Part I

Change
in the Heartland

They’re not on land yet, but the sailors approaching from Lake Erie smell it already, the oil of John D. Rockefeller’s Standard Oil Company. Ashore in Cleveland, they smell, too, burning coal and the sour of steel mills. It’s the turn of the 20th century, and the chug and rumble of locomotives, loaded with goods, is nearly constant, and factory whistles signal the start of a shift and, hours later, the time to go home. Some buildings belch black smoke—dirtying laundry hung clean on the line and compelling workers to change detachable collars midday to relieve their gritty necks. The smoke sticks even now, many decades later, to old stone buildings that haven’t been washed, markers of an industrial past.

In those days, people in industrial centers such as Pittsburgh and Cincinnati may have moved up the hillsides to live away from the smoke that settled in the basins of their cities, but they knew: Smoke meant jobs. Industry. Prosperity.

For a century, roughly 1870 to 1970, these odors and sights and sounds shaped life across the industrial heartland as US manufacturing there grew rapidly, fueled in the earlier years by the nation’s growing access to electricity and in the fifties and sixties by the work of rebuilding foreign industrial powers after World War II. It’s not an exaggeration to describe Cleveland as the Silicon Valley of the era. The city has the advantage of hugging Lake Erie and in the early 1900s it stood at the cutting edge of industrial tooling technology.

Historically, the nation’s industrial heartland has been heavily reliant on manufacturing for its economic success—and, to a lesser degree, it still is today. Map credit: Chris Dellamea

Competitors to the industrial heartland’s manufacturing dominance emerged in many forms beginning in 1970. Machines, particularly CNC machines, came online, reducing the number of people needed to control tools and rendering some workers’ skills obsolete. Americans point often to foreign competition as the culprit of the heartland’s job losses, and while it did ramp up then, domestic competition dealt its blows, too, says Cleveland Fed senior vice president Mark Schweitzer. As the interstate highway system expanded in the seventies and eighties, it connected more places to the southern United States, where manufacturers opened more plants, drawn to the South’s iron and its lower-cost workers (the South was and still is less unionized). As transportation became cheaper, it further fueled moves down south.

The 1980s would see the first of two massive declines to US manufacturing and this bustling geographic center of the sector. During the decade, US manufacturing lost 1.4 million jobs, or about 7 percent of its workforce. Industries most decimated were textiles and apparel manufacturing, as companies relocated their operations overseas, and steel, as more countries began producing the metal, resulting in plummeting prices and tremendous cutbacks. The loss of steel jobs hit heartland communities such as Pittsburgh and Youngstown hard. Locals in the Mahoning Valley still speak of “Black Monday,” the day (September 19, 1977) when Youngstown Sheet & Tube, the region’s largest steel manufacturer, shuttered its doors, directly and indirectly pink-slipping thousands of workers.

Front-page headlines of the <em>Youngstown Vindicator©</em> chronicle developments in 1977, the year Youngstown Sheet & Tube—the region’s largest steel manufacturer—closed. Front-page headlines of the <em>Youngstown Vindicator©</em> chronicle developments in 1977, the year Youngstown Sheet & Tube—the region’s largest steel manufacturer—closed. Front-page headlines of the <em>Youngstown Vindicator©</em> chronicle developments in 1977, the year Youngstown Sheet & Tube—the region’s largest steel manufacturer—closed. Front-page headlines of the <em>Youngstown Vindicator©</em> chronicle developments in 1977, the year Youngstown Sheet & Tube—the region’s largest steel manufacturer—closed. Front-page headlines of the <em>Youngstown Vindicator©</em> chronicle developments in 1977, the year Youngstown Sheet & Tube—the region’s largest steel manufacturer—closed.

Locals in the Mahoning Valley still speak of “Black Monday.”

The worst was yet to come. A historically unprecedented and more sweeping decline began in the early 2000s and deepened during the Great Recession of 2007–2009. The result was the loss of nearly 5 million US manufacturing jobs from 2000 to 2016.

“Manufacturing employment dropped by nearly 30 percent nationwide,” says Susan Houseman, vice president and director of research for the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan. “That’s huge. There was no manufacturing that didn’t lose employment over that period of time.”

Full citation: US Bureau of Labor Statistics, Percent of Employment in Manufacturing in the United States (DISCONTINUED) [USAPEFANA], retrieved from Haver Analytics.

In the early 2000s, Congress guaranteed lower tariffs to Chinese goods permanently, says Tim Bartik, a senior economist with the Upjohn Institute. That meant that companies thinking about offshoring could do so with greater certainty that tariffs wouldn’t go up on the goods they’d produce there.

The early 2000s was also a time when the US dollar appreciated and many considered it to be overvalued (because of a variety of factors), a situation that made US exports more expensive and imported manufactured goods cheaper, Bartik and Houseman explain.

Despite the stark decline of manufacturing jobs in the 2000s, Houseman rejects the notion that manufacturing is going away. The data on manufacturing workers are misleading, she asserts. Work such as transportation and warehousing, maintenance and repair, even R and D, can be contracted out, and for that reason and others, many jobs connected to manufacturing are counted as other sectors’ jobs by federal agencies.

Houseman notes structural change like that facing manufacturing isn’t isolated to manufacturing. “You get to a certain tipping point where closures overwhelm a local economy, and it spirals downward,” she adds. “It’s not easy. Very often, it takes a generation or more for communities to adjust. Some local economies never do fully recover.”

It takes a generation or more for communities to adjust. Some local economies never do.

Who's to blame:
Robots or trade?

There is a lively debate about what has caused manufacturing jobs to decline, trade and globalization or automation. While economists widely agree that increased US trade has been positive for the economy as a whole, rigorous economic studies show that trade and globalization played a role in that jobs decline. US companies’ expansion elsewhere—in countries such as China, where wages used to be super low—meant less expansion and in some cases even contraction in the United States, Houseman says.

The United States remains today sort of stuck in the middle, says Susan Helper, Frank Tracy Carlton Professor of Economics at Case Western Reserve University’s Weatherhead School of Management. “We’re not low-wage like Mexico, we’re not high-wage like Germany,” she explains. “We continue to lose jobs to both kinds of countries.”

As for automation, Houseman says empirical evidence doesn’t support the fear out there that pits man against machine.

“The research evidence points to trade and globalization as the major factor behind the large and swift decline of manufacturing employment in the 2000s,” concludes Houseman’s 2018 working paper, “Understanding the Decline of US Manufacturing Employment.” “Although manufacturing processes continue to be automated, there is no evidence that the pace of automation in the sector accelerated in the 2000s; if anything, research comes to the opposite conclusion.”

There is no identifiable big technology shock during that period that would have caused the decline, Houseman adds.

There are also findings like these: Manufacturers that are investing in new technology reported to the September 2018 Manufacturing Employment Demand Study for Southwestern Pennsylvania that they expect hiring to remain the same or increase as a result of those investments.

What impact has automation had, then, on his businesses? He flashes a quick grin. “Unbelievable,” he replies.

For Dan T. Moore, majority owner of 10 manufacturing companies, automation reduces and requires workers. In one part of the cavernous home of his company Soundwich—it makes noise-cancelling parts for vehicles—three robotic arms swing to and fro, assembling and placing parts onto a conveyer belt headed straight for, on this day, a woman named Monica. She marks each piece with a green marker, triple-checking the robots’ work.

Full citation: Federal Reserve Bank of Cleveland calculations from Bureau of Economic Analysis, Gross Domestic Product by Industry and US Bureau of Labor Statistics, All Employees, Manufacturing [MANEMP] retrieved from Haver Analytics.

Find any defects? “As of late, no,” she replies. The robots’ eyes—their cameras—are keeping things precise.

Those robots replaced roughly six people, notes Moore, chief executive officer and chair of Dan T. Moore Company. What impact has automation had, then, on his businesses? He flashes a quick grin. “Unbelievable,” he replies. Machines do repetitive work accurately and tirelessly. They speed up production; for example, a rotary die cutter on the premises churns out 4,000 parts per hour where people could do 800. Machines make possible, too, what the industry dubs “lights-out manufacturing,” wherein machines work all weekend without operators.

All of this increases output, enabling US manufacturers to compete with places where workers may make much less an hour, thus allowing work to stay in communities across the industrial heartland, Moore says.

Machines don’t run themselves

But right after he rattles off this laundry list of automation’s perks, Moore notes this: The more his companies produce, the more he needs people, too. People like Windsor Ford, the general manager of another Moore company, Fiberworx.

When Moore steps inside his 1-million-square-foot Cleveland Industrial Innovation Center, his numerous employees—“teammates,” he corrects—hug him or wave to him. And Ford greets Moore with a pen, a paper, and a “Can I get a quick autograph from you, big dog?” Moore obliges. The form’s related to a $2,000 charge Ford put on a credit card for a device the company’s people will use to train robots. “To run our robots, it takes people to do that,” people to program and maintain the machines, Moore says. “It’s fine to buy the thing, but someone’s got to know how to use it.”

His point is automation replaces workers but also creates higher-skilled jobs that pay more. It can power people’s work, too, for example, when they analyze and act upon data collected by shop robots.

At Cleveland-based manufacturer Soundwich, the blue light of this robotic system reflects off of parts and identifies whether they are correctly made. After a 360-degree review, robotic arms place correct parts on one conveyer belt and faulty ones on another. This worker at Soundwich in Cleveland uses a green marker to place “witness marks,” which indicate to customers that people have checked the quality of the parts being manufactured. Anthony Cook, an employee of Soundwich in Cleveland, works with a 100-ton die cutter, a machine that presses down on material to create parts. Dan T. Moore, whose namesake company owns 10 manufacturing companies, speaks with Vannak So, who’s worked for one company, Soundwich, for more than 30 years. A reel of parts called isolator bushings hangs near robots inside Cleveland-based Soundwich. Robots punch the bushings into parts destined for use in vehicles.

Manufacturing
still matters

In Schweitzer’s office inside the Cleveland Fed sits a stack of books, all on manufacturing. The Federal Reserve’s studies about the sector are prolific enough he could (and might) build a timeline of them. Why all this Fed attention on manufacturing?

Each of the Fed’s 12 Reserve Banks studies and serves a corner of the United States, and the Cleveland Fed’s district (Ohio, western Pennsylvania, the northern panhandle of West Virginia, and eastern Kentucky) has long been in the heart of the industrial heartland. That’s one reason the heartland’s economic performance has been a focus of Cleveland Fed research, Schweitzer explains in the 2018 interview, “Why the Industrial Heartland Still Matters.” Another reason for studying and monitoring manufacturing, in particular, is that manufacturing tends to signal the first pinches of an economic downturn (when people stop buying and investing) and by keeping an eye on manufacturing the Fed can better do its job of setting monetary policy that’s appropriate for where the United States is in terms of economic growth or contraction.

Billowing smokestacks, such as those from this automotive manufacturing plant, are a familiar element of industrial cities’ skylines. River barges are iconic symbols of the industrial cities that grew up along midwestern waterways. These barges are being loaded on the Ohio River in Cincinnati, Ohio. Industrial storage tanks loom several stories high at a chemical production plant in western Ohio. A worker operates an automated cutting machine in a metal production plant near Cleveland, Ohio. The Joseph & Feiss Company, established in Cleveland, Ohio, in 1907, played a large role in Cleveland’s garment industry. The company produced suits, sport coats, and other menswear. Steel mills are close neighbors of downtown business districts in industrial heartland cities. In Cleveland, Ohio, they nestle in the valleys along the Cuyahoga River. The Ohio River Valley, passing through western Pennsylvania, eastern Ohio, and the northern panhandle of West Virginia, was a major steel-producing region. Although smaller today, the industry is still vital to the region’s economy. This steelworker is in Pittsburgh, Pennsylvania.

Pieces of this body of Fed research show that despite recent decades’ declines in manufacturing jobs, the industrial heartland remains manufacturing-intensive except for a handful of metropolitan statistical areas (MSAs) including Pittsburgh and Columbus.

“In much of the industrial heartland, manufacturing is the primary exportable industry (meaning the industry that makes and sells the most to other places),” Schweitzer says. “This is what these communities produce that other communities don’t.”

Predictably, then, the hits to manufacturing have rippled through heartland communities. “The loss of employment and the loss of activity in manufacturing detracts from what those communities are producing and offering to other places,” Schweitzer says. “It makes them less attractive to people outside and inside the region.”

Manufactured goods were top exports in 2018 for states in the industrial heartland and the nation. Click through this slideshow to see which types of goods made the top 5 for these states and the country—and where the goods were made.
Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 325 -- Chemicals, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 333 -- Machinery, Except Electrical, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 336 -- Transportation Equipment, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 334 -- Computer and Electronic Products, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 311 -- Food Manufactures, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 339 -- Miscellaneous Manufactured Commodities, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 331 -- Primary Metal MFG, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 335 -- Electrical Equipment, Appliances & Components, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 332 -- Fabricated Metal Products, NESOI, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 321 -- Wood Products, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx. Full citation: Foreign Trade Division, US Census Bureau, 2018 Exports of NAICS 324 -- Petroleum & Coal Products, retrieved from International Trade Administration of the US Department of Commerce; http://tse.export.gov/tse/MapDisplay.aspx.

Over the past 50 years or so, industrial heartland MSAs have experienced weaker growth in population, employment, and per capita income than have other US MSAs, according to a trio of Rust and Renewal retrospectives that compare the economic performance of Cleveland, Cincinnati, and Pittsburgh MSAs to those of other industrial heartland MSAs and the nation.

And manufacturing’s decline has been the primary hit to the revenues some communities collect, causing “nasty fiscal situations,” says Joel Elvery, a policy economist with the Federal Reserve Bank of Cleveland. Detroit’s 2013 bankruptcy is one example he cites. Municipalities have responded to manufacturing’s decline by cutting services as basic as water treatment and ambulances, and it ultimately makes their communities less attractive. They also raise taxes, he says.

For every one worker employed in US manufacturing, another four employees are hired in other sectors.

Communities lose people, too, when manufacturing jobs disappear, and that can cause housing values to drop, the social fabric of neighborhoods to erode, and local businesses to feel the pinch, or worse yet, to close up shop. So the jobs of many who are not employed in manufacturing, from those pouring steaming cups of joe at the local diner to those practicing law from a corner office, are influenced by how manufacturing rises and falls. For every one worker employed in US manufacturing, another four employees are hired in other sectors, according to the National Association of Manufacturers.

Full citation: US Bureau of Labor Statistics, Hires: Manufacturing [JTS3000HIL], retrieved from https://www.bls.gov/jlt/.

Elvery projects some continued decline in manufacturing jobs as automation and competition increase, and while Schweitzer calls that a fair assumption, he also emphasizes—multiple times—that net change in employment is the difference between two numbers: the number of jobs manufacturing is losing and the number of jobs manufacturing is gaining. So while the net numbers may tell a story of decline, it’s just as true that people are filling and entering manufacturing jobs. Manufacturers tell the Fed, too, that they’ll have more positions to fill going forward, given the size of their older workforces.

We can be competitive in manufacturing.

Looking also to the future with optimism is Bartik, the senior economist with the Upjohn Institute in Michigan. It’s fairly unlikely that the 30 percent drop in jobs that manufacturing suffered from 2000 to 2010 will happen again, he says, and it’s “quite possible” that reasonable macroeconomic and trade policies could at least stabilize the number of manufacturing jobs in the country. “We can be competitive in manufacturing,” Bartik adds. “The share of manufacturing jobs may go down over time, but we can still have some job growth in that area, and it can still be important.”

Long-lived
advantages

Can the heartland, in particular, remain competitive in this work? Sources say yes, and resoundingly. One long-running advantage the region enjoys is the coal, iron ore, natural gas, and other resources within its slice of earth.

“The other piece is because there are already a lot of manufacturers in the area, it means you have supply chain,” Elvery says. “It’s difficult to build supply chain. And compared to other regions, there is a more skilled manufacturing workforce here. That’s another long-lived advantage.”

Manufacturing in the US

In order to compete globally, manufacturers will need to drive up productivity using technologies such as robotics and automation, data integration and analysis, and 3D printing, say those working inside the sector. Still, we’re a long way away from the scene where some person pushes a button and robots do the rest, Bartik predicts. In the near and medium terms, manufacturers will still need a considerable number of workers, especially those with advanced skills. The question on many minds today is where and how to successfully recruit them. The US unemployment rate (as of early 2020) is very low, so there’s no sizable surplus of people out of work right now. Manufacturers will have to either offer wages that attract workers from other sectors, Bartik says, or they’ll have to employ some of the many people who are unemployed.

Dan T. Moore is seated inside a conference room inside his Cleveland Industrial Innovation Center, formerly home to Clevite Corp., a manufacturer of automotive and aircraft bearings that once employed thousands. He calls the property an “industrial playground.” His teammates and he have the space and the machinery to produce new products and start new companies, every year even.

This banner hangs inside Team Wendy, a Cleveland manufacturer that produces helmets for sports, the military, law enforcement operations, and search-and-rescue missions. Dan T. Moore founded the company in 1997 as a memorial to his daughter, Wendy, who passed away from a brain injury after a snow skiing accident. Hanging in the front offices of the Cleveland Industrial Innovation Center (CIIC) are press clippings and personal notes about bullets stopped by the helmets manufactured by Team Wendy, a company operating at the CIIC. On the side of this helmet bearing the Team Wendy logo is a Picatinny rail used for adjusting or attaching additional equipment such as night vision or side-mount flashlights. Team Wendy is one of several manufacturers owned and operated by the Dan T. Moore Company in Cleveland. People from many countries work inside this sewing facility, putting together the retention systems, including chin straps, for helmets manufactured by Team Wendy in Cleveland. These foam pads will be covered in fabric and placed inside helmets by Cleveland manufacturer, Team Wendy. Team Wendy sells helmets to a quarter of the world’s countries, according to company leadership. A closer look reveals dents and marks all over these “trialed helmets,” which have been tested for impact and labeled. Team Wendy, the Cleveland manufacturer that makes them, extensively tests helmets before they go to market. Helmets on display inside Team Wendy. Owner Dan T. Moore founded the company in memory of his daughter who passed away after sustaining injuries in a skiing accident. These foam pads will be covered in fabric and placed inside helmets by Cleveland manufacturer Team Wendy. Team Wendy sells helmets to a quarter of the world’s countries, according to company leadership.

If you ask any manufacturer, they’re having a terrible time finding workers.

Dan T. Moore Company now uses automation that allows it to compete pricewise with companies in countries such as China, and it’s growing its sales—Moore’s palms are in the air and he exhales, exasperated—“and there’s no one trained.” When it comes to machinists, in particular, he goes so far as to say, “We can’t be picky: ‘Here, fog this mirror, you’re hired.’ If you ask any manufacturer, they’re having a terrible time finding workers. Many more jobs than people looking for them. When you can’t find people, you can’t build a business.”

The history of manufacturing in the industrial heartland is one of prosperous heights and precipitous declines, and the present is one of decline and growth. The future hinges, say Moore and others, on manufacturing’s ability to recruit and retain the people with whom it can grow.

Given its continued concentration in manufacturing, the heartland’s future depends, too, on finding these workers, this next blue-collar generation.


Up next: "Part II: Help Wanted in the Heartland." | Explore the full "Manufacturing under Pressure" series.