Richmond Times Dispatch - September 05, 2010

Manufacturing's rally:
Va. comeback is modest, but officials say the free fall has stopped.

BY JOHN REID BLACKWELL

The worst days of the economic recession seem long past now at the Service Center Metals Inc. plant in Prince George County. Production has been humming along for months at the factory. The company has been hiring, too, restoring most of the jobs that were cut during the recession.

Service Center Metals isn't the only industrial company in Virginia that has seen a rebound in jobs this year as demand for manufactured goods improved. Yet most of the gains in manufacturing have been modest and have not come close to replacing the major blow to industrial employment the state suffered during the recession.

"We have seen business conditions improve over the last year -- July was the best July ever for us, and June was our best June," said Scott Kelley, the co-founder and president of the seven-year-old company.

The plant makes aluminum extrusions -- shaped rods and bars that are sold in many industries from equipment and machinery makers to construction, transportation and consumer goods. That gives managers and employees at the plant a good vantage on the national economy.

As the economy tumbled, demand for the company's products dropped in late 2008 and through the first half of 2009. "The market just fell off a cliff in the fourth quarter of 2008," Kelley said. "There was just no demand. [Customers] were drawing inventories down to nothing, and we had our first layoff in November of 2008."

Service Center Metals cut back to 92 employees from about 125 before the downturn. Later in 2009, the company saw resurgence in demand as customers started to re-stock products. Now, the company has staffed back to about 120.

"That was a great day when we were able to put that hiring sign out front," Kelley said.

Manufacturing employment in Virginia declined by more than 30,000 jobs from July 2008 to July 2010, according to seasonally UN adjusted figures from the Virginia Employment Commission. This year, employment in the sector has rebounded from a low of 226,900 in February to 231,700 in July.

Nationwide, manufacturing has been leading the economic recovery. The sector has expanded for 13 straight months, though some economic reports have indicated the growth rate slowed this summer.

The Institute for Supply Management reported last week that its manufacturing index, a key report on growth in the industry, rose to 56.3 in August from 55.5 in July. A reading above 50 indicates growth. Managers in manufacturing companies also indicated their hiring plans were at the highest level in nearly 30 years.

"We are looking at about a 3.9 percent growth in the third and fourth quarters in manufacturing, when the [overall] economy is only going to grow about 1.8 percent," said Dan Meckstroth, chief economist for the Manufacturers Alliance, a trade group based in Arlington.
He attributed the growth, in part, to strength in the export market.

In Virginia, manufacturing companies that have announced hiring or recalls of laid-off employees include Goodyear Tire and Rubber Co. The company said in July that its Danville tire manufacturing plant would return to a seven-day schedule and bring back about 400 workers who lost their jobs last year because of weak demand.

Volvo Trucks North America said it would recall 270 former employees to its plant in Pulaski County this month because of an increase in orders. With about 1,200 workers, the plant's work force is about half its size four years ago, though.

In the Richmond area, DuPont Co., a major Richmond area employer, also has hired more than 100 full and part-time employees this year. It cut about 450 jobs in 2009, almost 20 percent of the plant's work force, because of a slowdown in demand. At its Spruance plant in Chesterfield County, it makes high-performance materials such as Tyvek, Nomex and Kevlar.

"We were fortunate that we were able to deal with most of [the job cuts] through voluntary severance," said Joe Internicola, plant manager at DuPont's Spruance plant.

Demand started to pick up in late 2009, he said. As a result, the Spruance plant has hired 64 new full-time employees this year. The plant also is in the process of adding about 45 part-time workers.

"The intent [of hiring part-time workers] was to hedge a little bit so that we could have some flexibility to respond to conditions," Internicola said.

DuPont received about 1,700 applications for the part-time positions, he said.

The bump in hiring comes after the recession forced some manufacturing companies to make deep cuts in 2008 and 2009 to weather a recession of uncertain duration, said Brett Vassey, president of the Virginia Manufacturers Association.

The hiring this year reflects an uptick in demand ahead of their projections.

"The positive news is the free fall has stopped for the most part," Vassey said. "Companies made decisions in 2009 that were painful to make, but which allowed them to weather most of the recession. Now they are very carefully and thoughtfully hiring back in response to market stability.

"But that does not mean we are on pace for a full recovery soon," Vassey said. "We are looking at slow growth."

Vassey said he thinks manufacturing will see long-term changes as a result of the Great Recession, with companies becoming more sensitive to potential future expenses and international market conditions such as the strength or weakness of the U.S. dollar.

Even a full recovery won't restore all the jobs that have been lost in manufacturing, economists and manufacturers say.

Richmond-area manufacturing employment stood at about 31,700 in July, about the same as at the start of this year, according to Bureau of Labor Statistics figures. Local employment in manufacturing is down about 8,600 from July 2008.

The region has lost some significant industrial mainstays in the past two years, including the Qimonda computer chip factory that once employed more than 2,000 people in eastern Henrico County and the Reynolds Consumer Products aluminum foil plant in Richmond that employed nearly 500.

Nationally, the downturn wiped out about 16 percent of manufacturing jobs, said Meckstroth, the Manufacturers Alliance economist. The biggest gains in employment this year have come in Midwest states but those states also saw the largest declines during the downturn, especially in the automobile industry.

After the recession of 2001, manufacturing employment never made a major recovery to its pre-recession levels, Meckstroth said. "We think we will gain back some jobs in this cycle, which we did not do in the last cycle," he said.

Still, even with the bounce back from the recession, the long-term trend of eroding employment in manufacturing seems likely to continue.

That has been driven largely by technology and productivity improvements which enable companies to produce more with fewer workers. Manufacturing employment nationwide has dropped from about 20 million workers to about 11.7 million in the last 30 years, Meckstroth said.

This recession also has forced companies to push for even more efficiency and productivity gains.

"We have learned how to do more with less," said Kelley, the Service Center Metals president. "We are very close to where we were before [in employment], but we have found ways to improve our productivity and reduce our costs, which I think is the new normal."

The bump in hiring has come at a lucky time for some of the workers hired into manufacturing this year.

Service Center Metals has even attracted some new employees from out of state.

Nick Hicks, 20, moved from Florida to take a job at the plant several months ago. "In this economy, once you've found a job, you got to hang on to it," Hicks said.

Chad Bridger, a Chester resident, said he looked numerous places for a job before getting hired at the company four months ago. "Before this, I did iron work," he said. "But that really slowed down with the economy. To me, it feels like [the economy] is getting better now, but maybe that is just because I got a job."

Richard Asby, a 42-year-old Colonial Heights resident, was hired to work full time at DuPont's Spruance plant in July. Asby has been on the roller-coaster ride of the economy. He worked in maintenance at a health-care center for two years before joining DuPont. Before that, he worked in construction.

"When the economy went down, the jobs just bottomed out," he said. "There was nothing there."

Asby now works as a chemical process operator in Tyvek production. He said he sees good long-term prospects in manufacturing.

"It's a more stable environment to me, especially because of the products we make here," he said.”The products are used abroad for many things."

Contact John Reid Blackwell at (804) 775-8123 or jblackwell@timesdispatch.com