Lance Lambert reports:
Local factories cut back on hiring in July, potentially slowing the pace of economic recovery in the region.
Manufacturing employment in Greater Cincinnati dropped slightly in the past 12 months, with the most recent monthly data showing a year-over-year decline in the total number of manufacturing jobs. The drop in employment comes after two years of robust manufacturing growth.
Local economists say the slowdown is problematic because one out of every nine workers is employed by manufacturers making everything from jet engine components to medical test kits.
“Cincinnati still has a significant manufacturing sector, and over the course of the past year the sector has grown slower than first thought,” said LaVaughn Henry, vice president of the Cincinnati branch of the Federal Reserve Bank of Cleveland.
June marked four years since the Great Recession officially ended, during which Greater Cincinnati made significant employment gains. But the local Purchasing Manager Index, a broad measure of business activity, shows the region’s overall economy has contracted in five of the past 12 months.
Economists blame the ripple effect on manufacturing, which helps stimulate employment in restaurants, service industries and banking.
“For every manufacturing job on the payroll, that should create two other jobs somewhere else in the economy,” said Janet Harrah, senior director of Northern Kentucky University’s Center for Economic Analysis and Development.
Henry said the manufacturing sector makes up a slightly higher percentage of Cincinnati’s employment compared to the nation’s, which is why even a small drop has a bigger effect here.
Economists point to multiple reasons for the manufacturing slowdown, including rising interest rates.
“Manufacturing relies heavily on credit to finance inventory and equipment,” said Michael Jones, research assistant professor at the University of Cincinnati Economics Center.
Harrah said the drop in local job growth can be attributed to a fall-off in non-durable goods manufacturing. Non-durable goods are those expected to be used by consumers for three years or less.
Bureau of Labor Statistics data show non-durable manufacturing jobs in the 15-county Cincinnati metropolitan area decreased 1.8 percent year-over-year in July, while durable goods manufacturing jobs made slight gains during the same period.
Durable goods are coming back at a faster pace because they took a bigger hit during the recession, said Chad Moutray, chief economist for the National Association of Manufacturers.
He said manufacturing job growth has been sluggish the past year due to uncertainty around the federal fiscal cliff, increases in taxes and the sequester, but manufacturing employment should pick up next year.
Newtown-based Meridian Bioscience Inc., which manufactures diagnostic test kits, has increased employment at about the same rate for the past few years and has managed to hold steady the past few months.
CEO Jack Kraeutler said the company invested most of its recent profits into research and development, which he expects will increase growth.
Meridian Bioscience expects to hire about 20 more manufacturing workers over the next 18 months as it also brings some previously outsourced production in-house.
“We launched new technology and had a number of components made by third parties, so we could make it to market sooner,” Kraeutler said. “What we have done is identified space here where we will outfit some of those functions.”
Posted in: News |