Michigan manufacturing sees ups and downs on Trump’s watch
A Ford Motor Company workers works on a Ford F150 truck on the assembly line at the Ford Dearborn Truck Plant on September 27, 2018 in Dearborn, Michigan. The Ford Rouge Plant is celebrating 100 years as America’s longest continuously operating auto plant. The factory produced Eagle Boats during WWI and currently produces the Ford F150 pickup truck. | Bill Pugliano/Getty Images
In 2016, Donald Trump ran on “bringing back” manufacturing jobs to Rust Belt states like Michigan, which was one factor in his surprise wins in Michigan, Wisconsin and Pennsylvania (and less surprising victory in neighboring Ohio).
The results of that promise, however, have been quite muddled.
Michigan is down 5,300 manufacturing jobs since Trump took office in January 2017, although overall employment is up. Eighteen counties that swung from now-former President Obama in 2012 to Trump in 2016 lost manufacturing jobs.
“The heart of the [economic] slowdown has really been in manufacturing. The global manufacturing sector is in a recession right now, but the U.S. is doing a little better than everyone else,” Aditya Bhave, vice president and global economist for Bank of America Merrill Lynch Global Research, said during a Business Leaders for Michigan event in Detroit in November.
Recent months in Michigan, however, have seen ups and downs for the manufacturing industry, as steel companies have idled due to “current market conditions,” all while the Big 3 automakers in Detroit — General Motors, Ford and Fiat-Chrysler — have launched multibillion-dollar investment efforts here.
Those conditions are combined with vast uncertainty from trade and tariff policies from the Trump administration.
One big wildcard in the election is a brand-new trade deal that netted overwhelming bipartisan support in Congress.
Trump last month signed the United States-Mexico-Canada Agreement (USMCA) — although he only invited Republicans to the signing ceremony, irking Democrats. He came to Macomb County auto supplier on Jan. 31 to celebrate the victory.
In his February State of the Union address, Trump also touted the USMCA, saying that it would help with “bringing back our manufacturing jobs, expanding American agriculture, protecting intellectual property, and ensuring that more cars are proudly stamped with four beautiful words: made in the USA.”
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But despite widespread legislative support, manufacturing experts note that the USMCA is largely a replacement of the dated free trade deal, the North American Free Trade Agreement (NAFTA).
The USMCA’s largest impact is “ending a period of great uncertainty” for manufacturers,” said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research (CAR) in Ann Arbor.
“On the margin, it will move some production to higher-wage regions of North America to Canada and the United States,” Dziczek said. “There’s some job impacts to that, but because we’re not going from no agreement to free trade, the effects are pretty marginal.”
Trade tensions between the United States and China also appear to be cooling, as both Trump and China President Xi Jinping recently reaffirmed their support for the first phase of a new trade agreement, according to a Reuters report.
It’s hard to overstate the role of manufacturing in Michigan and the economic impact it brings.
Manufacturing makes up 19% of the state’s gross domestic product (GDP), accounting for more than $96 billion in revenue, and more than 14% of the state’s workforce are employed in the manufacturing sector, according to figures from the National Association of Manufacturers, a Washington, D.C.-based trade group.
While economists say that 2019 presented challenges and uncertainty for manufacturers and a whole host of other industries, there’s some evidence that things could be on the upswing.
A November forecast report from the University of Michigan’s Research Seminar in Quantitative Economics said that 2019 “provided a tough test for Michigan’s economy.”
“We believe that after slogging through much of 2019,” the report reads, “Michigan will return to moderate, but sustained expansion in 2020 and 2021,” the report said.
The forecast predicts the state added 23,300 payroll jobs in 2019 and will add another 54,900 new jobs in 2020 and 2021.
Meanwhile, the Big 3 automakers have all been on a tear in the last year, with multi-billion dollar investments around metro Detroit as they attempt to keep up with the demand for profitable trucks and SUVs and prepare for a driverless future.
But while large Tier 1 automakers continue to weather the storm, albeit with generally lower earnings, many of their suppliers and related industries are feeling an even stronger pinch. And it’s having a direct impact on the lives of working Michigan residents.
Shawn Crowley, 38, works at Gerdau Special Steel in Jackson. The company announced last month it’s laying off more than 100 employees. Although he’s not one of them, Crowley said it’s been a tough few years for he and a lot of workers in the steel industry.
“You have to understand that foreign companies have been dumping steel here on the cheap for years,” the Jackson resident said. “That put a lot of us at risk and then the whole tariff war comes in.”
Crowley said he’s not optimistic that the administration will end the trade war anytime soon.
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Wages also have been “kind of flat,” Crowley told the Advance, which has made it hard to keep up with other living expenses, like health insurance premium hikes.
Nationally, real wages in manufacturing slipped 2.4% last year.
“People pay a lot of attention to the stock market, but that’s not the same thing as the economy,” he said. “People make millions and billions in quick money, but they don’t think about the people who have lost their jobs. A lot of people in the country don’t see that perspective.”
Crowley’s company isn’t the only one in the steel industry to be hit hard. Just before Christmas, U.S. Steel, a Pittsburgh-based giant, announced that the company plans to “indefinitely idle” its facility in River Rouge, southwest of Detroit.
U.S. Steel CEO David Burritt cited “market conditions” in a statement announcing the idling of the Great Lakes Works operation.
“In order to further accelerate our strategy of creating a world-competitive ‘best of both’ U.S. Steel, we must make deliberate but difficult operational decisions. In this case, current market conditions and the long-term outlook for Great Lakes Works made it imperative that we act now, allowing us to better align our resources to deliver cost or capability differentiation across our footprint,” Burritt said.
“Transitioning production currently at Great Lakes Works to Gary Works will enable increased efficiency in the use of our assets, improve our ability to meet our customers’ needs for sustainable steel solutions and will help our company get to our future state faster.”
The move by U.S. Steel drew the condemnation of Michigan lawmakers like state Sen. Stephanie Chang (D-Detroit), who represents the River Rouge area and in a statement appeared to place the blame squarely at the feet of the Trump administration’s policies.
“I am disappointed to hear the United States Steel Corporation’s announcement to indefinitely idle their River Rouge facility,” Chang said. “It is unfortunate that our hardworking men and women are again paying the price for Washington’s detrimental policies that have led to the market conditions US Steel and so many others have been facing.”
Pennsylvania’s manufacturing industry has seen ups and downs, but its role in the state’s economy is still large. According to the the National Association of Manufacturers, an industry trade group, manufacturing output was worth $93.75 billion. That’s almost 12% of the commonwealth’s GDP.
The Bureau of Labor Statistics lists 575,000 manufacturing jobs in Pennsylvania. Those workers bring home a weekly paycheck of $1,199, or roughly $62,348 over the course of a year. Overall, this makes Pennsylvania the sixth-biggest state for manufacturing jobs, with only fellow Rust Belt states Ohio and Michigan ahead.
But David Taylor, president of the Pennsylvania Manufacturer’s Association, an industry lobbying group and trade association said those employment numbers could be even higher.
“There are 6,000 open manufacturing positions where our employers are having great difficulty in finding qualifying employees,” Taylor said.
At times over Trump’s first term, Pennsylvania’s most symbolic industry, steel, looked to be on the upswing. Last year, U.S. Steel promised to invest $1 billion into three steelmaking facilities south of Pittsburgh — including the 145-year-old Edgar Thomson Steel Works in Braddock, Pa., outside Pittsburgh. The investment would make the plant more efficient as well as reduce pollution, the company said.
“This is a truly transformational investment for U.S. Steel. We are combining our integrated steelmaking process with industry-leading endless casting and rolling to reinvest in steelmaking and secure the future for a new generation of steelworkers in western Pennsylvania and the Mon Valley,” David Burritt, the company’s president and CEO, said in a May 2019 press release.
The decision came as the industry was riding high on tariff-juiced steel prices. Since, prices have fallen, shrinking revenues. U.S. Steel finished 2019 in the red, and also announced that it was slowing down its previously announced investment in Pennsylvania. Instead, it was purchasing an under-construction mill in Arkansas that turns scrap metal into usable steel.
“We’re actually pivoting to the future and focusing on the company we want to become,” Burritt said at the time, according to the Pittsburgh Post-Gazette.
Wisconsin winners and losers
Manufacturing in the Dairy State appears to be holding up better than in many of its surrounding states and even, until recently, the nation as a whole. At the same time, challenges ranging from trade to worker shortages have dampened at least slightly an otherwise enthusiastic community of factory operators.
“The state of manufacturing in Wisconsin is actually pretty good right now,” said Buckley Brinkman, executive director of the Wisconsin Center for Manufacturing and Productivity (WCMP). Brinkman considers workforce development and longer-range strategic challenges among the sector’s top priorities.
The center is a consultancy that collaborates with WMEP Manufacturing Solutions — another networking and consulting organization — and the University of Wisconsin-Stout Manufacturing Outreach Center to aid small and medium-sized manufacturers.
In Wisconsin, manufacturing accounted for $63.3 billion in output in 2018 (the most recent year for which figures are available), just under 19% of the state’s GDP, according to the National Association of Manufacturers. The sector employs about 16% of Wisconsin’s non-farm workforce.
Conflicting measurements complicate assessing how well manufacturing jobs are actually doing, though. Federal government reports don’t even agree on whether the state is starting to lose ground or continuing to expand.
Based on monthly projections from the Bureau of Labor Statistics, Wisconsin had about 473,400 manufacturing jobs in December 2019, a 1% drop from a year earlier.
But Dennis Winters, chief economist at the Wisconsin Department of Workforce Development, says those numbers appear to be off target. The monthly reports, he says, come from surveys that throughout 2019 have “underestimated the Wisconsin manufacturing sector.”
More accurate quarterly reports, based directly on payroll records, have so far outpaced the monthly projections, showing an increase for the first six months of 2019. He expects the state’s third-quarter 2019 report, due by the end of February, to continue that upward trend.
National data also suggests a better picture. For five straight months from August through December 2019, the national factory index from The Institute of Supply Management (ISM) consistently fell below 50, a sign of contraction in manufacturing. Then, in January 2020, it jumped to 50.9, indicating an expansion.
Bolstered by that news, “I don’t see a turndown here anytime soon,” Winters says. “I think we weathered the storm and the angst that was there certainly due to the last half of last year.”
The scene in Ohio
At the start of 2019, Ohio manufacturers held 706,800 jobs, according to preliminary numbers from the Bureau of Labor Statistics. By the end of the year, preliminary numbers say the state had 701,500 jobs in the industry.
Jamie Karl, of the Ohio Manufacturing Association, said there has been growth overall, and the industry within the state has increased since Trump took office.
“Over the last year, we have fluctuated, and I would attribute that in part to the tariffs,” Karl said.
In the context of a decade, the state’s industry changes are only slight. In December 2009, Ohio reported 613,600 manufacturing jobs. In the month before Trump was inaugurated, the state held 687,600 jobs.
Karl said Ohio seems to be unique in the country as far as manufacturing growth.
“I don’t think there’s this story of maintaining manufacturing jobs in other states,” Karl said.
Still, projections by the Ohio Department of Job and Family Services say the industry will lose 40,000 jobs by 2026, an almost 6% loss. The biggest projected losses are in rubber product manufacturing (23%), printing and related support activities (18.2%), and glass manufacturing (16.7%). Iron and steel mills and industrial machinery manufacturing are close behind, with projected losses of between 15 and 16%.
Naturally, the role of manufacturing in the U.S. economy, and particularly in swing states like Michigan, is an issue the myriad Democratic presidential candidates have sought to use as key components of their platforms.
Former Vice President Joe Biden has a lengthy bullet-point plan to “revitalize manufacturing across the country” posted on his website. So does U.S. Sen. Elizabeth Warren (D-Mass.). Other major Democratic presidential hopefuls including U.S. Sen. Bernie Sanders (I-Vt.), former South Bend, Ind., Mayor Pete Buttigieg and U.S. Sen. Amy Klobuchar (D-Minn.) also have elements of policy proposals aimed at the revitalization of U.S. manufacturing.
But automotive industry analyst Dziczek notes that the economic policy plans to help the manufacturing sector need not be particularly complex.
“What they really need to do is create good, solid economic growth,” Dziczek said. “That helps manufacturing.
Dziczek also had one more bit of advice for presidential candidates who want to help manufacturers.
“Settle down with the tariffs a bit,” Dziczek said.
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