Ualr Study Details Whirlpool Job Loss Impact

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The loss of about 1,000 Whirlpool jobs in Fort Smith will result in the overall statewide loss of almost 1,550 jobs and a labor income reduction of $61.15 million, according to an economic impact model prepared by Gregory Hamilton, senior research economist at the University of Arkansas at Little Rock, for our content partner, The City Wire.

Of the 1,549.4 estimated jobs lost, 472 are indirect — Whirlpool vendors, companies that do business with Whirlpool vendors, etc. — job losses and 80 are jobs lost outside of the Fort Smith region.

Benton Harbor, Mich.-based Whirlpool Corp. announced Oct. 27 the closing of its refrigerator manufacturing plant in Fort Smith by mid-2012.

The future of Whirlpool’s Fort Smith refrigerator-production plant has been in doubt for almost 8 years. In November 2003, the company announced a global restructuring plan that included moving some production from Fort Smith to plants in Mexico. Whirlpool has announced numerous production changes that have seen employment in Fort Smith drop from about 4,600 in early 2006 to around 1,000 today.

In the Fort Smith area, the loss of 1,000 manufacturing jobs will create a labor income loss in the region of $56.89 million. If there is a positive side to the loss, Hamilton’s figures show that the overall labor income loss from the 1,000 jobs is 0.93% of the region’s estimated $6.562 billion labor income value.

Of the 472 non-Whirlpool jobs estimated to be lost in the Fort Smith region as a result of Whirlpool’s closure, 300 are estimated to come from Whirlpool vendors.

“Reduction of 1,000 jobs at Whirlpool (WP) causes other business to reduce employment by approximately 300,” Hamilton noted in his report. “The loss of payrolls to the community and local expenditures derived from those payrolls causes a loss of 172 jobs.”

The 172 job figure is referred to as the “induced” effect from losing the Whirlpool jobs.

But the impact of Whirlpool jobs losses is deeper when considering the plant employed at least 4,500 in early 2006. Hamilton modeled the impact of Whirlpool jobs lost between early 2006 and today.

The loss of at least 3,500 jobs since 2006 has reduced overall employment in the region by 5,141.8 jobs, and created a labor income reduction of $199.118 million. The 3,500 jobs lost also caused the estimated loss of 281 jobs outside the Fort Smith region, according to Hamilton’s report. The labor income lost statewide — including the Fort Smith region — from the lost jobs totals $214.026 million.

Numbers become even more staggering when considering the overall impact of 4,500 jobs lost between early 2006 and when the Whirlpool plant closes in mid-2012.

Hamilton’s report shows the 4,500 jobs lost results in an overall job loss of 6,610.9 jobs lost in the Fort Smith region, and a labor income loss of $256.009 million. The labor income loss on the 4,500 jobs rises to 4% of the region’s overall labor income value. Combined Statewide and Fort Smith job losses resulting from the 2006 to shutdown period total 6,972.2, with the lost  labor income totaling $275.176 million — 0.43% of the statewide total labor income.

Manufacturing sector employment in September 2011 was an estimated 20,700, down almost 29% compared to January 2006 employment of 29,100. September 2006 manufacturing employment in the region was 28,300.

In November 2003, when Whirlpool first announced its global reorganization plan, manufacturing employment in the Fort Smith region totaled 28,500. Overall, manufacturing employment is down 32.5% between January 2001 (30,700) and September 2011.

The number of unemployed in the Fort Smith metro area has risen substantially from 6,227 in January 2006 to 10,531 in August 2011. The number of employed reached a high of 12,234 in February.

Manufacturing jobs in Arkansas during September totaled an estimated 154,800, down from 155,900 in August and well below the 159,800 during September 2010. The September 2011 jobs total is the lowest for manufacturing jobs in Arkansas since May 1968 when sector employment was 156,600. Also, the September jobs figure is more than 34% below the January 2001 sector employment of 236,000.

Fort Smith City Administrator Ray Gosack has attempted to mitigate the impact of the jobs and labor income losses by mentioning the jobs gained from the Sykes call center that began hiring in Fort Smith in March. The company now employs about 450, with company officials saying employment could reach 600 at its location in a portion of the former Phoenix Village Mall space.

However, comparing just the indirect effect of jobs gain and jobs lost shows a clear difference in impact. Tthe annual indirect labor income value from 600 Sykes jobs totals $2.387 million, well below the $13.99 million from the annual indirect labor income value from the 1,000 Whirlpool jobs.

Gosack has also said Mitsubishi will add jobs to the regional economy during the first quarter of 2012. But those jobs remain uncertain.

Mitsubishi Power Systems Americas (MPSA) announced Oct. 16, 2009, plans to build a $100 million, 200,000-square foot wind turbine manufacturing plant on 90 acres at Fort Chaffee. The plant, with construction almost complete, could employ up to 400 once fully operational. Mitsubishi officials once said full production and 400 jobs would be in place by the first quarter of 2012.

That date is uncertain because of an ongoing legal battle between Mitsubishi and General Electric.

Less than three weeks before Maria Haley, the director of the Arkansas Economic Development Commission, died following a brain aneurysm, she expressed concerned for the future of Whirlpool and Mitsubishi operations in Fort Smith.

And for further perspective, the indirect effect of losing 4,500 Whirlpool jobs causes another 1,336 jobs to be lost, according to Hamilton’s research, more than the Sykes or Mitsubishi jobs combined.

Paul Harvel, president and CEO of the Fort Smith Regional Chamber of Commerce, sent on Oct. 28 an e-mail to chamber members saying the work will soon begin to replace the lost Whirlpool jobs.

“We will begin next week with meetings with the State, City, UAFS, and Whirlpool to begin a plan for replacing these jobs and finding a company for this facility,” Harvel wrote. “Tim Allen will begin work at Your Chamber next week. He knows Whirlpool very well and also has good contacts with the company. We will also begin next week contacting our major Consultants regarding our process.”

Michael Tilley with our content partner, The City Wire, is the author of this report. He can be reached by e-mail at [email protected].