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Tech downturn means big job losses in Rochester
by Erin Galbally, Minnesota Public Radio
December 9, 2003

Electrical engineer Gerald Fagerness lost his $100,000 a year job at IBM in summer 2002. Fagerness, 52, has been thinking about starting a new a career as a truck driver. He says he doesn't expect to earn a six-figure salary again. (MPR Photo/Erin Galbally)

The manufacturing boom of the 1990s brought thousands of high-paying jobs to communities around the state. But since the recession began in 2001, many of those jobs have disappeared. The technology sector has been one of the hardest hit. Rochester, home to a massive IBM plant and more than four dozen technology companies, lost one-fifth of its manufacturing jobs.

Rochester, Minn. — In 2000, Y2K anxiety came to an end, the dot-com bubble started to burst and demand for new computer equipment began to fall.

In Rochester, IBM welcomed the new year with a series of layoffs, and disk drive manufacturer Western Digital announced plans to shutter its local plant. The combination left roughly 1,000 Rochester area computer manufacturing workers unemployed.

Around that time electrical engineer Gerald Fagerness was helping to design a new IBM processor chip. Two years later the technology sector remained depressed, and in the summer of 2002, Fagerness lost his job. The search for new employment has not gone well.

"Everyone I worked with in that department that got laid off, are still laid-off," says Fagerness.

	Learning a new trade

It's late morning, and Fagerness sips coffee at a busy Winona restaurant. He recently moved to Winona, a Mississippi River town 45 minutes away from Rochester, to save money.

Before Fagerness was laid off, he was making close to $100,000 a year. These days he picks up odd jobs, and is living on the last of his savings.

Fagerness was caught in the downdraft that hit Rochester's manufacturing sector. The city has lost 20 percent of its manufacturing jobs since the peak in 1998 -- that's more than 2,700 jobs as of October. State research indicates Fagerness is not unusual. Many displaced technology workers in the Rochester area are having difficulty finding work.

Fagerness, 52, has given serious thought to starting a new a career as a truck driver. He says he has no expectation that he'll earn a six-figure salary ever again.

"I don't ever expect to make what I made in the digital design business," he says. "I don't see that happening, with the world economy and the way the Internet is affecting the technology sector."

Fagerness says he's sent out hundreds of resumes around the tri-state area. It's been more than a year and half since he lost his job with IBM, and Fagerness has landed just one interview.

Todd Graham studied the plight of Rochester's laid-off technology workers for the Minnesota Department of Employment and Economic Development. Graham says while about 75 percent of the workers in his study eventually found new jobs, the positions tended to be in different fields, where starting wages were less. He calls the re-employment rate lower than the rest of the state.

I'd just as soon do something that's going to stay in this country, and not pack up and leave. ... It's pretty hard to pack up a building and ship it overseas. - Scott Christian, who's becoming a building mechanic

Graham says part of the problem is that hard economic times have forced the computer hardware industry to reorganize. Graham says that's resulted in a wave of potentially permanent job losses.

"Not all jobs that have disappeared will come back," Graham says. "This is a difficulty for the engineers and a lot of computer professionals in our state. We just don't know if these jobs are going to come back."

Graham says the best advice for many technology workers is to retrain for a new career.

That's what Scott Christian is doing. He's just completing his first semester at the local community college, after nearly two decades in technology manufacturing.

Christian's job in computer programming at Rochester's Celestica plant was eliminated when the company decided to ship the work overseas. The plant closed this past summer, leaving some 650 workers jobless.

Christian says it made him decide it was time to get out of manufacturing. Now the father of three says he wants to use his technical abilities to become a building mechanic.

"I'd just as soon do something that's going to stay in this country, and not pack up and leave. As one of my classmates said earlier in the year -- it's pretty hard to pack up a building and ship it overseas," says Christian.

Christian says many of his classmates are also former Celestica workers.

"I think the majority of us, as we were leaving our past careers, left with the attitude that this isn't fun now, and it probably won't be for the next year or two. But I'm hoping in two to three years from now, we'll be looking back saying we're better off now. I intend to make that happen," says Christian optimistically.

Christian says he's prepared to take an initial pay cut. But he expects it won't be long before he begins to make just as much as a building mechanic as he did in manufacturing.

Since the technology market started to crumble, Rochester's workforce center has been hopping. Warren Oslin, a workforce development counselor, helps displaced workers find new jobs. He says it's been a busy time -- with more laid-off workers than expected signing up for help. Oslin says that's especially true in the case of the Celestica plant closing.

"We are currently at 550. It's double-plus what were expecting -- reflecting again the soft economy and the job market over the last few years," says Oslin.

	Pemstar worker

Oslin says placing workers back in manufacturing has been challenging. The sector continues to see job losses in Rochester, even while other industries appear to be hiring. From 2001 to 2003 Rochester was among the top Minnesota cities to gain new jobs.

Oslin says he still sees newly laid-off technology workers almost daily. But some are starting to find work.

"I probably had more people hired in the past 30 to 45 days of my caseload than in the past six months," Oslin says. "While this is significant, it's not overwhelming. In my particular case, we're talking about maybe a dozen people."

One Rochester-based technology company that's weathered the tech downturn is Pemstar. The company operates facilities around the world. Over the past 18 months, a major restructuring program has eliminated as much as 13 percent of the workforce. In Rochester, the cuts cost roughly 100 positions.

Pemstar CFO Greg Lea walks around the plant. He pauses and watches as women wearing blue lab coats peer over microscopes.

"They're actually testing and viewing printed circuit boards as they come out of a production facility," Lea says. "Think of a card that runs inside of your computer. That's what we would be assembling right here."

Lea says jobs like this will continue to stay in the U.S. at least for the time being -- low volume, highly-skilled positions. Meanwhile, more typical manufacturing work -- like assembling wireless handsets -- has already been sent to Asian or Mexican plants. And those jobs aren't likely to return.

State economist Tom Stinson says that's probably true of all manufacturing. The state has lost more than 50,000 jobs since the peak of 2000. While Stinson predicts some will return, it's unclear when and how much.

"I think manufacturing employment in Minnesota will come back. I'm not sure how strong, and it will take a while," says Stinson. "Nationally, no growth projected over the next decade, and if it's going to grow in Minnesota over the next decade, we'll have to increase our share of manufacturing."

Stinson says in the past, Minnesota has bucked the trend by gaining manufacturing jobs while the nation as a whole was losing them. But he predicts this time, global competition for those positions will be tougher, and it will be more challenging for Minnesota to regain the jobs the state has lost.

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