REGIONAL ECONOMIC BRIEFING Recent Developments in the U.S. Manufacturing Industry Kevin L. Kliesen Business Economist and Research Officer September 7, 2017 1
Disclaimer The views we will express today are our own and do not necessarily reflect the positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System. 2
The Big Picture (Macro Stuff) The U.S. economy has developed some momentum. Global growth is also strengthening. Hurricane Harvey will affect the U.S. economy; Q3 real GDP growth may be trimmed modestly. However, growth will probably be boosted in the fourth quarter because of rebuilding. Labor market conditions remain solid; capital spending appears to be picking up, as are exports. Inflation remains below the Fed s 2% target. 3
Manufacturing Facts Manufacturing output is volatile it is sensitive to changes in U.S. and world economic conditions. But U.S. manufacturing benefits more from stronger U.S. real GDP growth than foreign growth. Changes in the value of the dollar have modest effects on exports of manufactured goods. Manufacturers benefit from imports of intermediate materials that reduce their costs, which raises productivity and profits and wages. 4
A Slow Climb out of the Recession Manufacturing Production and Employment Index, 2012 = 100 150 140 130 Recession Employment Production Change since June 2009 120 110 Prod.: 18.6% 100 Employ: 6.0% 90 80 2000 2001 2003 2004 2006 2007 2009 2010 2012 2013 2015 2016 SOURCE: Federal Reserve, Bureau of Labor Statistics, and Haver Analytics 5
Favorable Labor Market Dynamics Labor Market Dynamics in the Manufacturing Sector Thousands of Workers 600 500 400 Hires Layoffs Quits Openings 300 200 100 0 2000 2002 2003 2005 2006 2008 2009 2011 2012 2014 2015 2017 SOURCE: JOLTS (Bureau of Labor Statistics) and Haver Analytics 6
THREE TAKEAWAYS FROM THIS MORNING S PRESENTATION 7
Fewer jobs in manufacturing. U.S. Employment Shares by Major Industry and Sector, 1939 to 2016 Percent of Total Nonfarm Payroll Employment 80 70 60 50 40 30 20 10 Manufacturing Services Construction Govt. 0 1939 1946 1953 1960 1967 1974 1981 1988 1995 2002 2009 2016 SOURCE: U.S. Bureau of Labor Statistics 8
But manufacturing output as a share of GDP has remained constant. U.S. Output Shares by Major Industry and Sector, 1947 to 2016 Percent of Real GDP 80 70 60 50 40 30 20 10 Manufacturing Services Construction Govt. 0 1947 1954 1961 1968 1975 1982 1989 1996 2003 2010 SOURCE: U.S. Bureau of Economic Analysis 9
Productivity growth in manufacturing exceeds services. Labor Productivity Growth, 1987 95, 1995 2005, and 2005 to 2016 Percent changes at annual rates 5.0 4.6 4.0 3.0 Nonfarm Business Manufacturing 2.0 1.6 2.7 2.8 1.2 2.0 1.0 0.0 1987 1995 1995 2005 2005 2016 10
REGIONAL ECONOMIC BRIEFING An Overview of Manufacturing in St. Louis Charles S. Gascon Regional Economist September 7, 2017 The views I will express are my own and do not necessarily reflect the positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System. 11
First glance: St. Louis looks very much like the US 16% Employment Share Output Share 14% 13.1% 13.7% 12% 11.7% 10% 8.5% 9.3% 8.4% Percent 8% 6% 4% 2% 0% Source: Bureau of Labor Statistics 12
Manufacturing employment shares vary within the region Calhoun County (No data available) Macoupin County 7.2% Lincoln County 16.0% Jersey County 3.8% Warren County 21.7% Franklin County 25.2% St. Charles County 10.9% St. Louis County 7.6% Madison County 10.3% St. Clair County 5.8% Bond County 18.3% Clinton County 7.8% Source: Bureau of Labor Statistics Jefferson County 8.5% Monroe County 4.3% St. Louis City 7.5% 13
Manufacturers headquartered in St. Louis Company Name Industry Revenue (Billions) Local Employees Emerson Electric Sigma Aldrich Electrical Engineering Biology, Chemistry, and Materials Science $23.2 2,600 $6.8 2,000 Edgewell Personal Care Consumer $2.2 175 products Energizer Holdings Batteries $1.7 400 Belden Inc. Electronics $1.3 334 American Railcar Industries Railcars $1.1 277 Source: Compustat, St. Louis Regional Chamber, St. Louis Business Journal, and St. Louis Post Dispatch 14
Other major local manufacturing employers Company Name Industry Local employees Boeing Aerospace 14,000 GM Auto 4,600 Anheuser Busch InBev Brewery 4,300 Mallinckrodt Pharmaceuticals and 2,500 Medicine Nestle Purina Pet Food 2,200 U.S. Steel Steel 2,200 Source: St. Louis Regional Chamber 15
St. Louis manufacturing subsectors Transportation Equipment, 23k jobs Other, 33k Machinery, 13k Primary Metals, 7k Plastics/Rubber Products, 7k Chemical, 12k Food, 9k Fabricated Metal, 10k 16
Concentration of employment relative to national average 3.5 3.6 3 Employment Concentration Relative to U.S. Average 2.5 2 1.5 1 0.5 1.0 1.0 1.9 2.4 1.7 2.1 1.9 0 Source: Bureau of Labor Statistics 17
Manufacturing wages average around $1,361 per week $2,000 $1,750 2,003 1,856 1,869 Avg. Weekly Wage $1,500 $1,250 $1,000 $750 1,285 1,361 Avg. National Wage Avg. St. Louis Wage $500 * Source: Bureau of Labor Statistics 18
Does the local decline in manufacturing look like the US? St. Louis U.S. St. Louis U.S. Share of Nonfarm Employment 18% 16% 14% 12% 10% 8% Loss from mfg. job decline Loss from shift to service sectors United States Transport Equipment Primary Metals Computers/ Electronics Apparel Other St. Louis 9% 8% 6% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Bureau of Labor Statistics 19
Is there evidence of right to work laws increasing employment shares in manufacturing? 35 Manufacturing Employment Share 30 25 20 15 10 5 Michigan West Virginia Texas Oklahoma Wisconsin Indiana 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Bureau of Labor Statistics and author s calculations/national Conference of Legislators 20
Advanced manufacturing Advanced industries defined as: R&D spending per worker at least $450 At least 21% of jobs require STEM knowledge 35 manufacturing subindustries are advanced Including aerospace products, motor vehicles, chemical, petroleum/coal, and more Roughly 40% of manufacturing employment is advanced Source: Muro, Rothwell, Andes, Fikri, and Kulkarni (Brookings Institute, 2015) 21
NOTE: There was a sector omitted in the version presented, this slide was updated on 9/13 with corrected data. Advanced manufacturing has declined as share of manufacturing employment in St. Louis 50% Share of Manufacturing Employment 48% 46% 44% 42% 40% 38% United States 45% 44% Missouri 42% St. Louis 36% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Bureau of Labor Statistics and author s calculations 22
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