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St. Paul, Minn. — Minnesota has lost more than 54,000 jobs since the recession began last March. Manufacturing accounts for nearly two thirds of them. Companies have laid off workers by the hundreds and by the handful.
The customers of Metal Treaters in St. Paul represent a broad cross section of the manufacturing industry. The company processes parts for everything from snowmobiles to foosball tables. The company's heat treatments fine tune the parts' strength and flexibility.
Metallurgist Ed Barcikowski grabs a purplish piece of metal that looks like a Popsicle stick glued to a bolt. It's the driver for a nailing gun. He holds the threaded end in the center space of a copper coil.
"And as that high-frequency current passes through that coil, it heats the metal part. See it starting to turn blue now? You'll see it actually starting to turn red. We allow that to cool in the air, and that will soften those threads to where they can take that repeated pounding and not break in service," Barcikowski says.
Metal Treaters' president, Dale Roberts, says sales are down 10 to 20 percent from a year and a half ago. He's using fewer temp workers, left jobs unfilled, and laid off one or two.
"And that was the first time in 30 years. It's very difficult. We've tried to avoid it. But there comes a time when you really have to look at survival," says Roberts.
He expects business to pick up, but others are more gloomy. Survival has been harder for many firms in Minnesota's manufacturing industry. The sector includes giants like 3M and Medtronic, but more than half the manufacturing firms in the state employ fewer than 10 people. Layoffs big and small add up to a torrent. Minnesota has lost 38,000 manufacturing sector jobs since 2000. That’s 80 percent of the new jobs gained during the 1990s.
"This is the largest number of jobs lost in manufacturing during any recession in Minnesota," says Jay Mousa, research director for the Minnesota Department of Economic Security, which tracks employment in the state. He says Minnesota's manufacturing industry had strength in areas that grew during the 1990s, such as communications equipment, electronic and measuring devices.
"Most of the manufacturing gains the state made during the '90s, will disappear by the end of this year. During the '90s we added more than 46,000 jobs. By the end of 2002, we probably [will] have lost almost all that gain," says Mousa.
Only about 8,000 of those new jobs remain. Only food and chemicals firms added jobs in Minnesota over the past 2 years, and the gains were small. Every other category of manufacturing lost jobs. Industrial machinery and equipment firms shed the most.
Mousa says the most important reason for the job losses is a decline in business investment. "Businesses are simply --because of the recession and its aftermath -- have not spent on capital goods, and machinery and equipment," Mousa says. Manufacturing is more important to Minnesota's economy than to the national economy, Mousa says, because it represents a bigger portion of all jobs. In 2000 manufacturing accounted for more than 16 percent of all Minnesota jobs, compared to 14 percent nationally.
Tom Stinson, Minnesota's state economist, says manufacturing jobs tend to be higher-paying, and bring income into the state.
"In 1990 we ranked 16th in per-capita personal income among the 50 states. By 2001 we ranked 8th. We passed eight states. One of the reasons why we were able to perform that well because of our strength in manufacturing employment with those high paying jobs," says Stinson.
Stinson and others say several factors cast doubt on Minnesota's ability to regain the jobs lost. University of St. Thomas manufacturing professor Fred Zimmerman says some of Minnesota's job loss is cyclical and may eventually rebound. But he says U.S. manufacturers face growing competition.
"Other countries are investing a lot in new equipment. The plants in the orient and in Mexico are very automated plants. They're well equipped with new equipment, with highly skilled people working there. So, I don't know if it's all going to come back," says Zimmerman.
For laid off-workers, like Francis Schroeder of Champlin, the job market has taken a dramatic turn. After some 20 years as a machinist, he earned $22 an hour. But in February 2001, his struggling employer, a custom machining shop, laid him off. Since then, he hasn't seen a job that pays more than $19 an hour.
"I haven't changed jobs a lot but in the past as a machinist, I usually have three or four places that want me and I get to choose. Well, now if you can find one, you're lucky," says Schroeder.
Many employers are hurting too. Kurt Manufacturing in Fridley, makes a range of products including treadmills, industrial vises, and parts for some currently struggling companies like Boeing. Sales are well off their peak and below what CEO Bill Kuban had hoped.
"Not a profitable year for the corporation. Some of the divisions are doing fairly well, but some of the divisions are doing very poorly," Kuban says.
He has cut the payroll by almost half as a result. "We have many people on layoff right now. About 400 or 500 people," Kuban says. "We're down to a workforce of approximately 600 today."
Kuban says he's not optimistic about manufacturing's future in Minnesota. He's concerned about growing competition from China. But he's also losing business to Canada, with its much weaker currency and lower wages.
"We lost one project that was about $6 or $7 million to Canada here just three or four months ago," Kuban says. "We just couldn't compete with them on price."
Kuban also worries about so-called reverse auctions. Companies put up a batch of work for manufacturing contractors to bid on over the Internet. Kuban says the competition drives bids down so far it can be impossible to make a profit. Participants can watch the bid prices descend on a graph.
"Oh, that drops right off the cliff. It's like brinkmanship. The line, instead of running a little bit southeast, runs straight south. It just drops right off the edge towards the end," says Kuban.
State economist Tom Stinson says he's not optimistic about regaining lost manufacturing jobs either. He says national spending priorities are shifting towards the defense industry -- not a Minnesota strong suit.
Stinson also says manufacturing is not the state's only worry. Since the recession began, Minnesota has lost a higher percentage of jobs than the U.S. average. Stinson says the state has been hurt by job cuts in the airline and mining industries. He says Minnesota's economic recovery is lagging the national average, but the reason's unclear.
"The real question is whether this is just a timing problem, or whether there are changes that are underway that will affect the relative competitive position of Minnesota compared to other states," says Stinson.
Stinson says the answer won't be clear for another year or two.