Manufacturing by the Numbers
Posted: April 6, 2011
The US Institute for Supply Management reported last week that the nation’s manufacturing sector continues to grow. That’s not surprising, since March was the 20th month in a row of national manufacturing growth. But the news prompted us to take a closer look at the State of Manufacturing in Washington, and that effort produced findings that are both surprising – and, surprisingly positive.
We took a detailed look at statewide manufacturing data for the period from 1994 through 2008, a 15-year period that included the 1990s boom, the dot-com bubble bursting, a severe Boeing slump followed by a major recovery and 9/11, along with major structural changes in the economics of our nation and the globe.
Yet, during this time of great tumult, in our state:
· 94% of our manufacturing jobs were retained (compared to 75% of all US manufacturing jobs);
· Revenues for manufacturing companies grew by 131% to $132 billion, more than twice the rate of manufacturing revenue growth for the US, and;
· Per-worker revenues for Washington manufacturing companies more than doubled, rising to $442,268 from $185,437 per worker.
The overall growth trends are muted because they include the numbers for manufacturing sectors that performed poorly. Outcomes were far rosier for those that did well, such as the machine makers and metal fabricators who comprise the metal trades.
From 1994 through 2008, metal trade revenues grew by 239% to $10.5 billion.
To put that sum into context, it was more than the $9.9 billion that was generated in 2008 by all US movie ticket sales (according to The Numbers website). It also exceeded the $9 billion presently generated annually by the National Football League.
Metal trades jobs also grew by 33% to 36,000. That was better than the 29% growth rate for all private sector jobs.
The Great Recession interrupted the upward trends, but the impacts weren’t as great as those of the 2001-2002 recession, which was bracketed by the Boeing downturn between 1998 and 2003. Manufacturing business revenues declined 12% in both recessions, but in the previous recession manufacturing jobs fell by 26%. That was slightly more than double the rate of job losses during the recent downturn.
Since hitting bottom in 2009, manufacturing in Washington has been rebounding, adding about 9,000 jobs. From the third quarter of 2009 to the third quarter of 2010, manufacturing revenues in the state grew by 10.4%. That compared with 6% growth for overall business revenues.
But in spite of all this good news, public understanding of manufacturing was (and is) so poor that a few years ago, several prominent civic leaders co-authored a guest editorial for the Seattle Times that called “manufacturing a race to the bottom” and urged creation of new training programs to move workers into “logistics … a race to the top.”
Misconceptions about manufacturing exist for many reasons, but one of the most persistent factors is the focus by public agencies and the news media on “manufacturing” as a singular economic entity, the health of which can be gauged by a single factor – jobs.
This approach all but guarantees negative perceptions because US manufacturing jobs have fallen nearly every year since achieving a numerical peak in 1979, resulting in more than three decades of seemingly endless (and hardly newsworthy) “news” stories about the “Drop in US Factory Jobs.”
If job counts were the be-all, end-all economic gauge that some believe they are, Americans should be starving by now due to the drop in US farm jobs. Instead, we suffer from an obesity epidemic.
Northwest Industrial Index
The data above comes from the Northwest Industrial Index, a research model developed by the Manufacturing Industrial Council of Seattle that is based on state data for business revenues as well as jobs, and is supported by the capacity to subject manufacturing activity to a six-digit level of analysis under the North American Industrial Classification System (NAICS).
Revenue numbers come from the gross business revenues that every Washington business must report to the Washington State Department of Revenue to calculate B&O and other state tax liabilities. Job counts come from the FTEs that all companies must report to the Washington State Department of Employment Security to determine their contributions to L&I and unemployment insurance.
Both the revenue and job information can be broken down to a six-digit level of detail under the NAICS. That makes it possible to break down manufacturing into more than 470 sub sectors of economic activity ranging from apple juice production to oil refining.
The Great Fish Net Boom
Combine this data with some on-the-ground reality checking and it becomes possible to use the Northwest Industrial Index to identify obscure but real manufacturing trends such as the remarkable - but unremarked upon - 21st Century Fish Net Boom.
Here’s how the Northwest Industrial Index found it.
The three-digit NAICS code 314 covers Textiles and Textiles includes a six-digit sub sector,314991, for something called “Cordage.”
While manufacturing on the whole enjoyed strong revenue growth during the 15-year survey period, revenue growth for Cordage was fantastic, soaring 1048% from $15.6 million to $179 million.
Closer examination reveals that the Cordage sub sector in Washington is dominated by a handful of companies that make commercial fish nets. This was surprising given the dismal state of the commercial fishing industry within and off the shores of Washington, but interviews with local companies showed the fish net boom was connected to the Alaska seafood industry and Seattle’s dominant role in it.
In Alaska twenty years ago, salmon was king and the industry was taking a beating due to new competition from cheaper farm-raised fish. Eventually the State of Alaska, local Alaska communities and Seattle-based seafood companies responded with a highly successful marketing campaign for the health and culinary benefits of “wild Alaska seafood,” boosting fish exports to existing markets in Asia and Great Britain, and finding new markets in places like Eastern Europe.
These successes combined with the dramatic rise of the Bering Sea pollock fishery to make Alaska the largest source of US seafood exports. Two-thirds of US seafood exports now come from Alaska and the Alaska “catch” is dominated by Seattle-based seafood and fishing companies. And those companies buy their fish nets from companies in Washington.
Net production was also driven by new environmental regulations that require a wider variety of fish nets to reduce “by catch” of the wrong fish species.
The good news about fish net production was matched by bad news - at least in our state - for farm-raised fish. Revenues for local companies engaged in fin fish farming peaked in 1995 at $11.7 million, and fell to $1.5 million by 2008 – a revenue plunge of 87%.
The good news is also tempered by the fact that, as in all of life, nothing in economics stays the same. Crap happens. Skin sections sometimes fly off of airplanes. Yesterday's great idea, like farm-raised fish, become tomorrow’s clunker and vice-versa.
But as far as the 21st Century goes for Washington manufacturing, so far, so good.
(In case you haven't heard)
Argo Bridge is Closing Soon
Airport Way South Viaduct over Argo Railroad Yard Rehabilitation Project is under way. Starting around April 1st the bridge will close for 12-14 months. All vehicles will detour to 4th Ave S. and bicycles to 1st Ave S in order to cross over the Railroad yard. For more info go to: www.seattle.gov/transportation/bridgerehab_airportargo.htm
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