Manufacturing and the New Hampshire Economy

Ross GittellJames R. Carter Professor

University of New Hampshire

Manufacturing at Risk in NH

• Since 1984 manufacturing employment in NH has declined from about 116,000 to 85,000 or by more than 1/4th

• Manufacturing “recovered” during the 1990s but at a level more than 10 percent below its 1980s peak.

• Over last 3 years NH has lost 1 of every 5 manufacturing jobs…. Higher than national and regional declines

Manufacturing Decline over last 3 years (March 2000 to March 2003) 20%. The decline is steeper in NH than any other state. Since 2002 (annual average

of 85,200) employment has declined to 81,300 All-States -15%Pennsylvania 30 -15%Illinois 31 -15%Arizona 32 -15%Georgia 33 -16%Tennessee 34 -16%Alabama 35 -16%Ohio 36 -16%Montana 37 -16%New England -16%Vermont 38 -16%South Carolina 39 -17%Massachusetts 40 -17%New York 41 -18%Colorado 42 -18%Michigan 43 -18%Oklahoma 44 -18%Delaware 45 -19%Mississippi 46 -19%North Carolina 47 -19%Washington 48 -20%Maine 49 -20%New Hampshire 50 -20%

Layoffs concentrated in high tech manufacturing in NH .. During period of extensive layoffs (1/01-8/02) about 50%

of layoffs in the state were in industrial machinery and electronics manufacturing industries

# Layoffs # Closures# People

Permanently % of totalJan. 1, 2001 through Aug. 22, 2001 48 6 4,376 48.8%Aug. 23, 2001 through Dec. 31, 2001 29 9 2,659 54.5%Jan. 1, 2002 through Aug. 22, 2002 23 8 1,532 46.7%Totals Jan 2001 to Aug 2002 100 23 8,567Percent of Total Layoffs in the State 36.8% 25.8% 50.0%

SICs 35 & 36 (Industrial Machinery & Electric/Electronic Equip Mfg

New Hampshire Labor Force Announced Reductions - January 2001 through November 2001Employer Industry Reason NumberTextron Automotive Injected molding, autos Decline in auto production 50

General Electric Electric Meters Moving Prod to Mexico 44

Plymouth Manufacturing Wood products Declining markets 50

Janco Electronics Printed circuit boards Closing division 38

Nashua Corporation Specialty imaging, toner Decline in toner business 12

Safety 1st Inc. Mfg child safety products Acquistion, Dorel of Canada 200

Polyclad Laminates Printed circuit boards Weakness in electronics 175

Adaptec Computer networking prod. Slowdown in IT 85

Shoe Doctor Footware Plant shutdown 75

Sanmina (Hadco) Adv. electronic services Softening in the economy 253

Aavid Thermal Technologies Heat sinks (chips) Economic slowdown 50

Teradyne, Inc. Semiconductor testing equip. Worldwide product slowing 350

Annalee Mobilitee Dolls Toy maker Market trends 30

Cisco Systems, Inc. Computer network mfg. Stop router production 19

Celestica New England Electronics for other cos. Slowdown in IT 200

Molex Premise Networks Electronics components Business slowdown 30

Bancroft Products Component assembly Business downturn 260

Texas Instruments Semiconductor Mfg. Softening in the IT market 340

Concord Litho Group Printed greeting cards Order slowdown, high costs 31

Ladesco Inc. Electronic components Drop off in orders 140

Osram Sylvania, Inc. Automotive lamps/lights Entire market slowed down 70

Textron Automotive Electric motor components Sold to Hong Kong co 150

SCI Systems Inc. Printed circuit boards Slowdown in electronics 150

Troy Mills Automotive fabric, carpets Bankruptcy, move mfg to W. Va. 40

Sweetheart Cup Plastic disposable cutlery Relocate mfg to N. Andover, MA 170

Sanmina (Hadco) Assembles circuit boards Mothball plant until conditions improve 230

Sanmina (Hadco) Contract mfg circuit boards Telecommunications industry down. 140

Net to Net Technologies Mfg DSL equipment for telcom Telecommunications recession 20

Pulp and Paper of America Paper products Bankruptcy 810

Imtec Inc. Mfg. barcode reading machines Slowdown and overseas competition 40

Prime Tanning Supplies the shoe industry Running out of customers 400

Sanmina (Hadco) Contract mfg circuit boards Downturn in worldwide electronics 265

Teradyne, Inc. Semiconductor testing equip. Worldwide product slowing 200

Hitchiner Manufacturing Co., Inc. Iron and steel castings Moving some jobs to Milford, NH 350

Flextronics International Ltd. Contract electronics mfg Consolidating plants worldwide 254

DT Magnetics Mfg transformers/inductors Severe cut back in orders 92

Polyclad Laminates Printed circuit boards Slowdown in electronics 100

Beebe Rubber Custom rubber compounds Foreign competition, changing tech. 78

Moore North America Machines for printing forms Closing factory 190

Aavid Thermal Products, Inc. Heat sinks (chips) Recession in electronics industry 85

Star Specialty Knitting Knitting Foreign competition, changing tech. 50

Comparing the last 2 Manufacturing Downturns in NH: The good news is that manufacturing in NH economy might be is less cyclical than it once was because it is more diverse and not as concentrated in a few larger employers…the bad news is that NH is suffering from

structural decline. Since 1998 approximately 2/3rds of decline is cyclical,1/3 structural

Manufacturing employment in NH: Last Two Downcycles Manufacturing "End of PeakPeak decline" to "trough"1984 1992 84-92

Late 1980s and Early 1990s 116.9 89.69 -23.3%1998 2002 98-2002

Early 2000s 103.67 85.19 -17.8%84-98 92-02 84-02

Declines from previous manufacturing recession -11.3% -5.0% -27.1%

How long can the state continue to have the strongest economy in New England and lose

its manufacturing base?Employment Change 1998-2002: Total and Manufacturing US,

New England, MA and NH

3.54% 2.96% 2.29%

5.01%

-12.85%

-15.81% -16.84% -17.83%-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

United States New England Massachusetts New Hampshire

% 9

8-02

Total Employment Manufacturing Employment

Why Should we Care About Manufacturing in NH?

Why Manufacturing Matters…

• Manufacturing accounts for:– 1 out of every 7 jobs in the state– 1 out of every 5 payroll dollars in the state – 2 of every 3 high technology jobs in the state

(manufacturing is very much part of NH’s “new economy”)

– 8 of 10 NH counties have above US average employment concentration in manufacturing (compared to only 5 in leisure & hospitality)

Why Manufacturing Matters

• Manufacturing directly accounts for 22 percent of gross state product. This compares to 18 percent for services and 15 percent for trade.

• Overall manufacturing accounts –directly, in-directly and in induced effects -- for 40 percent of overall NH economy. (This is a conservative estimate and compares to high tech’s 30%)

• Manufacturing in NH has high multiplier effects from supplier relations, high wages and export activities

Over 20% of payroll in the state from Manufacturing ..as much as Retail and Health Care combined, five-

times as much as Information Sector and Accommodation and Food Services

New Hampshire Payroll Breakdown by NAICS Supersector2001 Data

Industry Description

Annual Payroll ($1000)

Percent of Total Payroll

Manufacturing 3,819,083 21%Health care and social assistance 2,236,290 12%Retail trade 2,054,333 11%Professional, scientific & technical services 1,338,803 7%Wholesale trade 1,160,687 6%Construction 1,141,037 6%Finance & insurance 1,108,753 6%Admin, support, waste mgt, remediation services 1,079,160 6%Management of companies & enterprises 911,752 5%Information 823,485 4%Accommodation & food services 656,091 4%Educational services 543,485 3%Other services (except public administration) 485,516 3%Transportation & warehousing 417,977 2%Real estate & rental & leasing 224,281 1%Utilities 200,734 1%Arts, entertainment & recreation 155,877 1%Auxiliaries (exc corporate, subsidiary & regional mgt) 81,132 0%Forestry, fishing, hunting, and agriculture support 24,847 0%Total 18,494,050 100%

Employment Percentages…..manufacturing more important to NH economy than US or New England.

NH ranks 14 of US states and 2nd in Northeast in percent of employment in manufacturing..

New% of Total Employment in 2002 US England NHEducation and Health Services 12.5% 16.8% 14.9%Government 16.2% 14.2% 14.2%Professional and Business Services 12.4% 12.0% 8.7%Retail Trade 11.7% 11.9% 15.5%Manufacturing 12.0% 11.8% 13.8%Leisure and Hospitatlity 9.0% 8.8% 9.8%Financial Activities 6.0% 7.1% 5.9%Wholesale Trade 4.4% 4.0% 4.3%Other Services 3.9% 3.7% 3.5%Information 2.6% 2.6% 2.1%Transportation and Wharehousing 3.1% 2.3% 2.1%

Rank ordered from high to low in percent of total employment in New England

NH Ranks #1 in Concentration of High Tech Manufacturing, 2/3rds of NH high tech employment is in manufacturing compared to a little over 1/3rd nationally

Rank StateHigh Tech

Rank StateHigh Tech

Manuf.Rank State

High Tech Service

1 Colorado 109 1 New Hampshire 59 1 Colorado 772 Massachusetts 104 2 Idaho 45 2 Virginia 763 New Hampshire 93 3 Massachusetts 44 3 Massachusetts 604 California 93 4 California 42 4 Maryland 595 New Jersey 90 5 Oregon 39 5 New Jersey 576 Virginia 88 6 Minnesota 38 6 Utah 537 Idaho 85 7 South Dakota 34 7 Washington 528 Utah 81 8 Connecticut 34 8 California 519 Maryland 76 9 Arizona 32 9 Georgia 48

10 Connecticut 72 10 New Jersey 32 10 New Mexico 4611 Minnesota 72 11 Colorado 32 11 Texas 4212 Washington 69 12 Utah 28 12 Nebraska 4013 Oregon 68 13 New York 26 13 Kansas 4014 Texas 67 14 Texas 25 14 Idaho 4015 New Mexico 66 15 Pennsylvania 25 15 New York 3916 New York 65 16 Indiana 24 16 Connecticut 3917 Arizona 64 17 Illinois 23 17 Missouri 3818 Nebraska 61 18 Nebraska 20 18 New Hampshire 3419 Illinois 56 19 New Mexico 20 19 Minnesota 3320 Georgia 56 20 North Carolina 19 20 Illinois 3321 Pennsylvania 55 21 Washington 17 21 Arizona 3122 North Carolina 49 22 Delaware 16 22 Florida 3123 South Dakota 49 23 Maryland 16 23 Alabama 3024 Missouri 48 24 Maine 16 24 Pennsylvania 3025 Kansas 47 25 Rhode Island 16 25 Oregon 30

High Tech Employment Concentration per thousand, 2000

Trade: Concentrated in High Tech and Specialized Manufacturing

$ Value 2001

(in thousands) % Change 1999-2001

334   Computers & Electronic Prod. 743,217 7%

333   Machinery Manufactures 447,649 36%

316   Leather & Related Products 181,503 -3%

335   Elec. Eq., Appliances & Parts 106,958 -2%

332   Fabricated Metal Products 93,051 -2%

336   Transportation Equipment 88,524 -42%

325   Chemical Manufactures 83,846 -13%

990   Spec. Classification Provisions 75,597 40%

339   Misc. Manufactures 64,600 33%

NAIC Product Group

Manufacturing pays well with relatively low educational attainment

Real Wages, Selected Industries, NH, 1988-2001

10

15

20

25

30

35

40

45

50

55

60

Year

$ (1

,000

)

Manufacturing Retail Trade Finance, Insurance, and Real Estate Services All Industry

Manufacturing wages compared to retail and services…

• Retail average wages are about 50% lower than wages in manufacturing industries.

• Service industry wages are about 30% lower than manufacturing wages.

• These differentials have been consistent over the last decade

Profile of NH Manufacturing

Ranked by Employment Level in 2001… high tech concentration, with diversification

Industry DescriptionTotal

EmploymentLocation Quotient

Total Establishment

Average Payroll Per Employee

($)Computer & electronic product mfg 23,648 3.07 267 47,821Fabricated metal product mfg 13,539 1.59 441 35,564Semiconductor & oth electronic component mfg 11,683 4.00 120 35,169Machinery mfg 9,727 1.51 202 48,083Nav, measuring, medical, control instruments mfg 7,888 3.59 70 59,467Electrical equip, appliance & component mfg 7,322 2.63 65 37,526Plastics & rubber products mfg 6,668 1.37 116 34,139Miscellaneous mfg 6,435 1.86 192 33,313Other fabricated metal product mfg 6,033 3.99 50 35,327Plastics product mfg 5,602 1.44 94 35,616

Highest relative concentration in NH compared to US

Rank Industry DescriptionLocation Quotient

1 Leather & allied product mfg 3.442 Computer & electronic product mfg 3.073 Electrical equip, appliance & component mfg 2.634 Miscellaneous mfg 1.865 Fabricated metal product mfg 1.596 Machinery mfg 1.517 Plastics & rubber products mfg 1.378 Wood product mfg 1.229 Primary metal mfg 1.18

10 Textile mills 1.1511 Printing & related support activities 1.1112 Paper mfg 1.0813 Textile product mills 1.03

Most establishments

Industry DescriptionTotal

Establishment

Fabricated metal product mfg 441Computer & electronic product mfg 267Printing & related support activities 209Machinery mfg 202Miscellaneous mfg 192Wood product mfg 158Plastics & rubber products mfg 116Furniture & related product mfg 108Nonmetallic mineral product mfg 80Food mfg 74Electrical equip, appliance & component mfg 65Chemical mfg 57Apparel manufacturing 56Textile product mills 46Paper mfg 38Primary metal mfg 36Textile mills 30Transportation equipment mfg 29Leather & allied product mfg 21Beverage & tobacco product mfg 15

Largest average establishment size.(Overall NH has very similar average size of manufacturing

establishment [43] as US average [45])

Rank Industry Description

Average Employment

Per Establishment

1 Electrical equip, appliance & component mfg 1132 Primary metal mfg 913 Computer & electronic product mfg 894 Transportation equipment mfg 785 Paper mfg 736 Plastics & rubber products mfg 577 Textile mills 578 Beverage & tobacco product mfg 559 Machinery mfg 48

10 Leather & allied product mfg 48 Manufacturing 43

11 Miscellaneous mfg 3412 Fabricated metal product mfg 3113 Nonmetallic mineral product mfg 2814 Food mfg 2815 Chemical mfg 2616 Textile product mills 2217 Wood product mfg 2118 Printing & related support activities 2019 Furniture & related product mfg 1620 Petroleum & coal products mfg 1321 Apparel manufacturing 9

Highest pay per worker

Rank Industry Description

Average Payroll Per

Employee ($)1 Machinery mfg 48,0832 Computer & electronic product mfg 47,8213 Beverage & tobacco product mfg 44,1084 Chemical mfg 43,4145 Nonmetallic mineral product mfg 40,9336 Textile mills 40,774 Manufacturing 39,6747 Electrical equip, appliance & component mfg 37,5268 Paper mfg 37,3369 Transportation equipment mfg 37,136

10 Textile product mills 36,18611 Primary metal mfg 35,68612 Fabricated metal product mfg 35,56413 Printing & related support activities 34,61314 Plastics & rubber products mfg 34,13915 Miscellaneous mfg 33,31316 Leather & allied product mfg 32,43517 Food mfg 30,84518 Wood product mfg 30,07819 Furniture & related product mfg 28,188

Ranked by Industry Wages Relative to US average in that industry (from high to low)

Industry DescriptionWage Ratio

(NH/US)Total Manufacturing 1.02Machinery mfg 1.17Plastics product mfg 1.12Plastics & rubber products mfg 1.05Electrical equip, appliance & component mfg 1.03Nav, measuring, medical, control instruments mfg 1.03Fabricated metal product mfg 1.01Other fabricated metal product mfg 0.94Miscellaneous mfg 0.93Computer & electronic product mfg 0.90Semiconductor & oth electronic component mfg 0.75

Across the state .. Manufacturing’s significant role..

Percentage of Total Payroll, in five counties manufacturing represents at least 1/4th of payroll

NH Manufacturing Payroll Breakdown

County Total Manufacturing

Manufacturing as a Percent of Total Payroll

Sullivan 324,481 129,046 39.8%Cheshire 836,000 228,497 27.3%Belknap 606,405 147,874 24.4%Hillsborough 6,783,471 1,653,846 24.4%Strafford 1,126,114 274,064 24.3%Merrimack 1,763,878 329,714 18.7%Rockingham 4,785,233 749,894 15.7%Grafton 1,401,109 211,624 15.1%Carroll 454,404 44,987 9.9%Statewide 18,494,050 3,819,083 20.7%

Annual Payroll ($1000)

Manufacturing employment concentration in NH counties is high compared to US average. All but 2

NH counties have above US concentration

County 2002 % of Employment in ManufacturingSullivan County NH 26.2%Strafford County NH 20.6%Belknap County NH 19.1%Hillsborough County NH 18.2%Essex County MA 17.8%Cheshire County NH 16.3%Coos County NH 14.2%York County ME 14.1%Carroll County NH 13.9%Rockingham County NH 13.8%Middlesex County MA 13.2%Merrimack County NH 11.9%Grafton County NH 11.7%

Example of how the mix of leading manufacturing industries varies by county

COUNTIES Manufacturing Industries Among the Leading

Belknap Fabricated Metals Miscellaneous Plastics and Rubber Wood Products

Cheshire Electrical Equip. Wood Products

Coos Paper Plastics and Rubber

Grafton Electrical Equip. Machinery Wood Products Fabricated Metals

Hillsborough Computer Products Electrical Equip. Machinery Fabricated Metals

Merrimack Wood Products Fabricated Metals Plastics and Rubber

Rockingham Computer Products Fabricated Metals

Strafford Computer Products Machinery Plastics and Rubber Leather Fabricated Metals

Sullivan Fabricated Metals Wood Products Furniture & Related

Structural Issues of Concern

The High Tech Advantage in NH: High Value Added per Worker in Manufacturing (e.g,

Computer and Medical Equipment).

-

50,000

100,000

150,000

200,000

250,000

300,000

$

US NH MA CO NE

Value Added Per Worker in High Tech Manufacturing

Capital Expenditures per Worker in NH High Tech Manufacturing is below average: What will be the

effect of this on long term competitiveness?

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

$ 1,

000

US

NH

NewEngland

R&D Expenditures not at level to sustain high technology rank

• Federal R&D as a percent of gross state product …NH ranks 29th among the 50 states in at less than 50% of US average

• Also ranks low (relative to #3 high tech rank) in Industry R&D as percent of gross state product –ranked 12th among 50 states

Percentage of Manufacturing workers with college degree is below NH All-Industry average and well

below Services and High Tech averages

34.6

24.6

31.7

19.0 18.0 20.117.8 20.0

37.2

48.7

38.6

54.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

%

Hig

hSc

hool

som

eC

olle

ge

Col

lege

degr

ee o

rm

ore

Educational Attainment of NH Workers, Selected Sectors, 2000 (Source: CPS)

Manufacturing High Tech All-Industry Services

Manufacturing workers in NH lag behind educational attainment in other high tech states

34.6 36.7

28.1

18.0

9.3

20.6

37.2 39.4 40.4

0

5

10

15

20

25

30

35

40

45

%

Educational attainment of Manufacturing Workers, US, NH, MA, and CO, 2000 (Source: CPS)

NH MA CO

Skilled workforce gaps

• NH ranks below the US mean and 50 state median in % of workforce with BS, MS and PhD degrees in engineering and sciences

• Degree completions in engineering and sciences declining while overall degrees are increasing in New Hampshire

• Low matriculation among females in sciences and engineering ..a lost opportunity in NH and US

Distribution of DegreesNH compared to Colorado

(number 1 ranking high technology state)

% of Total FY-2000

Field NH COEngineering & Related 3.4% 6.7%Mathematics 0.9% 1.5%Business Management 20.9% 23.3%

Looking Forward…

New England Economic Project (Spring 2003) NH employment growth expected to be higher than region and US in total and all

sectors except manufacturing. Info and Business Services expected to rebound back close to 1990s growth rates but not

manufacturing

US, New England, NH, & ME: Forecasted Ave. Annual Growth 2002-07

1.3

2.72.4

2.6

1.3

0.7

1.1

-0.5

0.7

2.1

1.61.4

0.6 0.6 0.5

-0.7

1.7

3.1

2.6

3.6

1.9 2.0

4.7

-0.6-1

0

1

2

3

4

5

Total

Employment

EH&S Leisure and

Hospitatlity

Professional and

Business

Services

Financial

Activities

Retail Trade Information Manufacturing

US New England NH

Manufacturing Employment Growth: (Quarterly-rates annualized) US, New England, NH, & ME 1999-2005

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

US New England NH

Electronic & Electrical Manufacturing Employment Growth: (Quarterly-rates annualized) US, New England, NH, & ME 1999-2005

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

US New England NH ME

Information Employment Growth: (Quarterly-rates annualized) US, New England, NH, & ME 1999-2005

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

US New England NH

Prof. & Bus. Services Employment Growth: (Quarterly-rates annualized) US, New England, NH, & ME 1999-2005

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

US New England NH

What to do? Some thoughts• Focus on product development (“D” of R&D) and also pilot

manufacturing.. (move away from mass production, cannot compete with China and East Asia)

• Leverage engineering talent and intellectual capital in the state along with ties to greater Boston-128 to compete in high value- added manufacturing

• Industry Partnerships ..with UNH and Dartmouth in areas of research strength and tied to economy ..including environmental engineering and homeland and national security.. Try to get Fed R&D funds to help seed and support collaborate efforts.

• Invest in skills and training of manufacturing workforce.. From K-16+ get students interested in engineering and manufacturing …in inventing and producing “things”

• Strategic alliances among NH manufacturers …with state and local government as facilitator and entrepreneurial in helping businesses connect and secure resources