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Manufacturing Expands; Will Jobs/Wages Follow?

September 11, 2013 By Lee Egerstrom, Economic Development Fellow

Schult Homes of Redwood Falls is building, assembling, and shipping manufactured homes for North Dakota’s Bakken oil field boomtowns, cashing in on proximity to one of the region's few growth areas.

Like several other companies in what has become a rural Minnesota manufacturing hub in Redwood County, Schult Homes is both a barometer of the state and regional economy and a testament that manufacturing is in early stages of recovery.

Boomtowns of western North Dakota are helping the entire manufactured housing industry in the Midwest, not just his company, said Shult executive Jeff Wedan. But, he added, “We are seeing a recovery in the housing market.” Some categories of his manufactured homes this year have sales increases of 7 percent; others are up by 11 percent, he said.

There are 39 manufacturers based or operating in Redwood County (pop. 15,972) and most appear to be working through what has been a decade and more of decline for America’s manufacturing sector.

“There’s been some contraction, some shuffling (from communities and states), and some jobs lost to technology,” said Julie Rath, economic development specialist for the Redwood Area Development Corp. “We’ve been pretty fortunate. Our companies are looking pretty healthy.”

Anecdotal evidence throughout Minnesota shows companies are again investing in manufacturing. In time, these investments should produce what are generally thought of as “good jobs” – full-time positions that pay living- and middle-class wages, with benefits sufficient to support workers and their families.

At the same time, federal and state employment data show how much work remains before manufacturing might help lift household incomes and compensation packages up to achieve community-wide prosperity and reduce poverty.

A statewide look at monthly and second-quarter statistics suggest a modest rebound for rural Minnesota’s manufacturing, although employment numbers show rural communities are struggling with job growth. Month-to-same month comparisons this time next year will be more telling about the economy than simple month-to-month variations currently being tallied.

Consider these conflicting signals from recent Minnesota Department of Employment and Economic Development (DEED) reports:

On Aug. 27, DEED released data showing 1,500 new jobs were created in the second quarter from 80 business expansions in the first half of this year. Of them, about three-quarters were expansions in and around the Twin Cities; a quarter of them are in rural manufacturing communities.

Earlier, however, DEED released July employment numbers for the state. Private employers added only 300 jobs statewide while government – almost entirely local schools – added 4,000 positions.

Adam Belz, writing in the Minneapolis Star Tribune cited yet another DEED employment study showing job openings in Minnesota hit a 12-year high in the second quarter, 15 percent more than in the same quarter a year ago.

Unfortunately, nearly half were part-time position where the median wage offer fell 50 cents an hour from a year ago to less than $8.50 an hour. Rural job vacancyies increased only 6.7 percent.

Again, that might change when hiring catches up to expansions.

DEED’s Business Expansion Report found manufacturing and food processing account for the most business and plant expansions announced this year. Most involve companies already based or that have existing operations here. Only a few, like Way Better Snacks that moved from New York to Minneapolis and Capital Safety Group, which relocated from London to Red Wing, have come in search of greener pastures.

Jackson, in southwest Minnesota, has three business expansions underway that range from farm machinery to technology components manufacturing. Albert Lea, Dawson and Perham are among communities with food processing expansions underway. Alexandria, Chatfield, Fairmont, Fergus Falls and Wadena have plants expanding to produce agricultural or other heavy industry equipment.

All of these business and plant expansions combine two or more of rural Minnesota’s resource strengths, be they ties to the land, to area markets, to area infrastructure strengths, and especially local human resources. The same can be said for Sappi Fine Paper’s planned retrofitting of its Cloquet paper mill, and Grand Rapids-based Magnetation’s $120 million development of a mine and processing plant at Coleraine on the Iron Range.

North Dakota’s oil fields helped provide a market during an extreme slow period for America’s home construction industries. And, Schult, the Redwood County home builder, avails itself to other aligned resources that help employment and business growth in Minnesota. “We get two large truckloads of Norboard oriented strand board each week from Bemidji,” he said.

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