A new state survey suggests Minnesota manufacturing is stabilizing, and may even be slowly experiencing an economic rebound. Minnesota has lagged behind the rest of the country in climbing out of the recession. One major reason was the predominance of manufacturing in the state's economy. Manufacturers took the brunt of the economic downturn.
The recession hurt manufacturers more than every other sector of the Minnesota economy. In the second half of last year, Minnesota manufacturers shed 25,000 jobs - more than any other industry.
Now a survey of 256 state manufacturers found that more than 40 percent of manufacturers surveyed believe business will get better in the coming six months. At least 80 percent of those surveyed expect no further job reductions. Among those optimistic companies is Plastech, a plastic injection molding company based in Rush City.
What's more, Plastech's largest customers are the major manufacturers in Minnesota - 3M, Toro and Polaris to name a few.
Owner and CEO Dennis Frandsen says December was the only bad month for business. "November was a good month, January was a good month, March is a good month So things seem to be quite well. And we're busy," according to Frandsen.
"We are seeing some signs indeed that manufacturing is turning around," says Art Rolnick, vice president of research at the Minneapolis Federal Reserve, which helped conduct the survey.
He points out that of all sectors in the economy, manufacturing took the biggest hit after the Sept. 11 terrorist attacks.
Manufacturing is one of the state's largest industries, comprising 18 percent of the state's economic output. And it pays extremely well; an average of $40,000 a year for a 40-hour-a-week job.
For those reasons, Rolnick says, signs the industry is rebounding are indicators that a recovery is on its way. "I think that's critical," he says. "I think that they went through the worst part of the recession relative to the other sectors in this economy. And so if they're coming back, odds are that by the end of this year, this economy should like it's in pretty good shape."
But predictions of a recovery are not unanimous.
Buck Huot, CEO of Huot Manufacturing, based in St. Paul. says manufacturers in general, and his company in particular, are not yet buying new production equipment - a move that would certainly indicate confidence that demand is rising.
"Manufacturers for the most part, they're just holding their own and not investing in new capital equipment. The banks are not encouraging manufacturers to invest in new capital equipment, or at least or bank isn't," he says.
In January, poor sales forced Huot to reduce work hours. A week ago, the company brought back the 40-hour week after business picked up in January and February. But March numbers were lackluster.
So Huot says it's too soon, from his perspective, to say there's an economic recovery underway. "It's probably coming back a little bit, but it's not real strong yet, not at all. If March had continued as good as February had, we'd going full board. But as it is, we just went back to 40 hours here a week ago."
The commissioner of the Department of Trade and Economic Development, Rebecca Yanisch, says despite optimism reflected by the survey, many manufacturers agree with Huot.
"Many of the manufacturers are being quite cautious about the speed of the recovery here. Many of them are talking about more of a stabilization or a kind of holding their own, rather than a kind of speedy recovery or a large increase in investments," she says.
For now, manufacturers will continue to monitor market indicators for signs that the economy is rebounding.
"To date there's probably been a stabilization, but there hasn't been any evidence of a dramatic recovery," according to Glenn Stolt, treasurer for G&K Services in Edina, which makes uniforms for businesses.
G&K's business is uniquely tied to the economy; the more people who have jobs, the more people need G&K's uniforms. So as layoffs mounted over the last several months, revenues dropped.
Stolt says G&K is still finding new customers, but old ones are still spending less. "Our ability to penetrate the market has not slowed down in the current economy. Our existing customers however have continued to pare back their employment basis to cut costs out of their organization," he says.
Stolt agrees G&K may soon be seeing demand for new uniforms rise.
New national statistics show a healthy month-to-month increase in manufacturing activity, defying predictions to the contrary.