LAGRANGE — National economic indicators show that U.S. manufacturing is beginning to slow down, but local economic leaders say the effects here have been minor, if noticeable at all.
But it’s something to keep an eye on, especially around the RV firms in LaGrange County, which are typically among the first industries to start contracting when economic times change.
Recent measures of the U.S. economy show that manufacturing may be hitting a small skid after numerous months of boom. Hiring in the sector has slowed notably month-to-month compared to last year and the Federal Reserve declared that manufacturing is in a “technical recession” — meaning the sector has had shrinking output for the past two quarters.
Nationally only about 8.5% of workers are employed in manufacturing, but that’s not the case in Noble and LaGrange counties, where about 50% of people are employed in manufacturing, meaning any major downturns in the sector cause major problems for the local economy.
LaGrange County Economic Development Corp. Executive Director Bill Bradley said he’s aware of the national data, but that the local economy isn’t showing any significant fluctuations yet.
“It has been fairly minor, fairly small. I think the statistics show we’ve had a lessening in manufacturing like 320 jobs or so,” Bradley said, a small percentage of the thousands of LaGrange County workers working in industry.
When the Great Recession hit in 2008, the downturn blasted northeast Indiana’s economy as manufacturing sustained a hard hit. LaGrange County has one of the state’s highest unemployment rates, topping 20% in March 2009.
That’s in part due to the prevalence of RV manufacturing on the county’s west side. As a luxury item, RV purchasing is one of the first markets to shrink when the economy turns bad. But on the flip side, it’s also one of the first markets to return when the economy gets good.
So watching what’s happening in the RV factories has been a fairly accurate forecast of what’s coming with the broaded economy.
“The RV industry is usually the first in and the first out. They tend to be a bellwether of the economy,” Bradley said. “It’s due to some of the nature of the product they produce. When people start tightening the belts, that’s one of the first things.”
Further south in Noble County, where the manufacturing industry is made up of a lot of firms doing automotive, machining and metal work, Noble County Economic Development Corp. Executive Director Rick Sherck said he’s not seeing signs of a slowdown at this time.
“I’m thankful we don’t have much of that going on in Noble County,” he said. “Is the economy slowing down? It may be, it may be. Sometimes there are corrections in the economy that need to be made. I don’t want to be pessimistic.”
Both local economic leaders highlighted one factor that’s dominated the discussion about area manufacturing for the last few years — workforce — but in a few different lights.
If manufacturing is beginning to cool off as national figures suggest, Sherck thinks that is in part because of labor. Firms may want to produce more or introduce new lines requiring new skills, but having people available to do either has been a real struggle.
“I think part of the reason it’s slowing down is we don’t have the workforce we need any more,” Sherck said. “It’s hard to find employees. We’re even working with a program through the Department of Correction for people who are incarcerated and getting them employed. Carlex (in Ligonier) is one of the first ones to do that.”
One other impact that Sherck is starting to see is that the workforce issues are leading to increasing automation in the field.
For example, this month B&J Medical west of Kendallville was seeking a tax abatement from the county for $3.4 million in new equipment. That equipment will enhance production, but company representatives said the machines will be able to operated simultaneously by a single person.
Automation is one reason why manufacturing employment has shrunk significantly in recent decades as companies added new technology to both boost production and reducing cost by reducing the number of payrolled employees.
Now, Sherck said, the automation being introduced isn’t necessarily displacing workers, but making up for workers that aren’t available in the labor pool.
For now, when labor is tight, that could be good for the workers currently on the job. Wages could increase for those workers if they’re now in charge of managing three or four or five machines instead of one. Pay will go up as each individual employee is responsible for a larger share of production.
“We hear that story a lot,” Sherck said.”The picture of manufacturing is changing where automation is important.”
From Bradley’s perspective, the ongoing labor shortage may actually help to insulate the workforce if the economy starts to slow. Because manufacturing has been so hot, many firms have been running extra shifts or paying overtime to make up for the jobs they’re unable to fill.
If orders slow down and production recedes, northeast Indiana may not see the same kind of job losses it did during the Great Recession, because companies could pull back that extra work and spread its workers evenly across the work that remains.
Since there are hundreds of jobs that are unfilled in the region, the first job losses might be those jobs that currently don’t have anyone in them anyway.
“If we do have a recession, I don’t think it’s going to be as deep as in other recessions because of the worker shortage, because there is such a shortage of workers wanting to go into manufacturing,” Bradley said. “Maybe if we do have a significant downturn, it may not be as severe as it has been.”