Donald Trump’s vow in 2016 to revive Rust Belt manufacturing may get some of the credit for his razor-thin surprise victory in Wisconsin, but four years later, the real impact has been murky at best.
On the one hand, manufacturing in the Dairy State appears to be holding up better than in many of its surrounding states and even, until recently, the nation as a whole. At the same time, challenges ranging from trade to worker shortages have dampened at least slightly an otherwise enthusiastic community of factory operators.
“The state of manufacturing in Wisconsin is actually pretty good right now,” says Buckley Brinkman, executive director of the Wisconsin Center for Manufacturing and Productivity (WCMP). Brinkman considers workforce development and longer-range strategic challenges among the sector’s top priorities.
The center is a consultancy that collaborates with WMEP Manufacturing Solutions — another networking and consulting organization — and the University of Wisconsin-Stout Manufacturing Outreach Center to aid small and medium-sized manufacturers.
In Wisconsin, manufacturing accounted for $63.3 billion in output in 2018 (the most recent year for which figures are available), just under 19% of the state’s GDP, according to the National Association of Manufacturers. The sector employs about 16% of Wisconsin’s non-farm workforce.
Conflicting measurements complicate assessing how well manufacturing jobs are actually doing, though. Federal government reports don’t even agree on whether the state is starting to lose ground or continuing to expand.
Based on monthly projections from the Bureau of Labor Statistics, Wisconsin had about 473,400 manufacturing jobs in December 2019, a 1% drop from a year earlier.
But Dennis Winters, chief economist at the Wisconsin Department of Workforce Development, says those numbers appear to be off target. The monthly reports, he says, come from surveys that throughout 2019 have “underestimated the Wisconsin manufacturing sector.”
More accurate quarterly reports, based directly on payroll records, have so far outpaced the monthly projections, showing an increase for the first six months of 2019. He expects the state’s third-quarter 2019 report, due by the end of February, to continue that upward trend.
National data also suggests a better picture. For five straight months from August through December 2019, the national factory index from The Institute of Supply Management (ISM) consistently fell below 50, a sign of contraction in manufacturing. Then, in January 2020, it jumped to 50.9, indicating an expansion.
Bolstered by that news, “I don’t see a turndown here anytime soon,” Winters says. “I think we weathered the storm and the angst that was there certainly due to the last half of last year.”
The recent vote in Congress to approve the new USMCA trade agreement involving the United States, Canada and Mexico, along with the first phase of a new agreement in China that allayed threatened tariffs, have further eased some concerns. (The agreement still awaits action in Canada.)
In its latest twice-yearly survey of business executives, which was released in January, Wisconsin Manufacturers and Commerce reported that 50% said tariffs were hurting their businesses, up from 47% in mid-2019.
“The trade disputes that have gone on over the past three years have definitely not been helpful to Wisconsin,” says economist Menzie David Chinn of the University of Wisconsin. “Whatever protection we’ve put in is for industries that we don’t produce.”
For example, Wisconsin isn’t a major producer of steel or aluminum, but for manufacturers using those as raw materials, tariffs that Trump imposed in the summer of 2019 of 25% on foreign steel and 10% on foreign aluminum kicked up supply costs.
Even so, 79% of the executives surveyed for WMC said they supported tariffs “as a negotiating tactic to force nations like China to play fair,” the business lobby reported.
Some affected companies that were importing affected materials and components from China and other countries where the U.S. has imposed tariffs have also made adjustments, seeking out new sources, says Winters of the state DWD.
“A lot of that supply chain has already been reconfigured,” Winters says. “What were significant and rapid changes early on have, to a significant extent, been smoothed out.”
The WMC survey was conducted before Trump signed the Congressionally-ratified USMCA, replacing the North American Free Trade Agreement, and before he and Chinese Vice Premier Liu He put their signatures on the first phase of a new bilateral trade agreement that averted threatened tariffs and promised to open new markets for U.S. goods.
UW-Milwaukee economics and finance professor Richard Marcus expects the USMCA to help manufacturers, including those with operations in Wisconsin — but only marginally.
One source of help, he says, is that the new agreement includes the cost of labor when measuring the content of foreign imports, which determines how much they will be taxed.
“That is supposedly going to help some Wisconsin firms from competition that will be taxed that otherwise would have gotten through,” Marcus says. But, he adds, “I wouldn’t see it as a huge boon to manufacturers” in most instances.
Hope for farm exports
If the China agreement makes good on promises to open up more farm exports to that country, he adds, that could have a wider impact, such as on Wisconsin-based farm equipment manufacturers. Although it’s too early to calculate how significant it would be, Marcus says “anything that helps our agriculture will also help our domestic manufacturers in those sectors.”
The main benefit from the recent trade settlements, observers agree, will be if they give manufacturers and other businesses a clearer view of the future. “It’s more the cessation of the uncertainty,” Chinn said.
Brinkman of WCMP says the biggest challenges he hears from manufacturers — and one also spotlighted in the WMC survey — is ensuring an adequate supply of workers now and decades ahead.
“I think we’ve done a pretty good job as a state working on skills and working on recruiting,” he says. The problem is there aren’t enough bodies. The demographics are really against us. We’re getting older … [and] our workforce is going to stay relatively flat for the next two decades.”
The outlook in other purple states
From the Ohio Capital Journal:
At the start of 2019, Ohio manufacturers held 706,800 jobs, according to preliminary numbers from the Bureau of Labor Statistics. By the end of the year, preliminary numbers say the state had 701,500 jobs in the industry.
Jamie Karl, of the Ohio Manufacturing Association, said there has been growth overall, and the industry within the state has increased since Trump took office.
“Over the last year, we have fluctuated, and I would attribute that in part to the tariffs,” Karl said.
In the context of a decade, the state’s industry changes are only slight. In Dec. 2009, Ohio reported 613,600 manufacturing jobs. In the month before Trump was inaugurated, the state held 687,600 jobs.
Karl said Ohio seems to be unique in the country as far as manufacturing growth.
“I don’t think there’s this story of maintaining manufacturing jobs in other states,” Karl said.
From the Michigan Advance:
Data from the U.S. Bureau of Labor Statistics shows that through last October, Michigan was down about 10,000 manufacturing jobs since Trump took office in January 2017.
Recent months in Michigan, however, have seen ups and downs for the manufacturing industry, as steel companies have idled due to “current market conditions,” all while the
Big 3 automakers in Detroit have launched multibillion-dollar investment efforts here.
The USMCA’s largest impact is “ending a period of great uncertainty” for manufacturers,” said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research (CAR) in Ann Arbor.
“On the margin, it will move some production to higher-wage regions of North America to Canada and the United States,” Dziczek said. “There’s some job impacts to that, but because we’re not going from no agreement to free trade, the effects are pretty marginal.”
From the Pennsylvania Capital-Star:
In 2016, Donald Trump ran on “bringing back” manufacturing jobs to Rust Belt states such as Pennsylvania, which was one factor in his surprise wins in Pennsylvania, Wisconsin and Michigan (and less surprising victory in neighboring Ohio).
“The heart of the [economic] slowdown has really been in manufacturing. The global manufacturing sector is in a recession right now, but the U.S. is doing a little better than everyone else,” Aditya Bhave, vice president and global economist for Bank of America Merrill Lynch Global Research, said during a Business Leaders for Michigan event in Detroit in November.
But Pennsylvania’s outlook is murky. Big Steel promised investment outside Pittsburgh, only to turn around six months later to place its bets outside the Keystone state.