. and the world with cheap goods.

China exports to the U.S. soared from $250 billion in 2000 to $2.5 trillion in 2018, according to the World Bank.

Ohio was the biggest loser among the Rust Belt states (and second-hardest hit nationwide behind California). The Buckeye State has lost nearly 305,000 jobs since 2000 – more factory jobs than currently exist in Washington, Missouri or Alabama.

Other big factors played a role in the loss of factory jobs: The Great Recession – the deepest downturn since the Great Depression – hammered the manufacturing sector; also automation, which is credited with keeping state-side production but employing fewer people.

The eight Rust Belt states alone lost 1.7 million factory jobs in the New Millennium – about one-third of job casualties nationwide.

Despite the carnage, manufacturing remains an outsized force in Ohio’s economy, accounting for 12.5% of employment or one in eight jobs statewide, compared with 1 in 12 nationwide.

Art Schaller Jr., president of a small third-generation manufacturing firm in Cincinnati’s West End neighborhood, said foreign competitors got into his industry after the 9-11 attacks and have never left, forcing him to diversify and adapt. His factory’s workforce has shrunk from 48 to 28 in the last two decades.

Schaller’s tale is hardly unique in the Rust Belt. The only thing that distinguishes his experience from legions of other Ohio small manufacturers is maybe his line of business: his company, The National Flag Co. makes American flags.

“After 9/11… it did open doors for an influx of foreign-made imports and they have not gone away, Schaller said. “I get 3-4 emails a week (complaining) about China-made flags & banners.”

@alexcoolidge

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