As National Manufacturing Rebounds, Arkansas Offers A Different Picture

As national manufacturing rebounds, Arkansas hasn’t been an obvious beneficiary, but economic development leaders are hoping to turn that around as an industry paradigm shift occurs.

The numbers don’t lie and they paint a bleak picture of the state’s manufacturing sector for the last two years.

Since the Great Recession’s trough in December 2009, Arkansas lost 4,100 jobs in its manufacturing employment base, which today stands at an estimated 155,000 workers, or 13% of the state’s total non-farm workforce.

The overwhelming majority of those state layoffs — 4,000 jobs — occurred in the “nondurable goods” subsector during the past two years, according to Arkansas Department of Workforce Services and U.S. Labor Department statistics.

Nondurable goods are items that do not have a long shelf life, typically less than 3 years. They include foods, cosmetics, cleaning products, paper goods, and clothing. Durable goods are items with a longer life expectancy, such as automobiles, refrigerators, washing machines, jewelry and bricks.

During the same two-year period that Arkansas manufacturing employment tumbled — December 2009 to December 2011 — U.S. manufacturing gained a net 334,000 jobs led by the revived auto sector. However despite that big gain, nondurable manufacturing jobs in America have fallen by 47,000 workers during the two-year stint, a decline similar to the one seen in Arkansas.

“Arkansas’ manufacturing sector, historically, has been centered more in the production of non-durable goods, instead of durable goods,” said Greg Kaza, an economist and executive director of the Arkansas Policy Foundation.

He noted that several gubernatorial administrations have talked about attracting a durable goods manufacturing superproject to Arkansas, such as the state’s near decade pursuit of a Toyota factory in the Delta.

“To date, that goal has not been achieved,” Kaza said. “Instead, one can observe large durable goods manufacturers departing Arkansas. The best example is Whirlpool in Fort Smith.”

LAYOFFS HIGHLIGHT THE DOWN SIDE
As Kaza points out, it is not difficult to find examples of major manufacturing setbacks around the state.

The pending layoffs at Fort Smith’s Whirlpool facility will wipe out about 1,000 direct jobs. Suppliers to Whirlpool have recently announced scores of layoffs. A $100 million Mitsubishi wind turbine plant in the region has yet to materialize it’s expected 400 new jobs due to pending litigation.

Other higher-profile manufacturing layoffs, involving durable and non-durable goods, have been reported at Welspun Pipes, Cargill, Georgia-Pacific and Yarnell’s Ice Cream. Every area of the state has experienced a major hit in the last two years.

In the summer of 2011, Arkansas reported an advanced uptick in “mass layoffs,” a measuring stick used by workforce officials when a company lays off more than 50 workers during a five-week period. During the three months between May and July 2011, there were 61 mass layoff events in Arkansas — a stretch that rivaled the tipping point of the recession during October to December 2008.

During the May to July 2011 time frame, Arkansas manufacturing employment dropped 1,900 jobs with a supermajority of the layoffs occurring in the non-durable goods sector.

“What must happen to reverse this trend is a more statewide focus on growth and export by company leaders,” said Dan Curtis, president of Arkansas Manufacturing Solutions (AMS).

Curtis’ statewide group consults with manufacturing concerns to help them streamline operations and improve bottom lines. AMS, a division of the Arkansas Science and Technology Authority, also helps companies develop new product lines and market opportunities.

“If the state wants to see these numbers improve, the economic development groups must look for ways to support, encourage and drive innovation,” he noted.

‘SIGNS OF LIFE’
Examples of success stories abound, but the numbers suggest they are not out-gaining the failures.

Despite the state missing the strong U.S. rebound in manufacturing, there are some beneficiaries of the positive national momentum.

Shipping companies with national and international footprints like J.B. Hunt and Arkansas Best have enjoyed business growth, especially in the last 12 months. These transportation giants carry goods from producers to distributors and retailers.

Other out-of-state firms with major Arkansas operations, such as American Railcar, Nucor Steel, Cooper Tires and Superior Industries have benefited during the rebound. Two weeks ago, Asian food manufacturer JYC International announced a soybean processing facility in western Arkansas.

Other areas of the economy with ties to heavy durable goods manufacturing are also showing rebound potential.

“We’re seeing signs of life,” said Grant Tennille, interim director of the Arkansas Economic Development Commission. He describes the competition for the smaller number of good-sized projects as “brutally fierce.” Other local economic developers contacted for this story agree with Tennille’s viewpoint.

With the massive layoffs seen around the country from the recession and the softness in the jobs arena, Tennille said it is a “seller’s market for big projects.”

An example can be seen in Arkansas’ pursuit of a new Caterpillar hydraulic excavator factory. As many as 24 states, including Arkansas, and several countries are vying for the mega project, which could initially employ 1,400 workers. Gov. Mike Beebe (D) referenced the project in a Talk Business interview last week.

However, Caterpillar officials have been quoted in published reports saying they prefer to site the plant near a deep-water (ocean) port and near other Caterpillar operations. Obviously, that combination is not available in Arkansas.

Tennille said in recent months there has been a pick-up of interest in the aerospace, steel aluminum casting and natural gas industries — all of which have deep roots or tentacles in the manufacturing sector.

A tricky balancing act for the state is making sure it has a workforce prepared for the new manufacturing jobs that are to come. With advancements in technology, traditional manufacturing jobs are becoming more high-tech, requiring different skill sets and far fewer workers than in the past. Laid-off factory workers and new entrants in the manufacturing workforce will need advanced training often with robotics, computers or software. Greater technical skills allow fewer employees to be more productive, which will eventually skew the manufacturing rebound numbers.

“It’s an everyday thing to put workers in place to be ready for the jobs of tomorrow,” Tennille said. “As this starts to come back, I’m pretty confident that we’re going to be in a position to get those companies the workers they need.”