Posted by: Josh Lehner | December 14, 2016

Manufacturing Across Metros (Graph of the Week)

Economists spend a lot of time examining the manufacturing sector for a number of reasons. At least historically it employed a large share of the workforce. The industry is very cyclical and tends to lead or even drive the business cycle. However I think this relationship is changing. Manufacturing overall has been in recession or at least a state of stagnation since late 2014 and the economic expansion continues. This manufacturing weakness — due to the strong US dollar and pullback in oil, gas and related investment — has been a drag on the economy, no question. And yet such weakness did not send the economy into recession.

As manufacturing employment has leveled out and even seen some small job losses in the past year, now is a good time to take stock of where things stand. Nationwide, manufacturing employment today is nearly 14% smaller than prior to the Great Recession and the sector has recovered just 3 in 10 of its lost jobs. Here in Oregon, manufacturing has seen somewhat better trends, but still has not fully recovered from the Great Recession. Oregon manufacturing employment is nearly 10% smaller than prior to the Great Recession but has regained more than half its lost jobs. Oregon is not immune to the impacts of globalization and technological change, however this relative pattern of outperforming the typical state has happened since the 1970s. Oregon’s manufacturing employment has fallen like it has everywhere, but Oregon manufacturing as a share of U.S. manufacturing continues to increase.

All that said, the gains and losses are not spread evenly throughout the country or here in Oregon. This edition of the Graph of the Week compares manufacturing employment across the country’s metropolitan areas. Just 49, or 13% of the nation’s 367 MSAs and NECTAs have a higher number of manufacturing jobs today compared with employment prior to the Great Recession. Manufacturing employment for the median area is nearly 15% lower today.

msamanufacturing2016

Here in Oregon, Medford is one of those areas that has fully regained its lost jobs and really stands out when comparing trends nationwide. This is really good news and shows strong regional trends even as Medford was among the hardest-hit housing bust metros in the country. Guy Tauer, regional economist for the Rogue Valley, has a recent article on local manufacturing trends and Employment’s projections for the region.

Among the state’s other metropolitan areas, Portland has outperformed most other areas across the country but manufacturing employment still remains a few percentage points lower today. Albany, Bend, Grants Pass and Salem all have experienced trends that are pretty typical of an urban areas across the country. Corvallis and Eugene have seen worse trends than the majority of the nation. In the case of Eugene, as we have written about before, unfortunately most of these losses are structural or permanent due to the loss of the RV industry and the chip plant.

An excerpt from our office’s forecast on recent manufacturing trends:

Finally, the manufacturing sector has moved from all bad news to more of a mixed bag. The dollar has stabilized and exports are rebounding. Here in Oregon, all major industries are seeing better export growth than a year ago. Forestry and Wood Products continue to fall due to lower global demand, however the rate of decline has slowed somewhat. Nationally, international trade – the net of exports and imports – has added to GDP growth in recent quarters as well.

That said, manufacturing employment nationwide is down and Oregon has seen job losses in recent months too. New orders for capital goods remain weak, but stabilizing. Industrial production too remains weak with more industries showing year-over-year declines than gains, but these trends are not worsening. Two other leading indicators – average hours worked per week and the purchasing managers index – both remain in expansionary territory. All told, manufacturing is clearly no longer the bright spot it was a couple years ago, however it does appear the sector is working through the major issues of the strong U.S. dollar and weaker global demand and pullback in capital investment, largely in oil and gas and related sectors.

Another excerpt on the Oregon manufacturing outlook:

Manufacturing in particular was expected to see very minimal gains in the coming years. By all accounts this slowdown is here today in Oregon. Employment is down in recent months and flat over the past year. Expectations are for some additional lost jobs in the coming quarters, however a return to growth as the manufacturing cycle strengthens and works through its issues. Even so, the weak global economy and strong Oregon dollar will weigh on growth. What manufacturing gains are expected are among the state’s food processers, and beverage manufacturers, predominantly breweries.


Responses

  1. I’d like to add some additional color, if I may.

    Manufacturing isn’t monolithic.

    The larger industries within manufacturing have shown different employment trends over the past 10 years.

    Wood products has recovered about 3,000 jobs over the past five years, but is still down nearly 10,000 since 2006. Conversely, machinery is near its 2000 peak, at about 13,000 jobs last month. But transportation equipment manufacturing currently employs fewer than 12,000, which is a drop from the over 18,000 it employed in 2006.

    On the nondurable goods side of manufacturing, Oregon has seen continued, gradual reductions in paper manufacturing, which was at 4,100 jobs last month, down from 6,500 jobs in 2006. These losses were offset by food manufacturing, which has steadily risen from 22,300 jobs in 2006 to reach about 30,000 currently.

    These widely differing trends highlight how Oregon’s larger manufacturing industries were impacted disproportionately by the many changes in the economic landscape over the past 10 years.

    • Thanks David; appreciated and yes, of course, subsectors differ wildly as well. The regional composition of manufacturing matters too, as you note.

  2. […] Source: Manufacturing Across Metros (Graph of the Week) | Oregon Office of Economic Analysis […]

  3. […] we know that manufacturing employment in the Corvallis MSA is down and down considerably in the past decade, while Portland’s manufacturing employment has done […]

  4. […] The region’s lost manufacturing jobs are not cyclical, but structural. In some other regions, manufacturing losses were largely cyclical. Not in Lane County. It takes a long time to reorient an economy after suffering such large losses. […]


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