by Julie Collins
March 2013
Duluth Area Chamber of Commerce President David Ross wrote of the "rise, fall, and rise again" of Manufacturing in the Northeast in a 2012 Duluth News Tribune article. The area lost a large number of manufacturing firms and jobs in the 1970s and 1980s, but Manufacturing continues to play an important role in the region today. Many local manufacturers have been planning expansions recently, such as Tritec, a Virginia steel fabricator.
At first glance, Manufacturing does not play as large a role in the Northeast's economy as it does in many areas of the state. In 2011 manufacturing employment represented 11.5 percent of total employment. Minnesota's employment share in Manufacturing is the 14th highest in the nation, according to the National Association of Manufacturers.1 However, Manufacturing accounts for a much smaller employment share in the Northeast where just 6.5 percent of jobs are in Manufacturing.
There's a lot of diversity in the region's seven counties, though. Manufacturing represents just 4.8 percent of employment in St. Louis County, where health care is dominant, but 20 percent in Koochiching County. Table 1 shows the number of manufacturing jobs and the employment share represented by Manufacturing for five northeast Minnesota counties. Manufacturing employment totals are suppressed for Aitkin and Cook counties to protect employer confidentiality.
| Table 1: Manufacturing Employment and Employment Share by County, 2011 | ||
|---|---|---|
| Manufacturing Employment | Share of Employment | |
| Aitkin | ND | ND |
| Carlton | 1,388 | 10.9% |
| Cook | ND | ND |
| Itasca | 1,182 | 7.4% |
| Koochiching | 1,019 | 20.0% |
| Lake | 503 | 11.7% |
| St. Louis | 4,530 | 4.8% |
| Northeast Total | 8,949 | 6.5% |
| ND = Not Disclosable
Source: MN DEED Quarterly Census of Employment and Wages, 2011 |
||
Some of the state's major manufacturing sectors, like Food Manufacturing and Computer and Electronics Manufacturing, are present in the Northeast but do not employ large numbers. Other Minnesota strengths, like Machinery Manufacturing, are also prevalent in the Northeast; some types of Manufacturing have a higher share of employment in the Northeast than in Minnesota as a whole.
Table 2 shows the number of jobs and the employment share represented by the major manufacturing subsectors in the Northeast. The last column shows the Location Quotient, or LQ, for each subsector. The LQ is the ratio of the employment share of each subsector in the Northeast to its employment share in Minnesota. LQs of greater than one indicate that a sector is relatively concentrated in the Northeast. The LQ of 0.6 for the manufacturing industry reflects the relatively small employment share held by Manufacturing in the region. High LQs in Paper Manufacturing and Wood Product Manufacturing show that these subsectors are areas of specialization in the Northeast.
| Table 2: Manufacturing Subsectors, Employment and Share of Employment in Northeast MN, 2011 | |||
|---|---|---|---|
| Subsector | Employment | Employment Share | LQ |
| Manufacturing, all subsectors | 8,949 | 6.5% | 0.6 |
| Paper Manufacturing | 2,420 | 1.8% | 4.1 |
| Machinery Manufacturing | 1,158 | 0.8% | 0.7 |
| Fabricated Metal Product Manufacturing | 870 | 0.6% | 0.4 |
| Wood Product Manufacturing | 849 | 0.6% | 1.5 |
| Transportation Equipment Manufacturing | 479 | 0.3% | 0.9 |
| Computer and Electronic Product Manufacturing | 424 | 0.3% | 0.2 |
| Food Manufacturing | 331 | 0.2% | 0.1 |
| Plastics and Rubber Products Manufacturing | 291 | 0.2% | 0.4 |
| Chemical Manufacturing | 248 | 0.2% | 0.5 |
| Printing and Related Support Activities | 226 | 0.2% | 0.2 |
| Textile Product Mills | 191 | 0.1% | 1.8 |
| Apparel Manufacturing | 185 | 0.1% | 4.5 |
| Miscellaneous Manufacturing | 148 | 0.1% | 0.1 |
| Furniture and Related Product Manufacturing | 87 | 0.1% | 0.2 |
| Electrical Equipment, Appliance, and Component Manufacturing | 46 | 0.0% | 0.1 |
| Source: MN DEED Quarterly Census of Employment and Wages, 2011 | |||
The mix of subsectors that are prevalent in the region show just how linked Manufacturing is to the rest of the regional economy. The area's natural resources provide materials for Wood and Paper Manufacturing sectors. Machinery and Fabricated Metal Product Manufacturing, while employing smaller shares in the Northeast than in the state, are still among the largest subsectors in the region in terms of employment numbers. These subsectors include companies that manufacture equipment used by the mining industry. Many have expanded to serve other industries in other locations, too.
Even if Manufacturing represents a smaller share of employment in the Northeast than in the state, it's still a vital part of the economy. Manufacturing wages tend to be higher than total average wages throughout the U.S., but the manufacturing premium is especially large in the Northeast: Average weekly wages in Manufacturing were $1,031 in the Northeast in 2011, 45 percent greater than average weekly wages for all private employment. The manufacturing premium was 23.8 percent in the U.S. and 19.6 percent in Minnesota.
| Table 3: Wages for all Private Industries and Manufacturing, U.S., Minnesota, and Northeast, 2011 | |||
|---|---|---|---|
| United States | Minnesota | Northeast | |
| All Industries (private) | $920 | $925 | $713 |
| Manufacturing | $1,139 | $1,106 | $1,031 |
| Percent Difference | 23.8% | 19.6% | 44.6% |
| Source: MN DEED Quarterly Census of Employment and Wages | |||
Manufacturing also produces an important share of regional economic output. A 2009 study by the University of Minnesota-Duluth's Bureau of Business and Economics Research found that Manufacturing represented almost a quarter of sales in the Northeast Minnesota-Northwest Wisconsin area, even though it accounted for less than 10 percent of jobs.2
The recessionary low point for Northeast Minnesota employment was the first quarter of 2010, when the region had 133,860 jobs, down from 139,169 in the first quarter of 2008. In the two years from that period to the first quarter of 2012, the region regained 1,024 jobs, a 0.8 percent growth rate. This number is the net job gain across all industries, including many that added jobs and others that continued to contract. The industry with the largest number of new or returning jobs was Manufacturing, which added 927 jobs over the period for an 11.7 percent growth rate.
The industry adding the second-highest number of jobs over that period was Mining with 824 new jobs. Not surprisingly, the Manufacturing subsectors that experienced the highest growth were those which serve the Mining industry, among other customers: Machinery Manufacturing added 321 new jobs, and Fabricated Metal Product Manufacturing added 228.
The impressive recent growth in Manufacturing does not erase the losses that the industry experienced over the decade. Manufacturing employment declined 30.4 percent from 2000 to 2011, and its employment share dropped from 9.1 percent to 6.5 percent. The post-recession growth in Manufacturing has provided much-needed employment for the region, but should not be expected to return the industry to its former employment share. The most recent data also suggest a drop-off in manufacturing growth, at least in some parts of the region: December 2012 employment figures for the Duluth-Superior Metropolitan Statistical Area show that Manufacturing there had lost 291 jobs since December 2011.
| Table 4: Manufacturing Subsectors, 2000 and 2011 Employment, Northeast Minnesota | ||||
|---|---|---|---|---|
| Subsector | 2000 Employment | 2011 Employment | Percent Change | Numeric Change |
| Manufacturing, all subsectors | 12,865 | 8,949 | -30.4% | -3,916 |
| Food Manufacturing | 807 | 331 | -59.0% | -476 |
| Textile Product Mills | 202 | 191 | -5.4% | -11 |
| Apparel Manufacturing | 238 | 185 | -22.3% | -53 |
| Wood Product Manufacturing | 1,885 | 849 | -55.0% | -1,036 |
| Paper Manufacturing | 3,689 | 2,420 | -34.4% | -1,269 |
| Printing and Related Support Activities | 353 | 226 | -36.0% | -127 |
| Chemical Manufacturing | 273 | 248 | -9.2% | -25 |
| Plastics and Rubber Products Manufacturing | 243 | 291 | + 19.8% | + 48 |
| Fabricated Metal Product Manufacturing | 848 | 870 | + 2.6% | + 22 |
| Machinery Manufacturing | 1,038 | 1,158 | + 11.6% | + 120 |
| Computer and Electronic Product Manufacturing | 865 | 424 | -51.0% | -441 |
| Transportation Equipment Manufacturing | 585 | 479 | -18.1% | -106 |
| Furniture and Related Product Manufacturing | 226 | 87 | -61.5% | -139 |
| Miscellaneous Manufacturing | 282 | 148 | -47.5% | -134 |
| Source: MN DEED Quarterly Census of Employment and Wages, 2000 and 2011 | ||||
Changes in Manufacturing from 2000 to 2011 also reflect the Northeast's larger economy. A few Manufacturing subsectors did add jobs over the decade, including those most linked to the mining industry - Fabricated Metal Product Manufacturing and Machinery Manufacturing. Two other subsectors belonging to the natural resource economy, Wood Product Manufacturing and Paper Manufacturing, both lost a large number of jobs over the decade, although the Wood Products subsector is projected to regain some in the next decade.
Manufacturing is projected to grow by 8.5 percent from 2010-2020 in the Northeast, adding jobs at a slower rate than the average for all industries (13.1 percent). Several Manufacturing subsectors will grow much more quickly, though. Wood Products Manufacturing, Nonmetallic Mineral Products Manufacturing, Fabricated Metal Product Manufacturing, Transportation Equipment Manufacturing, and Furniture Manufacturing will each increase employment by more than 25 percent. Subsectors projected to lose jobs include Paper Manufacturing, Apparel Manufacturing, and Textile Product Mills.
| Table 5: Projected Growth by Manufacturing Subsector, Northeast Minnesota, 2010-2020 | ||
|---|---|---|
| Subsector | Percent Change | Numeric Change |
| Manufacturing, all subsectors | 8.5% | 707 |
| Furniture and Related Product Manufacturing | 38.1% | 32 |
| Transportation Equipment Manufacturing | 36.2% | 179 |
| Fabricated Metal Product Manufacturing | 27.9% | 208 |
| Nonmetallic Mineral Product Manufacturing | 25.6% | 138 |
| Wood Product Manufacturing | 25.1% | 211 |
| Machinery Manufacturing | 17.0% | 164 |
| Primary Metal Manufacturing | 15.2% | 45 |
| Miscellaneous Manufacturing | 3.4% | 5 |
| Printing and Related Support Activities | 0.9% | 2 |
| Plastics and Rubber Products Manufacturing | -0.7% | -2 |
| Paper Manufacturing | -3.5% | -85 |
| Computer and Electronic Product Manufacturing | -8.0% | -22 |
| Chemical Manufacturing | -9.6% | -22 |
| Food Manufacturing | -11.4% | -35 |
| Textile Product Mills | -25.4% | -46 |
| Apparel Manufacturing | -32.9% | -56 |
| Source: MN DEED Employment Projections, 2010-2020 | ||
Almost all of the 179 projected new jobs in Transportation Equipment Manufacturing will occur in the Aerospace Product and Parts subsector, reflecting the growing aviation cluster in the Duluth area. In addition to existing airplane manufacturing, AAR Aircraft Services recently opened a new aircraft maintenance and repair facility in Duluth, and the Duluth International Airport unveiled its new terminal in January.
A wide range of occupations are represented in Manufacturing. Only about half of those employed in the Manufacturing industry work in production occupations. Other manufacturing employees work in office and administrative support occupations (10.2 percent), transportation and material moving occupations (7.1 percent), architecture and engineering occupations (7.1 percent), management occupations (5.9 percent), and others. Those who work in production may be assemblers, machinists, welders, or any of a host of other occupations.
Production occupations are projected to grow by 7.8 percent between 2010 and 2020 in both Minnesota and in the Northeast. DEED expects a total of 2,290 openings in production occupations between 2010 and 2020 in the Northeast, resulting from industry growth and from replacement openings created by retirements. The production occupations adding the most new jobs will be metal and plastic workers, assemblers and fabricators, woodworkers, and production supervisors. Educational requirements for these positions range from short-term on-the-job training to postsecondary vocational certificates. Most of these production occupations pay above the area median wage, some greatly above.
Manufacturing has been a growth leader in the Northeast since the recession ended, but this growth does not erase the decline in manufacturing employment over the last decade. The industry's employment share is smaller than in the past and smaller in the Northeast than in the state as a whole, but it remains vitally important to the region's economy for a number of reasons. Manufacturing accounts for a disproportionately high share of the region's output and wages. It supports mining, another locally important high-output, high-wage industry, and is part of a developing aviation cluster which promises to be a source of new jobs in the future.
1National Association of Manufacturers, 2013, "Manufacturing Employment by State."
2University of Minnesota Duluth, Bureau of Business and Economic Research, "The Economic Structure of the Northland Works Region, 2009." Cited in: Digby, Drew. Minnesota Employment Review. Aug. 2009. "The Changing Economic Picture of Northeast Minnesota."
