Good News for Industrial Sector, Rust Belt

Joel Kotkin says manufacturing – and the auto industry – are making a comeback. The author and geographer details new impressive numbers for Indiana and Midwest industrial cities. Kotkin will offer these findings and much more to the Indiana Vision 2025 task force and Indiana Chamber board members during a work session next week. Forbes reports:

Manufacturing has grown consistently over the past 21 months, and now, for the first time in years, according to data mined by Pepperdine University’s Michael Shires, manufacturing regions are beginning to move up on our list of best cities for jobs.

The fastest-growing industrial areas include four long-suffering Rust Belt cities Anderson, Ind. (No. 4), Youngstown, Ohio (No. 5), Lansing, Mich. (No. 9) and Elkhart-Goshen, Ind. (No. 10). The growth in these and other industrial areas influenced, often dramatically, their overall job rankings. Elkhart, for example, rose 137 places, on our best cities for jobs list; and Lansing moved up 155. Other industrial areas showing huge gains include Niles-Benton Harbor, Mich., up 242 places, Holland-Grand Haven, Mich., (up 172),  Grand Rapids, Mich., (up 167)   Kokomo Ind., (up 177) ; and Sandusky, Ohio, (up 128).

Industrial growth also affected some of the largest metros, whose economies in other areas, such as business services, often depend on customers from the industrial sector. Economist Hank Robison, co-founder of the forecasting firm EMSI, points out that manufacturing jobs — along with those in the information sector — are unique in creating high levels of value and jobs across other sectors in the economy.  They constitute a foundation upon which other sectors, like retail and government, depend on.

“700 Tons of Metal a Day; Now Sir, You’re Tellin’ Me the World’s Changed?”

Kind of a random headline for this blog, but when I can work a Springsteen lyric (from "Youngstown") into a headline, I’ll do it every time. Governing tells the story of how rust belt cities are rebounding, citing Youngstown, Ohio as a prime example. 

The "rust is chic" movement has been around for a while, but thanks to blogs and online magazines, such as, a certain fascination with places that have fallen on hard times like the Rust Belt — which stretches from the Midwest through the mid-Atlantic and up into the Northeast — has taken hold. Part of it is the scruffy, industrial look. It may also be a rejection of cities with gleaming condo towers, bistros and boutiques that were once so trendy yet now seem so frothy and fake in the wake of the economic meltdown.

But the other fascination is the defiance these Rust Belt cities have shown. Many of them, such as the gritty cities Bourdain visits, reflect a rebellious attitude. Youngstown, Ohio, has to be the poster child of this stance. Once part of America’s steel manufacturing hub, Youngstown went into a death spiral as the industry collapsed in the mid-1970s. Today, Youngstown’s population is 75,000, less than half of its original size, and is 43 percent vacant.

Yet nearly 10 years ago, the city made the bold decision to embrace its new shrunken state rather than put time and money into trying to grow back. Public officials created a master plan, called Youngstown 2010, that envisioned a smaller, but thriving city with a more diversified economy. Indeed by 2010, certain elements of what Youngstown could become were falling into place.

The downtown area has come back to life, and more importantly, economic development has begun to take hold, delivering an interesting range of jobs to the area. The Youngstown Business Incubator (YBI) has played a key role, providing free or reduced rent and equipment to startup software companies. Ohio provides a large chunk of the YBI’s funding, and the payoff so far is about 300 technology jobs.

Recently, software firm Reserve Data in Silicon Valley, Calif., pulled up stakes from pricey San Francisco and opened shop in inexpensive Youngstown, trading California’s Bay Area chic for Rust Belt grit. The number of jobs that follow may be modest — 50 to 100 — but the staff will be able to enjoy Youngstown’s unique social scene, which includes the Rust Belt Brewing Co., located in an old train station.

Meanwhile, Youngstown’s manufacturing tradition isn’t over yet. French company Vallourec announced plans to invest $650 million in a steel manufacturing facility that will put another 350 people back on the payroll. How chic — sorry, "gritty" — is that?

From Not So Good to Great?

Maybe, just maybe, that Rust Belt name will find its place in history. The Midwest has been stuck with that unflattering moniker for years. Deservedly so in many ways. But the Brookings Institution, no Johnny-come-lately to the think tank game, says in a recent report that the Great Lakes region could be the economic leader going forward.

The State Science & Technology Institute (based in Ohio, giving it extra incentive in this case) analyzed the report this way (with more than a few items and initiatives that are no strangers to Indiana):

The Next Economy: Economic Recovery and Transformation in the Great Lakes Region provides a roadmap for federal, state and local stakeholders to transition the Rust Belt into a forward thinking economy. It replaces the old economy, which was driven by highly-leveraged, domestic consumption, with an export-oriented Next Economy powered by a low-carbon energy strategy and driven by innovation that benefits all Americans.

The report outlines the many resources that can position the Great Lakes region as an economic leader. They include:

Global trade networks: Many of region’s cities rank among the top cities in terms of the share of their metro output that is exported;

Clean energy/low carbon capacity: Their blue-green potential due to the Great Lakes, waterways and abundant natural wind/solar resources position the region well in renewable energy generation; and

Innovation infrastructure: The region’s metros are home to 21 of the 32 major public and private research universities, which attract substantial federal research investment. Each year almost 36% of all U.S. science and engineering degrees come from schools in the region. The region also registers almost 33% of all U.S. patents.

To achieve this economic transformation, the region will have to address the deficient transportation infrastructure for trade, the concentration of energy-intensive industries, the lack of seed capital and the low educational attainment levels. To resolve these challenges, the report provides three key Next Economy drivers that will help federal, state and metropolitan leaders to maximize the region’s promise:

Invest in the assets that matter: innovation, human capital, and infrastructure: Even though budget cuts have become a regular occurrence, the researchers argue, long-range economic health is not just a matter of spending less, but spending and investing to spur growth. The region should concentrate its efforts on developing regional innovation clusters, instituting workforce development at community colleges and smart spending on infrastructure to facilitate trade.

Devise new public-private institutions that are market-oriented and performance-driven: Government leaders should be prepared to go to voters to support bond issues or dedicated tax sources for these institutions. They also can consider reorganizing money from programs and systems that are underperforming. These institutions include new infrastructure banks, advanced manufacturing labs, regional energy research and innovation centers and a venture capital fund of funds.

Reimagine metros’ form and governance structures to set the right conditions for economic growth: To achieve growth and innovation, cities and states must overhaul their physical redevelopment strategies and local governance structures in the Great Lakes region due to their significant population and economic declines. They must focus on right-sizing communities, green development and infrastructure and governance reform.