Long-term decline may be plateauing, but there are limited signs of factory renaissance
October 16, 2022 at 7:00 a.m. EDT
PERRYSBURG, Ohio — The transformation of American manufacturing that is unfolding here promises to reshape the nation’s economy and its politics, with new solar energy, electric vehicle and semiconductor plants sprouting in faded factory towns.
Talk of industrial revival already is starring in the race for Ohio’s open U.S. Senate seat, as both Rep. Tim Ryan, the Democrat, and Republican J.D. Vance seek to embed themselves in the state’s comeback narrative.
In interviews, Ryan embraced the Biden administration’s use of generous government subsidies to encourage creation of new manufacturing jobs while Vance touted former president Donald Trump’s import tariffs and said faster development of the state’s energy resources could spark a boom.
“Our goal needs to be: how do we position ourselves to be in front of as many growing industries as possible? Electric vehicles, cars, trucks, batteries … hydrogen, natural gas, nuclear solar, aerospace. How do you lay the groundwork where we have an industrial policy for all of these?” Ryan said. “There’s an opportunity for us to dominate these industries of the future.”
What’s playing out on the ground, though, is different from what the candidates stress on the stump. Yes, manufacturing jobs are growing in Ohio. But they are not the jobs that disappeared decades ago.
Manufacturing has changed so much in recent years that the blue-collar job gains from new factories, while welcome, are likely to pale alongside the 5 million U.S. jobs lost since the late 1990s, economists said. Many of the new positions will require special skills or education that most blue-collar workers lack. Much of the work will be done by machines.
“When we talk about bringing manufacturing back today, that’s very different than bringing back manufacturing 10 or 20 or 50 years ago,” said Amanda Weinstein, an economics professor at the University of Akron. “It’s not going to produce as many jobs.”
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The sparsely-populated factory floor at Toledo Solar illustrates the challenge.
The three-year-old manufacturer of solar panels for homes and businesses is exactly the kind of green-energy, high-tech business that the Biden administration favors. Aaron Bates, the chief executive, announced a major expansion last month, boosted by tax incentives in the climate and health bill the president signed in August.
But like many advanced manufacturers, Toledo Solar’s growth will create a limited number of new jobs, at least in the near term. On a recent visit, just a handful of workers stood alongside the automated production line.
“This isn’t the kind of factory where you just throw bodies at things,” Bates said. “It’s all robotics.”
The White House says manufacturing is booming, thanks to federal investments and the industry’s rethinking of supply chain risks, amid the pandemic and the war in Ukraine.
Biden has won passage of three bills designed to promote domestic manufacturing: the Inflation Reduction Act, the bipartisan infrastructure bill, and the CHIPS and Science Act, which subsidizes semiconductor production.
Several leading employers already have responded, including Intel, which broke ground last month on a $20 billion semiconductor complex outside Columbus.
Over the past year, U.S. factories have added 467,000 jobs, marking the sector’s best recovery from recession since the 1950s, according to the White House.
Yet hanging onto those gains — let alone building on them — will be tough.
Manufacturing has enjoyed key advantages over the past two years. Unlike face-to-face businesses such as restaurants, most factories could operate safely through the pandemic. And orders surged as consumers used their stimulus checks to buy computers, furniture and appliances.
Those tail winds are fading. In September, the Institute for Supply Management’s manufacturing gauge fell to its lowest mark since May 2020 with new orders and employment contracting. Many companies are reducing their head counts through hiring freezes and attrition, ISM said.
As the Federal Reserve and other central banks raise interest rates to fight inflation, Wall Street analysts predict a global slowdown that will weaken factory demand. Higher rates also have lifted the value of the dollar by more than 10 percent since March, which makes U.S. goods more expensive for overseas buyers.
Talk of a manufacturing boom is “more hype than reality,” Michael Feroli, an economist for JPMorgan Chase, wrote in a recent client note.
Both of Ohio’s U.S. Senate candidates grew up in steel towns that had seen better days. On the campaign trail, both Ryan, a native of Niles, and Vance, who was raised in Middletown, draw upon their personal experiences when they talk about manufacturing’s importance.
The type of voters who work in Ohio’s factories may decide the race. White voters without a college degree made up more than half of the electorate here in 2020, and they backed Trump by a 2-to-1 margin, according to CNN exit polls.
One out of every three Ohio manufacturing jobs have vanished since 2000. When pressed, Ryan will acknowledge that it is unlikely all of them can be replaced. “There’s no way,” he said, standing outside a local steelworkers union hall.
Ryan, who has long staked out a spot in the anti-trade wing of the Democratic Party, appeals to blue-collar workers by supporting a blend of tariffs and industrial policy. Wearing a gray T-shirt reading “Beers in Ohio just taste better,” Ryan said the government should go beyond subsidizing new factories and try to steer jobs to towns that suffered as companies moved abroad.
“We want it to happen in the forgotten communities that have been left behind, because those were dominating the older industrial areas,” Ryan said.
Vance, who detailed the social costs of deindustrialization in his best-selling memoir, has attacked Ryan as a career politician who failed to prevent the job losses he now bemoans.
The Republican praised Trump for exploding the bipartisan consensus in favor of free trade, which he said wrongly allowed production jobs to go abroad on the assumption that high-paying research and development jobs would remain in the United States.
“What’s really going on here is that the loss of manufacturing made our economy less innovative,” he said in a telephone interview.
Vance wants Ohio to double down on fracking, to ensure manufacturers have access to inexpensive energy. And he wants policymakers to recognize that reversing the errors of the past will require staying power.
“If you’re really going to rebuild American manufacturing, it is going to be a multi-administration, multi-decade project,” he said.
As a share of total U.S. employment, factory jobs have been sliding since the 1950s. Despite increased hiring over the past year, today’s 12.9 million manufacturing positions account for a slightly smaller slice of total non-farm employment than they did when Biden was inaugurated, according to the Bureau of Labor Statistics.
Biden promises the new semiconductor plants will mint good-paying blue-collar jobs. Micron announced last week a $20 billion investment in Upstate New York to create the nation’s largest semiconductor fabrication facility and 9,000 jobs.
But some experts caution that most of the new positions will require skills that are in short supply in places like Ohio.
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Many of those hired will have four-year degrees in science or engineering or associate degrees along with certifications in robotics, according to Ned Hill, a professor of economic development at Ohio State University.
“They will not be blue-collar workers,” Hill said via email.
Some new projects also will take years to bear fruit. Micron, for example, does not plan to begin “substantial hiring” until the second half of 2025, the company said in an emailed statement.
Forecasts of sizable job gains also are viewed skeptically on some factory floors.
Perry Osburn, owner of IMCO Carbide Tool, attended a trade show in Chicago last month, where the largest convention center in North America was filled with automated warehouse equipment, laser-measuring devices, and 3D manufacturing systems.
“Everywhere you look, it’s automation,” he said.
Osburn is expanding his toolmaking shop, adding 92 jobs to his current 116 workers. He also plans to double the number of machines, replacing some basic models with fully robotic units.
“I personally think manufacturing will grow slowly. But it’s a very different kind of manufacturing. It’s not as people intensive,” he said. “If you say you’re going to bring millions of jobs back, it’s not the same jobs you had 10 or 20 years ago.”
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Likewise, at Toledo Solar, machines perform the most important tasks. Designed to operate around-the-clock, they move large plates of glass along conveyors, where a substance called cadmium telluride is imprinted on the panels, forming a semiconductor that converts sunlight into energy.
Last month, Toledo Solar said it would expand in response to Biden’s signing this summer of the Inflation Reduction Act, which contained $430 million in tax incentives for renewable energy.
The tax incentives will encourage consumers to buy U.S.-made solar panels. But equally important, Bates said, is that the act signaled Wall Street that solar companies will be a viable investment.
Without the tax benefits, Bates could only have afforded a smaller expansion funded by the company’s profits. Federal backing means capital markets now will be more willing to invest, he said.
“That’s huge,” he said.
His 45-person workforce — median salary around $100,000 — is projected to hit about 115 by the end of next year, he added. Many workers are physicists, engineers or advanced degree holders.
With less than four weeks before Election Day, Ryan and Vance are crisscrossing Ohio in a search for votes.
In an Oct. 10 televised debate, the candidates traded shots about inflation, abortion, and political extremism in exchanges that occasionally veered into insult and sarcasm.
But after an hour of rhetorical combat, when Ryan was offered an opportunity for closing remarks, he listed solar panels in Toledo, electric vehicles in Lordstown, batteries in the Mahoning Valley, and computer chips outside Columbus before concluding with the one comment that Vance might well have applauded: “We have an opportunity to be the manufacturing powerhouse of the world.”
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