Hopes of factory jobs rebound fade in U.S. heartland

Mon May 9, 2016 10:25am EDT
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By Timothy Aeppel

(Reuters) - The U.S. factory sector appears to be stabilizing after a long and painful slide, but not when it comes to jobs.

You might not hear that from Washington, where the latest job report for April showed factories added 4,000 positions and other measures suggest the sector has stopped contracting. That comes after a three month stretch of job cuts — including March, the worst single month for job losses since the recession — that wiped out all of last year’s modest gains.

Manufacturing's job problem undercuts hopeful forecasts that U.S. companies would bring significant numbers of jobs back from overseas. That's simply not happening to a degree sufficient to offset the continuing exodus of work and suggest deeper problems roiling factory floors.

The fallout is most visible on the U.S. campaign trail, where Donald Trump has ridden the wave of anger about losing jobs to become the presumptive nominee for Republican party. But interviews with more than a dozen company executives and analysts across the U.S. heartland show the plight of manufacturing is more than a campaign slogan.

"People are hanging on by their fingernails in manufacturing," said J.B. Brown, president of Bremen Castings Inc. in Indiana, which saw business for its metal casting drop off sharply last year and is now down 40 percent from 2014.

The slowdown in oil and gas has radiated deep into the economy and huge cuts by heavy equipment and farm machinery manufacturers are battering thousands of smaller suppliers across the industrial belt. Caterpillar Inc. (CAT.N: Quote) alone is in the midst of shuttering 20 facilities, about half of them in the U.S., and has permanently shed 3,500 U.S. workers through restructurings.

Christopher Williamson, chief economist at Markit, told Reuters the job cuts are driven by a mix of “disappointing order books” and a cloudier political outlook.

"Companies are becoming more reluctant to expand and more cost conscious, so that cutback in hiring is a reflection of that," said Williamson. By his estimate, U.S. factories are now cutting an average of 10,000 jobs a month, and he sees that continuing.   Continued...

The frame of a 2015 Ford Mustang vehicle moves down the production line at the Ford Motor Flat Rock Assembly Plant in Flat Rock, Michigan, U.S. August 20, 2015.  REUTERS/Rebecca Cook/File Photo