Tag: Manufacturing

Goods Producing Sectors Poised to Add Jobs this Year

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Companies are divided into two categories: Goods Producing sectors and Service Producing sectors. In simplistic terms: you make stuff or you do stuff.

One of the reasons the Goods Producing category is important is that many primary jobs are in these sectors. The NAICS categories include the Extractive Industries, Construction, and Manufacturing.

Only twice (1997 and 1998) since 1990 have all three sectors added jobs in the same year. At the midpoint of 2012, the trio are in a position to show gains for this year also. Previously the gains were a result of an economy hitting on all cylinders. This time the gains will occur because of an economy that has misfired and the sectors have nowhere else to go but up. They are playing a small, but extremely important role in the recovery.

For additional details on the Colorado economy click here or go to https://cber.co/.

©Copyright 2011 by CBER.

U.S. Employment Tapers Off – Another False Start?

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After three months of solid job growth, BLS released what seems to be a bad April Fool’s Day joke in the form of the March jobs report. After adding jobs at an average monthly rate of 246,000 for December 2011 – February 2012, total nonfarm payroll employment rose by only 120,000 in March.

In light of projections by analysts that job gains would exceed 200,000, this report begs the question, “Are we seeing another false start in job growth, as we did in the first half of 2010 and 2011, or was the March report just another bump in the seemingly endless road to full recovery?”

On Monday (April 9), the DJIA lost 130 points, or 1%. Is that a real answer to the question or just a partial answer?

On a positive note, jobs were added in the Leisure and Hospitality (39,000); Private Education and Health Care (37,000); Manufacturing (37,000); Professional and Business Services (31,000), and Financial Services (15,000) sectors.

Many of the jobs in the Manufacturing and PBS sectors are primary jobs, i.e. they bring outside wealth to the community and they create more support jobs than other sectors. It is good news when jobs are added in the Tourism sector because the industry touches most regions. Increased tourism jobs are an indicator that people have greater disposable income – and they are spending it.

Increased jobs in the Financial sector may be a sign that the woes of the industry may be behind us – with an emphasis on “may”. And then there is the Private Education and Health Care sector. Depending on our perspective this sector may be viewed as a perpetual job creation machine or nothing more than a bureaucracy builder.

The losers were Retail Trade (33,800) and Construction (7,500) sectors.

So is the latest report an April Fool’s Day joke? Employment growth is likely to continue, but not likely at the rate of 2250,000 jobs a month that is needed to significantly lower the unemployment rate.

 

©Copyright 2011 by CBER.

Governor’s Office Kicks Off Manufacturing Initiative

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In early December the Governor’s Office of Economic Development and International Trade (OEDIT) convened a Working Group to develop a State-wide Strategic Plan and Implementation Plan for the state’s manufacturing sector. The following information describing the process is either taken directly or paraphrased slightly from OEDIT communications about that effort.

The Strategic Plan will be created by chief executives from businesses across the state (Steering Committee) and the Implementation Plan will be created by government, economic development organizations, academia, non-profits and trade associations (Tactical Team).

In mid-December the Steering Committee met for 3 hours with a facilitator to create the vision, mission statement, and the major goals for the core objectives in the Colorado Blueprint. A follow up meeting may be needed in January.

The Tactical Team met for 5 hours to identify the tactics and action items necessary to achieve each of the goals identified by the Steering Committee in order to create a 1, 2 and 3 year Implementation Plan.

The work of the Steering Committee and the Tactical Team will provide a basis for retaining and growing existing Colorado companies and increasing the global competitiveness of Colorado’s industries.

The six core objectives are included below.

Business Environment refers to the government-driven factors that affect a company’s operations, including:
[1] local, state, and federal government regulations;
[2] local, state, and federal tax environment (sales and use, property tax, tax exemptions, and incentives); and
[3] any other Colorado business environment issues, such as utility or labor costs.

Business Development refers to the retention and expansion of existing Colorado operations and the recruitment and attraction of business prospects that:
[1] consist of national and global companies that are primary competitors and/or collaborators within the industry and would deepen the industry if brought to Colorado;
[2] consist of national and global companies critical to the value chain, supply chain and/or distribution chain for the industry in Colorado and would increase competitiveness if brought to Colorado; and
[3] provide access to international markets for export of products or services provided by companies within the industry.

Business Funding refers to:
[1] the lending climate between banks and companies in the industry in Colorado;
[2] activity level of private investors (angel and venture) with companies in the industry in Colorado; and
[3] access to other types of financing, including foreign direct investment.

Industry Branding refers to:
[1] the reputation that the industry in Colorado has on a national and global level—what level of “awareness in the marketplace” does the industry posses;
[2] the awareness of the industry locally and the affect on the ability of companies to attract potential employees, entrepreneurs or investors;
[3] the reputation that the industry has among the general public and policy-makers in Colorado and the associated effect on policy.

Education & Workforce refers to:
[1] the current talent pool—availability of qualified and high quality talent to grow the companies in the industry;
[2] the development of the future talent pool—availability of high quality and dynamic post secondary programs (universities, colleges, applied technical colleges, workforce centers) preparing and/or retraining students and workers to participate in the industry workforce;
[3] entrepreneurial training focused on developing new ventures within the industry.

Innovation & Technology will be addressed uniquely by all industry, but in general refers to:
[1] research and development activity within the industry within Colorado at universities, private research labs, or federal labs;
[2] activity in technology transfer and commercialization of products within the industry in Colorado and associated entrepreneurial activity;
[3] the impact of technology on increasing productivity of companies within the industry in Colorado.

Updates will be available on the OEDIT website.

 

©Copyright 2011 by CBER.

ISM Manufacturing Index Points to Continued Growth

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The Institute of Supply Management produces the Purchasing Managers Index (PMI), a measure of sentiment among manufacturing purchasing managers. The November PMI registered 52.7, an increase from 50.8 in October. November marks the 28th consecutive month of expansion for the PMI and the manufacturing sector.

Generally speaking, a reading above 50 indicates that the manufacturing economy is expanding while a reading below 50 points to a general contraction in manufacturing. A reading above 42.5 points to expansion in the overall economy. (November is the 30th month the PMI has been above 42.5).

Looking back over the past decade, manufacturing was hit hard during the 2001 recession and did not show sustained expansion until mid-2003. Sentiment remained strong for about a year then gradually tapered off with a severe decline in mid-2008. Despite 28 months of expansion, the PMI approached 50 in October.

Manufacturing is important because it is a source of primary jobs. In Colorado it is a particularly important part of the Boulder, Larimer, and Weld Counties. Each of the three areas has different manufacturing strengths.

©Copyright 2011 by CBER.

Challenges Facing Colorado Manufacturers in 2012

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Colorado’s seasonally adjusted manufacturing employment peaked at 192,700 employees in April 1998. On an annual basis, it has been declining since. As 2011 comes to an end, it appears that net jobs will be added for the first time in Colorado in 13 years.

Some economists are projecting that manufacturing job losses will resume in 2011. Manufacturers face a number of challenges. The following questions point to some of the challenges they face in terms of demand, the workforce, and the industry.

Demand
• Will there be sufficient demand for manufactured goods given the fact that consumers have received minimal increases in wages and disposable income?
• Will manufacturers be able to pass on increased input costs to customers and maintain demand?
• How much longer can shipments and output increase without significant increases in the size of the workforce?
• What impact will personal and private sector debt have on demand?

Workforce
• How much longer will productivity increase without adding labor?
• What is being done to address the mismatch between the skills that manufacturers need and a different set of skills in the workforce?
• What is the role of the older worker in the workforce? Are there sufficient workers in the pipeline to replace them when they retire?
• Has Colorado lost its pool of trained workers as a result of the Lost Decade?
• What is being done to educate high school and college students about the importance of learning skills that can be transferred between professions?
• What type of training opportunities are available to meet the changing needs of the manufacturing workforce?

The Industry
• How will changes in the manufacturing sector affect the growth of Colorado’s high tech cluster?
• Has Colorado lost its critical mass of manufacturers?
• Has Colorado lost the supply chain associated with the decline in its manufacturers?
• What is being done to retain existing manufacturers and attract new manufacturers?
• How will second and third generation manufacturers transition their businesses into the future?

For additional information on the Colorado manufacturing sector go to https://cber.co. or click on Colorado Manufacturing Update.

 

©Copyright 2011 by CBER.

10 Years After 9/11 – Summary of Impacts on Colorado

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This is the final post summarizing the way the economy has performed in the 10 years after 9/11. The series of posts began in early August and has included a review of tourism; construction, housing, and financial activities; retail sales and personal services; high tech and the military.

Tourism

• From an employment perspective, tourism (accommodations and food services) has expanded in Colorado since 2001. Competitiveness within the industry has increased, as evidenced by the flat growth in output.

• In Colorado, the airline industry was “restructured” after 9/11.

• The impact of 9/11 was short term. These declines may have been offset by gains in emerging industries,
such as teleconferencing and other means of communications.

Construction, Housing, and Financial Activities

• Construction, housing (prices and foreclosures), and finance are all interrelated. A portion of today’s
problems can be tied to 9/11 and the 2001 recession. There was a mindset that the country could “spend” its way back to prosperity. That mindset created problems when overextended consumers lost their jobs or saw declines in the values of their houses.

• Construction output peaked in 2000 and has dropped-off since. From an employment standpoint, there was a slight decline during the 2001 recession. A much more severe drop-off began in 2008.

• Creative financing allowed financial employment to grow throughout the 2001 recession. Some of the
products that spurred that growth were problematic in the second half of the decade. In turn, layoffs in the
financial sector began in 2007 and have continued since. These declines are a function of lack of activity,
consolidation, automation, bank failures.

• Year-end equity market values are about the same in 2010 and 2000.

Retail Sales and Personal Services

• Sales of retail goods and personal services has become more competitive during the past decade, yet
employment has remained relatively flat. Increased savings in recent years may be an indicator that consumers learned from the 2001 and 2008 recessions that they have limited resources that can be allocated to the consumption of goods and services.

High Tech (Manufacturing; Information; and Professional Technical Services)

• Employment has dropped significantly as a result of increased efficiencies, outsourcing, and offshoring. At
the same time output has risen dramatically. MIPTS is the driver of the state economy. 9/11 played a role in the adoption of high technology goods and services (surveillance, security, teleconferencing, etc.)

Military
• The U.S. military has increased their dependence on Fort Carson since 9/11.The movement of troops in and out of the base have had a noticeable impact on the El Paso County economy.

The “Lost Decade” was a turning point in the structure of the U.S. and Colorado economies. While 9/11 did not cause this transformation, it played a role in accelerating the change that occurred in some industries.

For additional information, see The Colorado Economy Ten Years After September 11, 2001 at cber.co in the Special Reports section.

©Copyright 2011 by CBER.

Manufacturing, Information, and Professional Business Services Drive Colorado Economy

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All industries play different and important roles in our economy. Some pay high wages or create new jobs, while others provide services that generate tax revenue.

Economic developers welcome the creation of any job, but they emphasize the recruitment and retention of companies that have primary jobs. A primary job brings in money from outside the local community and often pays higher than average wages. As a result, these jobs create wealth and other local jobs.

In Colorado most primary jobs are in the Manufacturing, Information, and Professional Business Services sectors. They account for about 29% of total state private sector employment and 35% of the state’s private sector Real GDP. Colorado’s Advance Technology cluster is a subset of these three sectors.

In recent years, the Mining and Logging sector has employed about 1.5% of total private sector workers, yet it has accounted for about 6% of the state’s private sector output. The Real Estate and Finance group of sectors are also small from an employment perspective; however, they make a significant contribution, 23%, to the state’s private sector output.

Tourism and retail are important for different reasons. First, they touch the economies of all 64 counties.
Colorado’s scenic mountains provide the state with a distinctive competency, that cannot be replicated. Sales tax from the retail sector are a funding source for special districts and state and local governments. These sectors are important because they employ about 1 out of every 4 workers. Combined, they are responsible for about 11% of the state’s private sector output.

Finally, industries such as health care, personal services, utilities and the remaining sectors are important
because they add to the quality of life. These and the remaining sectors employ 35-40% of private sector workers, while being responsible for about 25% of private sector output.

The above analysis is based on 2009 data. The Bureau of Economic Analysis is scheduled to release its 2010 data within the month. Watch for more in-depth analysis at www.cber.co.

©Copyright 2011 by CBER.

Third Consecutive Month of 200,000+ Job Growth

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On Friday (5/6/11), the Bureau of Labor Statistics announced the U.S. had added 244,000 jobs in April (2011), the third consecutive month for the U.S. to add at least 200,000 net jobs. Private sector jobs were added at the highest rate in 5 years.

The Professional and Business Services sector added about 51,000 new workers, followed by tourism (46,000), and health care (37,000). Manufacturing posted gains of 29,000 employees.

As expected the largest loser was government, primarily local governments. Sector employment dropped off by 24,000 workers.

The nation has regained 1.3 million jobs in the past year; however payrolls have about 7 million fewer workers than at the pre-recession peak. Despite this improvement, the recovery continues to be painful for a society that thrives off instant gratification.

The current momentum will continue if inflation remains in check, the double dip in the construction sector and housing markets is short-lived, and net job gains continue to average at least 200,000 jobs per month. It will take about 3 more years to recover all jobs at that rate of growth.

In two weeks the Colorado Office of Labor Market Information will release its preliminary employment update for April. Positive, but less than robust job gains are expected, with PBS, Tourism, Health Care, and Higher Education leading the way.

©Copyright 2011 by CBER.

1 in 6 Colorado Jobs are Construction or Construction-Related

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The following is an excerpt from Colorado’s Construction Industry – Impact Beyond the Hammers and Nails  olorado’s construction and related industries employ one-in-six private-sector covered workers, yet almost 60% of the net jobs lost between 2007 and 2009 were in these sectors.

What type of economic activity is necessary to generate enough construction and construction-related activity to recoup these losses, particularly given the state of Colorado’s housing and commercial markets? (Note: this does not suggest that construction is primary or export industry or that is could or should be).

A financial analyst might suggest that the risk or volatility associated with the construction industry could be reduced if Colorado had a larger, more diverse economy. Therein lies the paradox. Because Colorado is a growth state, it is necessary to have a construction industry to support the current base of five million people and build the homes and buildings that would support a larger, more diverse economy. The Colorado State Demography Office projects continued population increases in the range of 1.5% to 2.0% for the extended future. (Population projections can be found on the State Demography Office website ).

Even with the recent reduction in state construction workers, the 2009 location quotient is 1.29, down from 1.44 in 2001. Because the industry is not considered a primary or export industry, at some point the location quotient will eventually revert to 1.0. At that time Colorado will have a concentration of construction workers comparable to most other parts of the country. Keep in mind that this correction will likely include a comparable adjustment in the related industries identified in this study.

Construction is necessary for the expansion and maintenance of the Colorado economy. It is essential that economic development, public, and private leaders understand the relationship between construction employment, its related sectors and the overall economy. That includes awareness of the volatility of the industry and the likelihood that construction employment will ultimately return to a location quotient of 1.0.

©Copyright 2011 by CBER.

REO – Bright Light in the Down Economy

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Although Colorado’s high tech cluster has been hit hard during the “lost decade” there are some bright spots. On November 17 the Colorado Photonics Industry Association (CPIA)  recognized Research Electro-Optics, Inc. (REO)  as one of those bright spots when it named it the 2010 Colorado Photonics Company of the Year.

REO is a precision optics and thin film coating company founded in Colorado in 1980. It services small to medium to high volume OEMs including manufacturers of defense and aerospace systems, laser systems, semiconductor tools, medical systems, life sciences instrumentation and telecommunications equipment.

In recent years REO has expanded its staff and increased its new manufacturing and technology assets. REO officials indicated that they have been profitable for all of the past six years, with double-digit growth in several of those years. The company is privately held, with 2010 annual sales projected to be in the neighborhood of $40 million.

The Colorado photonics cluster received a boost during the mid-1980s, around the time REO was started. At that time, the Colorado Advanced Technology Institute (CATI) provided a small matching grant for at National Science Foundation Center of Excellence at CU and CSU. That grant ultimately led research that was commercialized to form 20 companies.

As an enabling technology, photonics touches many industries, such as aerospace, renewable energy, homeland security, biomedical devices, telecommunications, and defense. This allows companies, such as REO to diversify their product line and clients, thus insulating them from turbulent economic times.

Congratulations to REO!

©Copyright 2011 by CBER.