The Status of Manufacturing in NH: Trends and Challenges
October 27, 2017 Advanced Manufacturing and Technology Summit Brian Gottlob, Polecon Research bgottlob@poleconresearch.com
Topics •
NH Manufacturing Performance Trends
•
……and Compared to Other States
•
Some Challenges : Industry & Policy
•
For Discussion: What will matter Most? • Innovation • Workforce • Energy & Other Costs
Manufacturing Output in NH Has Grown More Than U.S. Manufacturing Output (and it is More Cyclical - Business Investment i.e Capital Goods vs. Consumer Goods) 115
Real (Inflation Adjusted) Dollar Value of Manufacturing Output (Index 2005=100)
110
105
100
U.S. Manufacturing NH Manufacturing
95
Linear (NH Manufacturing) 90 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
NH’s Economy Grew More Slowly Over the Past Decade than the U.S. Economy but NH’s Manufacturing Output Grew More Rapidly Real (Inflation Adjusted) Growth 2005-2016 20% 18%
16.8%
16%
NH
U.S.
15.1%
14% 11.5%
12% 10%
11.6%
10.1%
7.5%
8% 6% 4% 2% 0% GDP
Private Sector GDP
Manuf. GDP
Manufacturing is the Largest Component of Private Sector Gross State Product but it is a Smaller Share than 20 Years Ago – The Evolution of the NH Economy? Industry Share of Private GSP Manufacturing
12.9% 9.0%
Health Care 5.4%
Finance & Ins. Retail Trade
4.9% 2.6%
Information Construction
Arts./Ent./Rec. 0.0%
6.1%
4.9% 7.0%
3.5%
1997
2016
4.1% 3.4%
Accom./Food Srvcs.
Utilities
9.6%
6.9% 7.4%
Business Srvcs.
Trans/Warehousing
8.2% 8.1%
Wholesale Trade
Educ. Srvcs
10.2%
9.6% 6.4%
Prof./Tech./Sci.
14.7%
2.3% 2.1% 2.0% 1.5% 1.5%
3.5%
1.1% 1.3%
2.0%
4.0%
6.0%
8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
Manufacturing Emp. Has Slowly Increased Since the End of the Great Recession While Manufacturing Output Has Increased by a Larger Percentage $8,500
95,000 90,000 85,000
$7,500 Axis Title
GSP $ Million
$8,000
Manufacturing GDP Manufacturing Emp. Linear (Manufacturing GDP)
80,000 $7,000 75,000 $6,500
70,000
$6,000
65,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Real (Inflation Adjusted) Output per Manufacturing Worker Has Been Increasing Faster in NH Than the U.S. Since 2004 – Higher Productivity and a Shift to to Higher Value Added Industries % Change in Real Output per Manufacturing Employee 50%
NH
45%
U.S.
45.1%
43.2%
40% 35%
33.1%
30% 25%
24.1%
20% 15% 10% 5% 0% All Manufacturing
Durable Goods
NH Manufacturing Emp. Growth is Subject to Greater Cyclical Swings but Has Out-Performed the U.S. (on Emp. Growth) the Past Two Years 2.5%
Yr.-Over-Yr. Manufacturing Emp. Growth
2.0% 1.5% 1.0% 0.5% 0.0% 2011 -0.5% -1.0% -1.5%
2012
2013
2014
2015
2016
NH Manufacturing Emp. U.S. Manufacturing Emp.
2017
2
0
-1
-2
-3
-4
-5
-6
-7 Oklahoma Louisiana Wyoming Delaware Texas N.M. N.D. Alaska Vermont Rhode Island W.V. Connecticut Pennsylvania Massachusetts New York Illinois Iowa S.D. Virginia Kansas Wisconsin Washington Nebraska Maryland Ohio Arkansas Maine Minnesota Hawaii N.C. Indiana Missouri California Arizona S.C. Mississippi Alabama Colorado Oregon New Hampshire Utah Montana New Jersey Michigan Kentucky Georgia Tennessee Nevada Idaho Florida
Manufacturing Employment Growth in 2016 Was Higher in NH than the National Average Pct. Growth in Manufacturing Employment 2015-2016
5
4
3
NH
1
0
-1
-2
-3
-4 Delaware N.M. Virginia New York Connecticut Nevada Idaho Vermont N.D. Oklahoma Colorado Missouri Wisconsin Maine Michigan N.C. Illinois Massachusetts Texas Arizona Indiana Iowa Pennsylvania Kentucky Ohio Rhode Island Maryland Florida Minnesota Washington Utah W.V. Georgia S.D. Alaska Montana Alabama Tennessee Nebraska Kansas Arkansas New Jersey S.C. Mississippi Wyoming Louisiana New Hampshire Oregon California Hawaii
And Annual Pay for Manufacturing Workers Grew Faster in NH in 2016 Along With Increased Competition for Workers and Labor Shortages
5
% Chg. In Avg. Annual Manufacturing Wage 2015-2016
4
3 NH
2
1
NH Exports Have Accelerated over the Past Year Compared to U.S. Exports (& With Newer Products and to More Countries) but NH Exports are More Volatile. Annualized (4 Qtr. Sum) Dollar Value of Manufactured Exports (Index 2005=100) 220 200 180 160 140
NH
U.S.
120 100 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
The Falling Value of the Dollar (and a Stronger World Economy) Have Helped Boost NH Exports Over the Past Year Chart Title
210
110
190
105
170
100
150
95
130
90
110
85
90
80
NH Exports $ (Index 2005=100)
70
Trade Weighted Value of U.S. Dollar 75
50
70 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Canada is a Shrinking Destination for NH Exports Today Compared to a Decade Ago but Mexico is Larger. How Will NH Exporters be Affected by NAFTA Renegotiation? What Role Protectionism? Pct. Of NH Total Exports 60%
China Mexico Canada
50%
40%
30%
20%
10%
0% 04
05
06
07
08
09
10
11
12
13
14
15
16
17
Some Challenges: Industry and Policy
6
1
0
-1
-2
-3
-4 Delaware Wyoming New York Rhode Island N.D. Arkansas Oklahoma Connecticut Missouri N.C. W.V. Louisiana Massachusetts Illinois Kentucky Ohio Indiana Arizona New Hampshire Pennsylvania Wisconsin Nebraska California Colorado N.M. Iowa Texas Mississippi New Jersey Michigan Kansas S.D. Alaska Maryland Washington Maine Oregon Utah Vermont Alabama Hawaii Tennessee Montana Minnesota Nevada Virginia Florida S.C. Georgia Idaho
Emp. Growth Has Been Above Average but NH Lags in Growth in the Number of New Manufacturing Establishments
7
% Change in Number of Manufacturing Establishments 2015-2016
5
4
3
2
NH
Entrepreneurial Activity Has Declined Across all Industries in NH (and Across the Country) But Especially in Manufacturing – Where is the Next Generation of Manufacturing Firms? % of Employment in Firms 3 Years Old and Younger 10.0% 9.0%
8.7%
8.9% 8.5%
8.3%
7.9%
8.0%
NH Manufacturing NH All Other Industries
7.6% 6.7%
7.0%
6.2%
6.0%
6.0% 5.0%
4.3%
4.4% 4.0%
4.0%
4.4%
4.1%
5.8%
5.6%
5.6%
5.5%
2.2%
2.2%
2.0%
14
15
16
4.7% 3.7%
3.7% 3.2%
3.4%
3.0% 2.0% 1.0% 0.0% 04
05
06
07
08
09
10
11
12
13
Manufacturing Has to Become More Attractive to Younger Workers - it Has Among the Oldest Workforces in NH Median Age of Employees Real Estate Trans./Warehousing Utilities Government Manufacturing Health Care Educ. Services Pro./Sci./Tech. Information Other Services Construction Mining Social Services Wholesale Trade Ag/Forrestry Finance/Ins. Mgmnt. Of Co's Retail Trade Arts/Ent./Rec. Accom./Food Srvcs.
52 50 50 49 49 47 47 47 47 46 46 46 45 45 45 44 43 41 36 27
20
25
30
35
40
45
50
55
In Key Industries (Including Manufacturing) There are Many More Workers Close to Retirement Than Younger Workers Ratio of Workers Ages 22-34 to Workers Age 55+ by Industry in NH Accomm. & Food Srvcs Admin. Support & Waste Mgmnt. Other Services Construction Arts/Ent/Rec Retail Trade Finance and Insurance Ag/Forestry/Fishing Prof/Sci/Tech Srvcs Information Health Care Wholesale Trade Real Estate Manufacturing Transp. & Warehousing Educational Services Public Administration Utilities
285% 155% 128% 126% 118% 116% 114% 110% 98% 94% 92% 76% 70% 68% 63% 60% 55% 40%
0%
50%
100%
150%
200%
250%
300%
Manufacturing is not Monolithic – the Demographics of NH’s Manufacturing Industries Differ in the Severity of the Problem Ratio of Workers Ages 22-34 to Workers 55+ by Manufacturing Industry Pharmaceutical & Medicine Motor Vehicle Parts Archit. & Structural Metals Rubber Metalworking Machinery Medical Equip. & Supplies Other Fabricated Metal Prod. Foundries Computer Equipment Machine Shops Plastics Other Electrical Equipment Cement and Concrete Nonferrous Metals Navigational, Electromedical, & Control Semiconductors Glass Products Industrial Machinery
174.6% 109.9% 102.0% 89.4% 80.8% 78.6% 77.4% 76.5% 74.8% 69.9% 66.1% 61.6% 57.1% 43.2% 42.3% 38.6% 37.4% 36.4% 0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
689 of the 17,602 Online Job Postings in July and August Were for Production Occupations – Competition for Machining Occupations is Strongest Top Titles for Production Job Openings in NH Machine Operator CNC Machinist Assembler Quality Inspector Production Worker Machinist Mechanical Assembler CNC Machine Operator Quality Control Inspector CNC Operator CNC Programmer Production Supervisor
Two Measures of the Educational Attainment of Manufacturing Workers Tell Different Stories – More Workers With Higher Skills Living in NH but Ed. Attainment of Employees Working in the State Stays the Same. Are NH’s Highest Skilled Manufacturing Workers Increasingly Employed in Another State? % of Manufacturing Workers With at BA/BS Degree or Higher 45% 40% 35% 30% 25% 20% 15%
Manufacturing Jobs Located in NH
10% 5%
Manufacturing Workers Living in NH
0% 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Some 14% of Production Workers in NH are Foreign Born and in Some Occupations the Percentage is Higher – How is (Will) Immigration Reform Affecting Manufacturers in NH?
Despite Being Less Than 7% of NH’s Workforce, NH’s Foreign Born Population Accounts for Almost 17% of NH’s Stem Degree Holders Pct. Of STEM Degree Holders Among All Employed NH Residents
16.5% U,S, Born NH Residents 17.7%
NH Born NH Residents 65.9%
Foreign Born NH Residents
NH is Not Cost Competitive With a Majority of Manufacturing Locations Around the Country (We Must Look for Other Advantages While Reducing Costs) Avg. After Tax Net Profit of Manufacturing Firms Montreal, CA Nashville Youngstown Atlanta Charleston Omaha Charlotte Richmond Raleigh Cedar Rapids Spartanburg, SC Austin Baltimore Boise Bangor Kansas City Minneapolis Manchester Burlington Hartford Denver Boston
0.00%
14.80% 9.60% 9.40% 9.20% 8.90% 8.80% 8.80% 8.70% 8.70% 8.60% 8.50% 8.10% 7.90% 7.50% 7.30% 7.00% 6.60% 6.60% 6.60% 5.90% 5.80% 4.90%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
The Price of Electricity for Industrial Customers is 83% Percent Higher in NH than the National Average Cost of Electricity in NH Compared to U.S. Average 240% 220% 200% 180% 160% 140%
Industrial
120%
Commercial 100%
Residential
80% 01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
NH Manufacturers are Challenged by Several Cost Factors Measure
•
NH Fares Poorly on Most Cost Factors
•
Total Tax Payments in NH are Labor Costs a Plus Utility Costs But Operating Margins are Lower and the Effective Income Tax Rate is High Total Operating Costs
•
•
Utility Costs Can and Should be Addressed, but Can Labor Total Taxes Costs? Effective Income Tax Rate
Manchester Rank Among 22 Cities (Higher Number = Higher Costs)
19 20 (Only Boston and Hartford Worse) 19 2 20 (Only Burlington and Bangor Worse)
NH Manufacturing is Performing Well, What is Most Important for Securing its Future in the State? •
Innovation
•
Labor Availability, Skills, and Quality
•
Costs in NH – Electricity, etc. (which ones?)
•
Something Else?