1

MANUFACTURING UPDATE

- April/May 2015 - 1. LATEST POLICY ================================== Manufacturing Jobs for America – A Plan for Jobs and Growth Americans have come a long way from the depths of the Great Recession. Our businesses have created 12.1 million jobs over the past 61 months – the longest sustained stretch of job creation in our nation’s history – and a key driver of that economic recovery has been a sector that helped build this country’s middle class – manufacturing. In fact, the Commerce Department reports that American manufacturing now accounts for nearly 20 percent of our nation’s economic growth when adjusted for inflation, and since 2010’s economic low point, manufacturers have created more than 860,000 new jobs. Still, while American manufacturing is newly resurgent, there’s much more we can do to build on its momentum. That’s why last Congress we started a campaign called Manufacturing Jobs for America (MJA) to focus on four key issues: investing in America’s workforce, expanding access to capital, opening up markets abroad for American goods, and crafting a national manufacturing strategy… Despite the progress we’ve made, Boston Consulting Group estimates that there are currently between 80,000–100,000 unfilled high-skilled manufacturing jobs and that this gap will only grow, rising to as many as 875,000 unfilled jobs by 2020. We should view those unfilled jobs as an incredible opportunity, especially in a country that has struggled with joblessness in recent years. Those jobs are there for the taking, and we strongly believe that if we focus and work together to give American workers the skills they need, their talents will more than meet the demand. As a country, we need to invest in American manufacturing and in American workers, and Manufacturing Jobs for America is our best chance to do that in Congress. More: Op-Ed in Republic 3.0, Baldwin Release Donnelly Joins Bipartisan Effort to Introduce Reauthorization of Ex-Im Bank U.S. Senator Joe Donnelly, who serves on the Senate Banking Committee, joined colleagues in introducing bipartisan legislation that would reform and reauthorize the Export-Import Bank. Donnelly — along with U.S. Senators Mark Kirk (R-IL), Heidi Heitkamp (D-ND), Lindsey Graham (R-SC), Joe Manchin (D-WV), Roy Blunt (R-MO), Kelly Ayotte (R-NH), and Mark Warner (D-VA)— introduced legislation late Thursday that would reauthorize the Bank’s charter until September 30, 2019 and implement several reforms. Donnelly said, “The Export-Import Bank benefits small businesses in Indiana and across the country, creating jobs and opportunity. We strengthen our economy when we expand export opportunities, allowing for more Hoosier and American companies to sell their products both at home and overseas. I

2

am proud to support bipartisan legislation to reauthorize the Ex-Im Bank as an important part of continued economic growth.” More: Donnelly Release Murphy Introduces Bill to Incentivize Investment in Startup Businesses U.S. Senators Chris Murphy (D-Conn.) and Brian Schatz (D-Hawaii) joined Congressmen Steve Chabot (R-Ohio) and Patrick Murphy (D-Fl.) to announce the introduction of the Angel Tax Credit Act, a bill that would provide investors with further incentive to invest significant capital in startup businesses. Startups are high-growth businesses that support millions of jobs throughout the country. But according to the U.S. Bureau of Labor Statistics, the creation of startups is on the decline, likely due to lack of access to seed capital. In order to encourage angel investors to support startup businesses, the Angel Tax Credit Act would allow them to claim a tax credit equal to 25 percent of their aggregate qualifying equity investments of $25,000 or more to U.S.-based high-tech startups. Establishing this incentive would help create a funding pipeline to grow startups and target job growth in the science, technology, and engineering fields so the United States can continue its leadership in these fields. More: Murphy Release Baldwin, Kaine and Portman Introduce Bipartisan Bill to Improve Career Readiness in Schools U.S. Senators Tammy Baldwin (D-WI), Tim Kaine (D-VA) and Rob Portman (R-OH), co-chairs of the Senate Career and Technical Education (CTE) Caucus, introduced the Career Ready Act of 2015, legislation that would help ensure students are college and career-ready by strengthening school counseling programs and encouraging states to keep track of career readiness factors implemented in school districts. The Career Ready Act of 2015 amends the Elementary and Secondary Schools Act (ESEA) to encourage states to keep track of school districts’ use of “career readiness indicators,” which are factors that demonstrate a student’s preparedness for postsecondary education and the workforce, such as CTE course completion and the number of students earning postsecondary credentials while in high school. Currently, all 50 states track districts’ efforts to instill academic knowledge for college preparation, but less than half of states publicly report on career readiness indicators. By tracking and publishing this data, businesses and workforce leaders will be better-informed about the level of career preparation in a given state or region. Additionally, the bill amends the current Elementary and Secondary School Counseling grant program to fund professional development for school counselors and train them to use information on the workforce needs of the local community to help guide students toward in-demand career paths. More: Baldwin Release 2. OTHER NEWS ================================== Coons Knows Manufacturing Push Needs GOP Support Sen. Chris Coons has started a matchmaking service. No, not a dating app. The Delaware Democrat is working with Sen. Tammy Baldwin, D-Wis., to spearhead an effort to bring together Republican and Democratic senators interested in manufacturing

3

jobs — and he’s even discussed the subject in a one-on-one meeting with Majority Leader Mitch McConnell, R-Ky. For now, Coons told CQ Roll Call in an interview that came as part of a significant media campaign to promote the effort, the focus will be on gathering ideas from Senate Democrats and collecting support within the caucus, before looking to find Republican co-sponsors and build bipartisan partnerships. “How I view Manufacturing Jobs for America is initially, a way to gather the best ideas that Democratic senators have that relate to manufacturing in any way,” Coons said. “Try and get them all kind of in one place at one time, socialize them within the caucus, strengthen them and then help with matchmaking, with finding Republican co-sponsors and then through that process with finding ideas that should have the attention of Majority Leader McConnell and his floor staff as potentially enactable bills.” Coons and Baldwin highlighted the renewal of their Manufacturing Jobs for America effort at an event last month at Union Station. The Third Way-sponsored event also featured the perhaps unlikely pair of Labor Secretary Thomas E. Perez and National Association of Manufacturers President and CEO Jay Timmons. More: Roll Call Article New MIT Report Details Benefits of Investment in Basic Research MIT released a report in which faculty and other researchers detail specific impacts, within their fields, of declining federal investment in basic research. The report — “The Future Postponed: Why Declining Investment in Basic Research Threatens a U.S. Innovation Deficit” — was prepared by a committee of MIT researchers and research administrators. Examining how funding cutbacks will affect the future of scientific studies in the U.S., the report highlights opportunities in basic research that could help shape and maintain U.S. economic power, and benefit society. More: MIT Release MEP Competition Aims to Strengthen Small Manufacturing Nonprofit organizations can now compete for $320 million in public and private funding to help small- and medium-sized manufacturers in 12 key states. It’s all part of a national effort to expand technology, innovation, and workforce development services to small manufacturers and bring new American-made products to market.

The National Institute of Standards and Technology’s Manufacturing Extension Partnership (MEP), a network of 60 centers and 1,200 manufacturing experts, is looking for nonprofits to operate its centers in Alaska, Idaho, Illinois, Minnesota, New Jersey, New York, Ohio, Oklahoma, Utah, Washington, West Virginia, and Wisconsin. More: American Alliance for Manufacturing Release NIST and NSF Partner to Launch Industry-University Consortium to Provide Input on National Advanced Manufacturing Research and Development Priorities The U.S. Commerce Department's National Institute of Standards and Technology (NIST) and the National Science Foundation (NSF) announced today that they will establish a consortium to provide private-sector input on national advanced manufacturing research and development priorities. NSF has

4

released a solicitation, calling for applications from organizations to administer the consortium through a cooperative agreement. The consortium is being established in response to one of the primary recommendations published in Accelerating U.S. Advanced Manufacturing, an October 2014 report from the President's Advanced Manufacturing Partnership, part of the President's Council of Advisors on Science and Technology. The report recommended the establishment of a "continuous channel for the federal government to access private-sector insights in crafting the national technology strategies and to ensure ongoing coordination of public and private investments." More: NIST Release GM to Spend $5.4 Billion in US Factory Makeovers General Motors announced $5.4 billion in new U.S. plant upgrades over the next three years, including in three sites in Michigan, the traditional hub of the U.S. auto industry The biggest investment outlined is $520 million for a site near Lansing to build tools and equipment for GM's future vehicle programs. The move will retain 1,900 jobs at the site, the company's newest plant in North America, the automaker said. More: IndustryWeek Release Obama Administration Seeks Public Comment on Proposed Rules to Implement the Workforce Innovation and Opportunity Act The Workforce Innovation and Opportunity Act (WIOA), signed by President Obama on July 22, 2014, is the first major reform to federal job training programs in more than 15 years. WIOA is designed to improve the coordination of employment and training services across federal agencies, strengthen collaboration with state and local partners, and provide Americans with increased access to training, education and other support to succeed in the job market and in their careers. Today, the departments of Labor and Education announced five Notices of Proposed Rulemaking to implement WIOA and seek public comment. "We are embarking on a fundamental transformation in the way we prepare people for the careers of today and tomorrow," said U.S. Secretary of Labor Thomas E. Perez. "More than ever before, we're taking a job-driven approach and making sure training programs connect businesses that want to grow with workers who want to punch their ticket to the middle class." More: Department of Labor Release Steel Industry CEOs Warn of a Possible Sectoral Collapse Due to Surging Imports CEOs from the country's largest and most important steel companies along with an executive from the nation's top industrial union were on Capitol Hill on March 26 and used the opportunity to raise alarms about surging steel imports. They told members of the Congressional Steel Caucus that their industry was in a state of crisis and used words such as "gruesome," "destruction" and "dire" to describe conditions that are worsening by the day. Imports now account for a record share of the U.S. steel market, leading to the recent and rapid closure of American steel mills and the loss of thousands of good-paying jobs.

5

The situation, they told the Steel Caucus in a unified voice, is far worse than anything they have seen in a generation, as foreign nations, awash in 638 million tons of excess capacity, dump subsidized steel into the United States, the world's most open market. More: Manufacturing and Technology News 3. SECTOR DATA ================================== Purchasing Managers’ Index (PMI) The April PMI was 51.5, unchanged from the March reading. The PMI is a widely watched measure of aggregate manufacturing strength. PMI is based on a survey that asks purchasing managers if Inventories, Supplier Deliveries, Employment, Production, and New Orders have gone up or down that month. Results above 50 indicate growth. For April, Inventories read 51.5 (-1.4 on February), Supplier Deliveries read 50.1 (-0.4), Employment read 48.3 (-1.7), Production read 56.0 (+2.2), and New Orders read 53.5 (1.7). This data is in chart form below.

More: Institute for Supply Management Employment Preliminary estimates by the Bureau of Labor Statistics show that manufacturing employment was down 1,000 in March, at a seasonally adjusted 12.319 million. The below chart shows the total number of manufacturing employees over the last ten years in millions of workers, as well as the month-on-month change in manufacturing employment for the last six months (in thousands). Both numbers are seasonally adjusted.

53.5

56.0

48.3

50.1

49.5

51.5

New orders

Production

Employment

Supplierdeliveries

Inventories

PMI

Change on prior month

0.0

-2.0

-0.4

-1.7

+2.2

+1.7

6

More: Bureau of Labor Statistics Federal Reserve Data The Fed publishes monthly data on industrial production and capacity utilization. Industrial production is represented as an index where the 2007 level equals 100. Capacity utilization is shown as percent of capacity. The chart below shows these measures for the last six months.

In addition to the Fed’s national data, six of the twelve Federal Reserve regional branches publish monthly updates on manufacturing conditions in their region. Because each branch uses different questions and methodology, interregional comparisons are not suggested. More: Fed New York Fed (NY state, 12 northern NJ counties, and Fairfield County in CT) “[B]usiness activity was flat for New York manufacturers. The headline general business conditions index turned slightly negative for the first time since December, falling eight points to -1.2.” More: NY Fed Philadelphia Fed (eastern PA, southern NJ, and DE) “Manufacturing activity in the region increased modestly in April… indicators for general activity and new orders were positive but remained at low readings.” More: Philly Fed

11

12

13

14

15

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Man

ufac

turin

g em

ploy

ees,

mill

ions

+23+43 +28 +10 +2

-1

Oct Nov Dec Jan Feb Mar

Month-on-month change, thousands

101.2

77.1

60

70

80

90

100

98

100

102

104

Oct Nov Dec Jan Feb Mar

Manufacturing capacity

utilization (%)M

anuf

actu

ring

prod

uctio

n

Manufacturing production Manufacturing capacity utilization

7

Richmond Fed (DC, MD, NC, SC, Virginia & most of WV) “Manufacturing activity remained soft in April, according to the most recent survey by the Federal Reserve Bank of Richmond.” More: Richmond Fed Chicago Fed (southern WI, IA, northern IL, northern IN, and southern MI) The Chicago Fed Midwest Manufacturing Index is currently suspended, while it undergoes a process of data and methodology revision. The next release is preliminarily scheduled for fall of 2015. More: Chicago Fed Kansas City Fed (western MO, NE, KS, OK, WY, CO & northern NM) “[M]anufacturing activity declined further in April, although producers’ expectations improved slightly from last month.” More: Kansas City Fed Dallas Fed (TX, northern LA and southern NM) “Texas factory activity declined in April… The production index, a key measure of state manufacturing conditions, posted a second negative reading in a row, coming in at -4.7.” More: Dallas Fed

U.S. Manufacturing Technology Orders (USMTO) February U.S. manufacturing technology orders totaled $304.74 million, down 10.6% from January and down 14.8% from February 2014. “U.S. manufacturing is facing some pressure in terms of a stronger dollar and lower capital expenditures from the energy industry, but in taking the long view, we’re still in a good position overall,” said AMT President Douglas K. Woods. “The automotive and aerospace industries continue to be strong performers, and a number of international manufacturers are making significant investments in U.S. production facilities. We project that manufacturing technology orders will gain momentum as we move through the second quarter.” These numbers and all data in this report are based on the totals of actual data reported by companies participating in the USMTO program. The chart below shows year-over-year change and total February 2015 orders on a national and regional basis. Fields marked “na” denote where, due to changes in the make-up of survey participants, an accurate reflection of the data is not available.

8

More: Association for Manufacturing Technology 4. ABOUT THIS NEWSLETTER ================================== This update is provided by the Office of U.S. Senator Chris Coons on behalf of the Manufacturing Jobs for America initiative. For more information, visit coons.senate.gov/manufacturing or email Riley_Ohlson@coons.senate.gov.

na

na

-15.2

na

na

-14.8

West

South Central

North Central-West

North Central-East

Southeast

Northeast

Total 304.7

na

na

70.8

77.1

27.1

na

Year-over-yearchange (%)

February orders ($m)