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Economy's bounce-back a pleasant surprise

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Jim Leute
December 15, 2013

JANESVILLE--The local economy hasn't replaced the high-paying manufacturing jobs that left with the General Motors assembly plant, but local economic development officials said the area has recovered better than they had hoped.

“The jobs are gone, and they're never coming back” was a popular prognosis after GM announced in 2008 that it planned close its Janesville assembly plant.

Five years later, the prognosis has proved prophetic: The high-paying manufacturing jobs associated with GM and its local suppliers remain missing, and there's no reasonable scenario under which they'll ever return.

But despite predictions that the last person leaving Janesville would turn out the lights, the local economy continues to burn brighter, having overcome the dual effects of GM's closure and a national recession. It has left local economic development officials pleasantly surprised with both the pace and scope of the recovery.

Make no mistake; the data tied to Rock County indicate the economy has struggled since 2008.

Whether that's a result of the GM closing, fallout from the Great Recession or a combination of both is difficult to discern.

Since December 2008, Rock County lost 2,600 jobs, and the average hourly earnings paid through August of this year, $21.69, are about the same as they were in 2008. That, of course, discounts inflation, which suggests the average wage of $21.72 in 2008 would be the equivalent of $23.59 in 2013.

MANUFACTURING LOSSES

It's no surprise that 2,300—nearly 90 percent—of the jobs lost in Rock County since December 2008 came from the manufacturing sector.

A few more than 4,000 jobs, however, were directly tied to GM, including the 2,800 GM employees and the 1,200 or so who supplied the plant from jobs at Lear, LSI and Allied Automotive.

While those jobs are long gone, the numbers suggest that the local manufacturing sector has added jobs when the GM and supplier base is removed.

Removing that GM base has altered the wage scale in the local manufacturing sector. A loss of 2,800 jobs at an average hourly rate of $28 will do that.

Overall, the average annual manufacturing wage in Rock County has fallen from $52,400 in 2008 to $51,600 in 2013, according to the U.S. Bureau of Labor Statistics.

The average annual wage, however, had been falling for two years before GM decided to shutter its Janesville plant, a reflection of falling employment at GM and fundamental changes in the sector that were augmented by the recession.

“When GM went out, that was a very small workforce when you put it in the context of the entire county,” said Mary Willmer, community bank president and regional market manager at BMO Harris Bank. “We now have a much more diverse workforce … and that's been our focus.”

Willmer and Diane Hendricks, chairman of the Beloit-based ABC Supply, are co-chairwomen of Rock County 5.0, an initiative designed to foster collaboration, communication and economic development connections in the county.

The organization formed in October 2009 as an effort to revitalize the devastated local economy.

“The world has changed,” Hendricks said. “We have become technical, even in our manufacturing area. It doesn't take 12 people to run one piece of equipment any more.

“How do you compare today to 10 years ago when the industries have totally changed? Everyone is information technology savvy.”

James Otterstein, Rock County's economic development manager, said the county's manufacturing sector suffered because the county was so dependent on manufacturing for so long.

Rock County hasn't been alone in seeing declining employment in the manufacturing sector. Since December 2008, manufacturing jobs were lost in both the state and national sectors, according to the Bureau of Labor Statistics.

“Manufacturers today are doing so much more with technology,” Otterstein said. “They're doing more with less, so a decrease in manufacturing headcount—without a significant increase in new businesses—is certainly understandable.

“It's even more so with the GM situation locally.”

 A few other local sectors also lost jobs since 2008, but none has been as dramatic as the decline in manufacturing jobs.

The most significant were retail trade, down 1,500 jobs, and public sector or government categories, which lost 1,300 positions.

JOB GAINS

Since December 2008, the county has added about 3,100 jobs in four segments.

The wholesale trade and professional/business services sectors each added 800 jobs.

That's significant to the county's overall economy because each has increased wages well beyond inflation.

Average annual earnings in the Bureau of Labor Statistics super sector that includes wholesale trade have increased 12.5 percent since 2008 and now total nearly $36,000 in Rock County.

In the professional/business services sector, wages have jumped more than 28 percent to $44,370 in 2013.

The two sectors combined for 1,600 jobs that on average add $64 million to the economy each year.

Another significant growth sector has been the local health care industry, which has added 500 jobs since 2008, many of them coming with the opening of St. Mary's Janesville Hospital.

While average health industry salaries are not the same as those paid manufacturing jobs, the average health care worker earns about $45,600.

That's an additional $22 million for the local economy.

Rock County also experienced growth in the leisure and hospitality sector, one typically associated with lower-paying jobs.

The sector added 1,000 jobs. Officials said the increase could be the result of people adding second jobs to make ends meet or unskilled workers taking any job they could get.

Through August, those jobs are averaging an annual salary of just less than $12,000.

Adding 1,000 jobs in that sector added $12 million to the economy.

Taken together, the new jobs have added $98 million in wages to the economy, far less than the $118 million lost in the manufacturing sector alone.

“What we are dealing with is large losses in manufacturing, which are typically higher-paying jobs that provide stability and benefits,” said Bob Borremans, executive director of the Southwest Wisconsin Workforce Board. “That provides buying power and has a significant residual impact.

“In return, what we have are jobs that don't pay at those levels, although health care is a good-paying sector and there are others in the services.”

RECOVERY ROOM

John Beckord, president of Forward Janesville, said he's often branded as too much of an optimist.

He readily admits that's sometimes the case.

It is not, however, when it comes to the recovery of the local economy, he said.

“Given what happened—and not just with GM—people underestimate the breadth of the pullback and the reduction in staff in a lot of sectors,” he said. “Given the trifecta of the recession, the collapse of the local sector and then all the more minor things we've had to deal with, I think it's remarkable that the area recovered to the extent that we have.”

The local economy has done well despite dire warnings following the closure of the GM plant in Janesville, said John Beckord, president of Forward Janesville.

Well before GM left, the community made efforts to diversify its economic base to help soften the blow if the automaker ever left town, Beckord said.

He cites growth at Data Dimensions, Prent, Goex, Cummins, United Alloy, Evonik, Amtec, Tigre, Green-Tek, Blain Supply and Seneca as examples of that diversification.

“We've got two other companies—SSI and MPC—that ironically are doing very well in the auto industry,” he said. “Out of the ashes of Freedom Plastics, North American Pipe has come back and continues to grow incrementally.

“The diversity of companies in this community and this area is overlooked, taken for granted and underestimated. There are a lot of companies, whether they're headquartered here or have branch plants here, that have really carried the water when it comes to the recovery.”

Beckord paused for a minute and reconsidered his list.

“I didn't even talk about the health care sector, MacFarlane Pheasants or SASid, which has tripled in size,” he said. “We've had this internal growth of our local economy by virtue of all these companies that are doing quite well.”

Beckord is quick to admit there's still work to be done.

“As a community, we need to nurture the companies we have, assist them when we can and encourage the state to be a partner,” he said. “There are certain things we can't control, such as the global economy, what goes on in Washington and to some extent what goes on in Madison.”

Beckord said he'd like to see the local housing and construction market continue to improve. Both typically are lagging economic indicators that follow improvements in other sectors of the economy.

Revitalizing downtown remains a serious challenge, he said, adding that some “real bold” proposals will surface in 2014.

Overall, Beckord said he and others are pleased with the progress.

The community is not likely to ever again look like it did during the heyday of General Motors, he said.

“The circumstances that we found ourselves in were extremely challenging, and to have come this far, this fast, is really very gratifying,” he said. “Most of the credit goes to that group of local companies who have doubled down on this area.

“They deserve a parade. There are a lot of folks who took a chance in very difficult circumstances and made substantial investments in this area.”



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