Arkansas manufacturing sector may fall below 150,000 jobs, down 100,000 jobs since 1995

After entering 2015 with big hopes and a potentially game-changing bid to land a flag-waving super project in the state’s neglected Delta region, Arkansas’ manufacturing sector has hit a wall in the second half of 2015 as the number of blue collar jobs in the state are sliding to the lowest level since the state began keeping such records.

On Oct. 20, following the release of the state’s September jobless report, the number of jobs in the state’s manufacturing sector declined for a fifth straight month to only 152,400 positions, down 1.8% from the same time a year ago.

According to Arkansas employment data compiled by the U.S. Bureau of Labor Statistics and maintained by the state Department of Workforce Services, the only time the number of manufacturing positions have ever fallen below that level was just over two years ago, when there were only 151,800 factory workers on payroll in July 2013.

But beginning in the fall of 2013, the blue collar, middle-class friendly sector appeared to be on an upward trend that continued through the end of 2014 when there were some 157,400 workers on payroll. That post-recession peak gave hope to state economic development officials that the sector was returning to a post-recession trend – especially if Lockheed Martin’s factory in Camden was able to capture the bid for the U.S. Army and Marine Corps’ $30 billion Joint Light Armored Vehicle project.

But Oshkosh Defense won the highly-prized Pentagon contract in August, and the state’s expected manufacturing rebirth has fizzled as payrolls touched a two-year low of 152,400 in September. Creighton University economist Ernie Goss said Arkansas and most other states across the U.S. that depend on factories that make durable and nondurable goods are experiencing a downturn that began late last year.

“U.S. Bureau of Labor Statistics data show that over the last year, Arkansas has lost 2,800, or 1.8%, of its manufacturing jobs,” Goss said. “Our surveys of supply managers in the state indicate that these losses will continue into the first quarter of 2016.”

WELL BELOW PEAK SET IN 1995
If Goss’ prediction is true, the number of manufacturing jobs may fall below 150,000 for the first time since the federal government began using the North American Industry Classification System, or NAICS, to classify and uniformly compare data from the different sectors of the growing U.S. economy.

The NAICS database officially replaced the former Standard Industrial Classification system in 1997, but Arkansas and most other states now only have comparable data going back to 1990. According to officials at the DWS’ Labor Market Information division, there is no “comparable” monthly industry-level data on manufacturing payroll jobs before 1990 – when former President Bill Clinton was governor.

“The historical series before 1990 was in no way comparable to the current series, due to changes in industry classifications and in methodology,” DWS officials said. “While data before then might still exist in original hard copy publications, it is not up to current statistical standards and cannot be compared to more recent estimates.”

Despite the lack of data before 1990, it has been known for several years that the state’s once thriving blue collar workforce – which made everything from HVAC air conditioning units and car rims for U.S. automakers to fast-moving products like Maybelline cosmetics, McDonald’s muffins and Levi jeans – has been on a steep decline for years.

After topping out at nearly 250,000 payroll jobs in April 1995, the state’s once largest job-producing sector has lost nearly 100,000 jobs in just 20 years. At the same time, more than half of the state’s manufacturing jobs were in the labor intensive, but middle-class friendly durable goods sector – which produces the long-lasting widgets and gadgets that kept Americans ahead of the rest of the world.

DURABLE, NON-DURABLE MANUFACTURING JOBS
Today, many of those higher-paying jobs in Arkansas factories have moved overseas and now Arkansas’ manufacturing labor pool is almost evenly split with between hard goods durable factories and the soft nondurable consumer goods that perish over time.

For instance, since cresting to 77,800 jobs in May, hiring in the nondurable manufacturing sector has declined for the fourth straight month to an estimated 77,400 positions in September and is down 2.4% from the 79,300 jobs in the sector at the end of 2014. The remaining 75,100 positions are in the durable goods sector.

In explaining the manufacturing downturn in Arkansas and the rest of the U.S., National Association of Manufacturers (NAM) Economist Chad Moutray pointed to the recent New York and Philadelphia manufacturing sector reports by the Federal Reserve that show a shrinking industry workforce and flagging new orders, goods shipments and hiring data throughout October.

“There is a persistent drip, drip, drip of disappointing news in recent data showing continuing struggles in the manufacturing sector, including a number of economic releases out last week,” Moutray wrote in his weekly newsletter. “Such developments are quite disappointing, particularly when compared to the cautious optimism coming into this year.”

In an interview with Talk Business & Politics, Moutray reiterated his view that the manufacturing sector has not lived up to expectations over the last several months.

“What you are seeing in Arkansas is not dissimilar to what is happening across the rest of the nation,” said Moutray, citing low oil prices, the strong U.S. dollar and widespread weakness in the global economy. “In general, it has been a disappointing year, especially with the (high) expectations at the beginning of (2015).”

REASONS FOR OPTIMISM
The NAM economist, whose organization represents small and large manufacturers in every industrial sector and in all 50 states, did say consumer confidence numbers and some optimism among nervous small business owners could bode well for strong hiring activity in the fourth quarter and beyond.

“Even with the current headwinds, if you take a look at a lot of the reports and (NAM”s) economic outlook for the rest of the year and 2016, there is some cautious optimism in all of those surveys,” he said.

Moutray said because of the industry’s struggles over the last several years, U.S. manufacturers are leaner and better able to handle economic downturns.

“It is hard not to be bullish about manufacturing over the long run,” he said. “I think you will see a lot of investment flowing back to U.S. companies over the next year or so, and Arkansas is seen as a pro-business state – so that should bode well for you.”

Some of the optimism Moutray and other economic experts see in the U.S. economy and manufacturer sector was reflected in the strong gross domestic product (GDP) growth of 3.9% in second quarter.

Also, Arkansas’ manufacturing sector is headed for a rebound as the economy improves, if a recent report by DWS holds true. In the summary of the 2015 Arkansas Labor Market and Economic Report released Sept 30, the Arkansas job market is expected to improve between 2014 and 2016 with 29,413 new jobs, an increase of 2.3%. Among the state’s five supersectors, manufacturing is expected to move from the current bottom and add nearly 2,500 jobs by the end of 2016.

MORE GOVERNMENT JOBS THAN MANUFACTURING JOBS
Once representing a healthy 20% of Arkansas’ civilian workforce, factory jobs have now been overtaken by occupations for workers in the trade, transportation and utilities, education and health services, and government sectors.

Greg Kaza, a local economist and executive director of the Arkansas Policy Foundation, has kept a watch on the state’s manufacturing sector for several years. Although DWS officials no longer keep archives of state workforce data before 1990, Kaza maintains a database of the state’s workforce statistics before the more service-sector friendly NAICS system was implemented.

In early 2006 when the number of manufacturing jobs in Arkansas fell below 200,000 for the first time during the Huckabee administration, Kaza’s research warned lawmakers and state workforce officials about the policy implications of having more government than blue collar jobs. Today, there are 214,700 government jobs in Arkansas, almost 65,000 more payroll positions that in the manufacturing sector.

Historically, Kaza says there were a total of 85,700 manufacturing jobs in Arkansas in 1955, the time associated when former Gov. Winthrop Rockefeller began his industrial recruitment campaign that brought thousands of manufacturing jobs to Arkansas. About 12 years later, that number touched 150,000 for the first time in the state’s history in 1967, Kaza said.