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Manufacturing in PA:
Trends & Opportunities
Kenneth P Voytek
Chief Economist
NIST MEP
November 2016
MEP Overview
A Negative Trade Balance Among the Most Advanced Technology
Products
-$120,000.0
-$100,000.0
-$80,000.0
-$60,000.0
-$40,000.0
-$20,000.0
$0.0
$20,000.0
$40,000.0
$60,000.0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Balance of Trade/Adv Tech Products Source: U.S. Census Bureau
4
MEP Overview
A Majority of Manufacturing Costs is in the Supply Chain
52%
53%
52%
57%
59%
48%
50%
52%
54%
56%
58%
60%
1992 1997 2002 2007 2012
Share of Manufacturing Costs in Purchasing Materials
Share of Manufacturing Costs in Purchasing Materials
Up 7 Percentage Points
5
MEP Overview
Job Openings are Outpacing Hiring in Manufacturing
0
0.5
1
1.5
2
2.5
DEC 2000
APR 2001
AUG 2001
DEC 2001
APR 2002
AUG 2002
DEC 2002
APR 2003
AUG 2003
DEC 2003
APR 2004
AUG 2004
DEC 2004
APR 2005
AUG 2005
DEC 2005
APR 2006
AUG 2006
DEC 2006
APR 2007
AUG 2007
DEC 2007
APR 2008
AUG 2008
DEC 2008
APR 2009
AUG 2009
DEC 2009
APR 2010
AUG 2010
DEC 2010
APR 2011
AUG 2011
DEC 2011
APR 2012
AUG 2012
DEC 2012
APR 2013
AUG 2013
DEC 2013
APR 2014
AUG 2014
DEC 2014
APR 2015
AUG 2015
DEC 2015
APR 2016
Hires to Job Openings Ratio
Source: U.S. Bureau Of Labor Statistics
6
MEP Overview
The Changing Face of Manufacturing Employees
79%
71%
70%
64%
66%
68%
70%
72%
74%
76%
78%
80%
1959 1989 2016
Share of Employment in Production Jobs
Share of Employment in Production Jobs
11.9%
15.6%
21.7%
24.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1994 2004 2014 2024
Share of Workers > 55 Years Old
Share of Workers > 55 Years Old
7
Source: US BLS
MEP Overview
Factors Driving Reshoring across Countries
8
MEP Overview
Smaller Establishments are an increasing share of the
Manufacturing Landscape
62.4% 63.9% 64.3% 67.1%
17.4% 17.1% 16.8% 15.8%
8.6% 8.5% 8.4% 7.7%
6.9% 6.6% 6.7% 6.1% 2.7% 2.4% 2.4% 2.1% 1.9%
1.6% 1.5% 1.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1979 1989 1999 2014 1-19 emp 20-49 emp 50-99 emp 100-249 emp 250-499 emp >= 500 emp Source: U.S. Census Bureau
9
MEP Overview
The Changing Face of Manufacturing: Getting Smaller;
Need to Get Smarter
$30,000
$80,000
$130,000
$180,000
$230,000
$280,000
$330,000
1972 1977 1982 1987 1992 1997 2002 2007 2012
Small Manufacturers (less than 500 employees)
Large Manufacturers (500 or more employees)
Facts about small manufacturers in 2012:
• Represent 99 percent of all manufacturing establishments
• Employ about 8.2 million people – 73 percent of all manufacturing employment, and
• Account for about 62 percent of the total value-added by all U.S. manufacturers
The Challenges for Small Manufacturers:
• In 2012, productivity per employee in large establishments was 63 percent higher than productivity in small establishments. In 1967, productivity per employee was “only” 26 percent higher.
• Over the last 10 years, productivity across smaller firms grew at a slightly faster rate than large firms (39% vs. 34%)
• Market Failures exist in several dimensions: firm, inter-firm, consulting/services, public failure.
Sources: U.S. Census of Manufacturing & the Bureau of Economic Analysis
Con
stan
t 201
2 $
10
MEP Overview
Manufacturers Report a Host of Challenges
69.9
52.8
46.6 44.7
20.1
14.3 14.1 10.3
6.9
71.9
59.2
45.3
19.1
25.5
10.4 13.1
18.0
8.0
0
10
20
30
40
50
60
70
80
Cost Reduction Growth Product Development
Employee Recruitment
Sustainability Technology Needs Managing Partners Financing Exporting
FY 2015 FY 2009 Source: NIST MEP Client Survey
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MEP Overview
Manufacturing is Important to the Pennsylvania Economy
• Accounts for 10% of all jobs (>563K jobs). Supports an additional
852K jobs are supported in PA thru indirect and induced jobs.
Multiplier @ 1.5
• Only three sectors with more jobs: Retail trade, Health care & Social
Assistance, and Government
• Accounts for 13% of GRP (largest direct contributor to GRP)
• Pays more, on average, than other jobs in PA (Mfg earnings per emp
are $75.5K versus $65.4K)
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Source: EMSI, The Economic Impact of Manufacturing in Pennsylvania, The Institute for Public Policy and Economic Development,
Wilkes University
MEP Overview
The Challenges Reported by PA Manufacturers Vary Across
Regions & Over Time
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
FY 2015
Catalyst DVIRC IMC Mantec MRC NEPIRC NWIRC
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
FY 2009
Catalyst DVIRC IMC Mantec MRC NEPIRC NWIRC
13 Source: NIST MEP Client Survey
MEP Overview
Pennsylvania Manufacturing Growth is Lagging
575,244
629,438
465,011
577,326
441,623
474,712
434,869
563,308
687,883
603,407 572,669
518,457
451,885 470,074
-2%
9%
30%
-1%
17%
-5%
8%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Pennsylvania Ohio Michigan Illinois Indiana New York Wisconsin
2009 Jobs 2016 Jobs % Change
Manufacturing Employment
Source: EMSI
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# of
Jobs %
Change
in Jobs
MEP Overview
Declining Business Dynamism in Pennsylvania Manufacturing
0
100
200
300
400
500
600
700
800
900
1000
0
1000
2000
3000
4000
5000
6000
7000
Qtr3 1992
Qtr1 1993
Qtr3 1993
Qtr1 1994
Qtr3 1994
Qtr1 1995
Qtr3 1995
Qtr1 1996
Qtr3 1996
Qtr1 1997
Qtr3 1997
Qtr1 1998
Qtr3 1998
Qtr1 1999
Qtr3 1999
Qtr1 2000
Qtr3 2000
Qtr1 2001
Qtr3 2001
Qtr1 2002
Qtr3 2002
Qtr1 2003
Qtr3 2003
Qtr1 2004
Qtr3 2004
Qtr1 2005
Qtr3 2005
Qtr1 2006
Qtr3 2006
Qtr1 2007
Qtr3 2007
Qtr1 2008
Qtr3 2008
Qtr1 2009
Qtr3 2009
Qtr1 2010
Qtr3 2010
Qtr1 2011
Qtr3 2011
Qtr1 2012
Qtr3 2012
Qtr1 2013
Qtr3 2013
Qtr1 2014
Qtr3 2014
Qtr1 2015
Qtr3 2015
# of Mfg Establishments Expanding
# of Mfg Establishments Contracting
Source: U.S. Bureau of Labor Statistics
15
MEP Overview
Where’s Manufacturing in Pennsylvania?
16
Source: EMSI
Source: EMSI
MEP Overview
Where is Manufacturing Important?
17
Source: EMSI
MEP Overview
Change in Manufacturing Jobs by County, 2009-2016
18
Source: EMSI
MEP Overview
Pennsylvania’s Growing Manufacturing Industries
19
Source: EMSI
MEP Overview
What’s hot and not so hot.....
20
Source: EMSI
MEP Overview
The Key Pennsylvania Manufacturing Clusters
21
Source: http://www.clustermapping.us/
MEP Overview
Profit Margin Predictors For SMEs
1.607
1.512
1.238 1.221
1.133
0.678
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Operational Excellence Growth Customer Diversification Strategy Recurring Revenu Log Revenue (Size)
Odds
Ratio
22
MEP Overview
Thank You
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