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Business Journals
05-05-2025
- Business
- Business Journals
Panelists: Manufacturing could resurge in powerful boost for regions
Post-World War II, manufacturing employed nearly a third of U.S. workers and accounted for a similar portion of GDP. Today, those figures are near 8 percent and 10 percent, respectively. Yet Jeff Korzenik, chief economist for Fifth Third Commercial Bank, says manufacturing holds significant potential. 'Every dollar added in manufacturing creates about $3 in GDP,' he said. 'Each manufacturing job generates five to seven additional jobs in the economy. It's a powerful multiplier effect that benefits the entire economy." Boosting U.S. manufacturing by 50 percent poses a promising and even reasonable goal, and strategies employed by some manufacturers already show potential, Korzenik said. At a discussion hosted by the Kansas City Business Journal, sponsored by Fifth Third Bank, and moderated by the bank's Kansas City president, Taylor Dunn, panelists talked about why manufacturing makes such a difference in regional economies, manufacturing myths and realities, and the battle for workers — as well as efficiency. Assembling an economic boost Kansas City-based Orizon Aerostructures, which builds large complex subassemblies for the aerospace industry, opened a facility in Chanute, Kan., in 2016. It began with 30 people and a starting wage of $13 an hour. Less than a decade later, that facility employs nearly 500, with a starting wage close to $22 an hour, said Orizon President Henry Newell. Meanwhile, unemployment in the county went from 7.6 percent to less than 3 percent, he said. In addition, that facility buys many of the smaller components it uses from hundreds of suppliers — a prime example of the multiplier effect of manufacturing on an economy, Newell said. 'Our Chanute facility is a great case study,' he said. If U.S. manufacturing were to grow by 50 percent, Korzenik said, it would mean 5 million direct jobs but 30 million new jobs through the multiplier effect. 'It makes manufacturing so important to a regional economy versus, say, retail jobs, which have virtually no add-on impact,' he said. Kristie Keast, CEO of steel company BlueScope North America, said manufacturing also helps establish a strong community through tangential support services, economic resilience through good jobs, increased consumption and prosperity, and innovation. BlueScope has invested in housing, child care and support services to help bring people back to some of the rural areas in which it operates. expand Steve Sanders A big manufacturing myth Manufacturing suffers from a slew of misunderstandings, panelists said. Among the most prevalent: That it lacks career potential. 'Manufacturing has had a poor perception as quite a dark age, dirty, heavy, heavy industry, which has been a challenge to attract the younger generation,' Keast said. 'So we've done a lot of work in changing that perception, and authentically through cleaner and brighter factories, through progression with technology.' Manufacturers recognize the need to work on their branding, even educating parents and school districts about the realities of modern manufacturing. Partnerships with high schools and colleges help. Through a relationship with Neosho County Community College in Chanute, Newell said, an Orizon-branded room offers training for mechanics in aerospace and defense, without the need to attend a four-year school. The manufacturing workforce also has diversified from the stereotypical rural white man, particularly in attracting more women. 'Manufacturing pay is pretty good, and … it offers a great pathway for people for whom a four-year traditional college degree is not a good fit,' Korzenik said. Aircraft manufacturing, for example, pays better than $55 an hour. Many young people go into retail and leisure/hospitality, but that sector typically offers lower earnings potential, as well as a lower multiplier effect in terms of GDP, Korzenik said. Economies in flux Global shifts likewise have shifted the economics of manufacturing. Over the past couple of decades, manufacturing costs in other countries have risen and their workforces have shrunk. 'The bottom line is, it's not as cheap as it once was to manufacture abroad,' Korzenik said. That boosts the appeal of domestic manufacturing. Similarly, natural disasters and the COVID-19 pandemic have jolted supply chains sufficiently that geographically diversifying or reshoring — bringing manufacturing back to the United States — became important concerns for many businesses. And the United States boasts low and relatively steady energy costs, a key factor for manufacturers. However, the case for U.S. manufacturing isn't perfect, Korzenik said: a labor shortage, lag in adopting automation, significant regulatory burden, and strong dollar pose obstacles, though not insurmountable ones. Automation may lag other countries, but it's growing. Newell said that Orizon now spends its time on upfront engineering processes to create automation so production can run continuously, completely hands off. The company employs artificial intelligence, augmented reality, virtual reality, a classroom with Meta-style glasses, and other technological tools to maximize efficiency. 'This has just really happened in the last two to three years,' he said. Likewise, BlueScope has implemented AI sensors for applications such as sorting or painting, algorithms that make product decisions, predictive analytics, robotics, and other measures, Keast said. 'Some of these trades, like welding, are quite a dying trade, so we have to overcome that,' she said. BlueScope also has altered its prerequisites and expanded its searches for workers, recruiting from a broader array of sectors, such as others that work in shifts — nursing, food processing, food services, the military. 'Rather than expecting people to come with a forklift or a crane certificate, we actually train that in,' Keast said. 'What we were looking for was more people that are safety focused, can problem solve, and that want to be part of a team.' Still, U.S. manufacturers need more workers, and the labor shortage is expected to worsen in the coming years, largely due to immigration policy. 'There's tremendous vulnerability to our labor shortage,' Korzenik said. 'We think that's going to start being felt.' Panelists pointed to countries such as Japan and Australia, which already have had to deal with labor shortages and have tried strategies the United States could consider. Those include encouraging more female labor force participation, facilitating reentry of retirees into the workforce, and establishing guest worker programs.
Business Journals
23-04-2025
- Business
- Business Journals
Houston economy poised for growth despite recession fears
By submitting your information you are agreeing to our Privacy Policy and User Agreement . A growing workforce and affordability are positives for Houston, though the region could be particularly affected by changes in immigration policy. A national economist explains why Houston is well positioned despite increased recession fears. Story Highlights Houston's economy is well positioned amid increased recession fears, economist Jeff Korzenik says. Houston leads U.S. metros in GDP growth and consumer confidence. Tariffs and immigration policies could put pressure on the local economy. When it comes to the economy, location matters, one national economist says. That's good news for Houston. The Houston region is well positioned for growth despite increased fears of a recession, Jeff Korzenik, chief economist for Cincinnati-based Fifth Third Bank, said at a Greater Houston Partnership luncheon on April 23. In-migration, affordability and workforce productivity point to positive signs for the local economy, he said. GET TO KNOW YOUR CITY Find Local Events Near You Connect with a community of local professionals. Explore All Events The Houston metropolitan area and multiple Houston-area counties are among the fastest-growing places in the U.S., according to recent data from the U.S. Census Bureau. Meanwhile, Houston has the third-lowest cost of living among the 18 largest U.S. metros, and the annual cost of living in Houston is about 25% less than the national average. Additionally, the Houston region leads the top 20 U.S. metropolitan areas for two-year GDP growth, increasing 25.1% between 2021 and 2023 to $697 billion. 'Place matters because if you think about what drives an economy, it's two things: how fast you can grow your workforce and how fast you can grow the productivity of your workforce,' Korzenik said. 'Those geographies that can grow their workforce have a decided advantage because companies follow workers now, rather than workers following them.' He also said: 'We think there is going to be greater geographic dispersion of (gross domestic product) in the years ahead. Houston is well positioned for that.' Positive signs in the economy Korzenik's confidence in Houston — as well as in Texas, more broadly — comes as recession risks have gone up 'substantially' in recent months. Korzenik pegged the chance of a recession this year at about 35%, which he admitted is just an educated guess. Notably, a recession this year is not Korzenik's baseline assumption for the economy, though. 'We still believe that the base case for the U.S. should be a year of continued economic expansion, not a recession,' Korzenik said. Additionally, Korzenik said the 'single most important recession indicator" he is looking at is initial unemployment claims. Weekly claims have been around the low 200,000s, far from the 400,000 to 500,000 weekly claims that would cause Korzenik to worry, he said. As it relates to consumers, aggregate debt burdens — how high debt payments are relative to income — are low, giving consumers resiliency. However, lower-income consumers are worse off, and the top 10% of earners — those who earn $250,000 or more — account for just under 50% of spending. 'We have good news here, but we are on a somewhat precarious base,' Korzenik said. 'We're relying on a small subset of consumers.' However, consumer confidence is slipping nationwide, exclusive data from global decision intelligence company Morning Consult shows. The Houston region leads the nation in consumer confidence, though, suggesting continued strength in the local economy. Additionally, business confidence has risen as the Trump administration promised deregulation and lower taxes, Korzenik said. However, unlike what typically occurred in the past, that confidence has not resulted in an increase in capital expenditures yet. Tariffs have also caused a slight pullback in confidence recently, Korzenik added. Economic implications of tariffs, immigration policy Tariffs have the potential to have positive long-term outcomes if done right, Korzenik said, an opinion shared by JPMorgan Chase & Co. (NYSE: JPM) CEO Jamie Dimon. President Donald Trump's new tariff policies will put pressure on inflation and likely limit the number of interest rate cuts from the U.S. Federal Reserve, Korzenik said. He expects inflation to close the year at about 4% to 5% and the Fed to cut short-term interest rates possibly one or two times. Any more cuts than that may signal that a recession is becoming more likely, Korzenik said. Korzenik said the Trump administration's goal to bring back manufacturing jobs would be a boost for the economy, but current policies are the wrong strategy. Korzenik deferred to economist Peter Navarro's suggestion as the 'right' tariff policy, which would be to gradually implement a 10% universal tariff. Bringing back manufacturing jobs would help alleviate the labor shortage issue that is beginning to fester again, Korzenik said. Unlike in the past, there are more job openings than there are job seekers, putting pressure on businesses and driving wage inflation — a trend Korzenik said is the 'new normal.' That issue may worsen given the Trump administration's immigration stance, Korzenik said. The U.S. relies heavily on foreign-born labor. Since 2021, 5.9 million immigrants have joined the labor force, making up the majority of labor force gains over that time period. However, just 1.5 million of those workers are those who have gone through legal pathways to full U.S. citizenship, while the rest are asylum seekers, refugees and those in the country illegally. The flow of foreign-born labor is coming to a halt, a trend that began during the 2024 election cycle, Korzenik said. More than that, he said it would be 'naive' to think that policies won't affect the current immigrant workforce, he said. There could be upcoming decisions that would take away many of these people from the overall labor market. Immigration policy would put particular pressure on Texas, Korzenik said. Estimates show that 10.4% of the state's labor force comes from immigrants in the country illegally, second only to California, he said. 'We've relied too much on a labor force that, under current law, may evaporate,' Korzenik said. 'We think this means that labor shortages are going to come back, it's going to be visible, and it will put upward pressure on inflation.' Sign up here for the Houston Business Journal's free morning and afternoon daily newsletters to receive the latest business news impacting greater Houston.
