America's factory towns stop the bleeding

As the nation nears full employment — a sort of finish line for the jobs recovery — many of the factory towns hit hardest in the Great Recession are already there.

Seven of the 10 metro areas with the nation’s highest concentrations of manufacturing jobs had unemployment rates below the 4.7% national rate in May, the latest local data available, according to figures from the Labor Department, Wells Fargo and Moody’s Analytics. (The U.S. rate was 4.9% in June.)

Buffeted by automation and foreign imports that decimated the country’s manufacturing payrolls, employment in communities like Hickory, N.C. , and Dalton, Ga., is likely to remain well below pre-recession levels.  But at least the towns are growing jobs again, including in factories buoyed by the housing and auto recoveries, and trying to diversify their industrial bases. Manufacturers are competing against cheaper imports by automating some functions and providing better quality and service.

Job growth surges in June as employers add whopping 287,000 jobs

In some cases, the low unemployment rates are at least partly byproducts of smaller labor forces after many laid-off workers retired or moved to cities with better job opportunities, reducing the number of jobless residents. Still, they signify a measure of stability and a return to gradual job growth.

“Small factory towns seem to be making their peace with globalization and technology,” says Wells Fargo economist Mark Vitner.

That’s no small achievement for communities that rely so heavily on one or two sectors and “lacked other industry clusters to employ” laid-off workers, says Mark Muro, a senior fellow at the Brookings Institution.

And it’s occurring against the backdrop of a vitriolic presidential campaign in which Republican Donald Trump has decried trade deals, saying they ravaged many factory towns.

The Hickory area, a national furniture-making hub and a large producer of textiles and fiber-optic cables, had a 4.9% jobless rate in May, down from nearly 15% in 2009. The region lost about 20,000 jobs in the 2001 recession amid a flood of imports and the fiber cable glut, and another 18,000 in the Great Recession. Since then, only 5,000 jobs have come back.

Williams-Sonoma, which makes sofas and chairs at a 600-worker plant there, delivers custom-made pieces to its Pottery Barn and other stores about a month after the order is placed, compared with about three months for Chinese imports, making the Hickory plant more competitive, says Darryl Webster, the plant’s vice president of upholstery.

Meanwhile, the housing recovery has bolstered sales.

Americans still don't see vibrant labor market

But with the Hickory area’s labor force — the number of people working and looking for jobs — 5% smaller than it was in early 2010, finding skilled workers is a struggle. Webster says he has been trying to fill 50 job openings for several months, forcing him to offer new hires $1,500 signing bonuses. The factory is also training its own unskilled employees for sewing and upholstery jobs, and working with high schools and community colleges to develop a pipeline of prospects.

Worker shortages are a regionwide problem, says Daniel Hearn, CEO of the Catawba County Chamber of Commerce, adding the metro area has 7,000 job openings. Many young adults leave for college in bigger cities, such as Charlotte and Raleigh, and don’t come back.

“Were losing young people,” he says. “Hickory is just not as big and exciting.”

Officials are trying to change that, he notes, with a multimillion-dollar plan to revitalize downtown. Already, shuttered mills have been converted into meeting spaces, upscale breweries and restaurants. And the tight labor market is pushing up wages, which were up 6% annually in the Hickory area last month, vs. 2.6% nationally.

Another town benefiting even more from the housing recovery is Dalton, which calls itself the world’s carpet capital. It was devastated in the housing crash. Now unemployment there, which topped 10% as recently as 2013, is down to 5.7%, in part because of a shrunken labor force. Still, payrolls, more than a third of which are factory jobs, have climbed 9% the past three years.

To survive, floor-covering companies have automated, allowing them to employ fewer workers, says Carl Campbell, head of economic development for the Dalton-Whitfield County Joint Development Authority. Officials, he says, are also recruiting other industries, with a maker of cardboard box parts set to open a 60-employee factory in October, partly to be near customers in the region. He’s also targeting makers of auto parts to supply Volvo and Kia manufacturers located within 150 miles.

Moody’s economist Alex Lowy calls Dalton the “least industrially diverse metro area in the country,” making it challenging to attract skilled workers. Campbell downplays the issue, saying local employers can draw from nearby big cities, such as Chattanooga, Tenn., about 30 miles away.

Still, factory towns riding the housing and auto recoveries face risks when those markets falter. That’s a looming problem for Kokomo, Ind. — home to Chrysler, General Motors and Delphi auto plants — whose 4.9% jobless rate is down from 17% in 2009. But the recently torrid vehicle market has peaked, auguring slower growth for the region. says Moody’s economist Kwame Donaldson.

“It is a concern,” says Mike McCool, manager of economic development for the Greater Kokomo Economic Development Alliance.