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Regional Report: Advanced Industry Clusters Fueling Growth in the Midwest States

Automotive, aerospace, and biomedical sciences among other advanced industry clusters are fueling growth in the Midwest States.

Directory 2015
Economic growth in the Midwest was steady in 2014, thanks to solid performances by the agriculture and manufacturing sectors, especially transportation equipment. The economy also got a boost from the surging energy sector, led by oil-shale production in Ohio, which improved sales for supporting industries like sand, chemicals, and steel drill pipe made in Midwestern steel plants.

Alternative energy is also driving some Midwestern economies — for example, Iowa remains one of the top states in the nation in renewable energy, with more than 27 percent of the state’s energy coming from wind. This has compelled companies like Facebook and Google to locate data centers within the state, which are powered fully or in part by renewable wind power. In addition to the $1.5 billion investment from Google and $300 million from Facebook, Microsoft plans to build a $1.1 billion data center in West Des Moines.

Steady Economic Growth
This overall economic steadiness across the Midwest has continued into 2014. According to Creighton University’s MidAmerica Business Conditions Index for June 2014, the Midwest economy continued to grow. “Growth among durable goods manufacturers in the region is pushing overall employment higher,” says Ernie Goss, director of Creighton University’s Economic Forecasting Group. “Regional job growth for the first half of 2014 was running at an annual rate of 1.5 percent, well ahead of the growth experienced for the same period in 2013. This pace should remain strong for the second half of 2014.”

As a result, hiring is up. The Midwest had a 5.6 percent unemployment rate in May 2014, considerably less than the national rate of 6.3 percent. September 2014 numbers include Minnesota (4.1 percent in September — fifth-lowest in the country), 5.5 percent in Wisconsin, and 6.3 percent in Missouri. Illinois’s unemployment rate hit a new six-year low in August at 6.7 percent, the lowest rate since 2008 and the continuation of an uninterrupted drop in the state jobless rate that began in late 2013.

Automotive as a Key Driver
Manufacturing is a key economic driver for the Midwest economy. For example, with more than 9,400 manufacturers employing over 450,000 workers in Wisconsin, the manufacturing industry makes up nearly 17 percent of the state’s entire workforce. The state ranks fifth in the nation for manufacturing job creation and continues to add jobs. In neighboring Minnesota, manufacturing has recovered more than 28,000 jobs since early 2010. Manufacturing is one of the fastest-growing sectors in Minnesota, adding nearly 10,000 jobs in the past year alone.

Many of these new jobs are in the automotive sector, which continues to increase production across the Midwest. In Michigan, automakers have experienced an 11 percent sales growth through the first three quarters of 2014 over the same period in 2013. Michigan’s 500,000 auto-related jobs comprise 22 percent of the U.S. auto industry workforce. Over the last five years, automakers and auto suppliers have invested more than $19 billion in Michigan expansions and facilities upgrades.

After facing major layoffs and restructuring during the recession, Missouri’s automotive industry is coming back strong. A recent report indicates that by 2015, the industry will have invested nearly $2 billion and generated or retained nearly 14,000 automotive jobs and an additional 21,000 ancillary jobs — producing nearly $15.4 billion in GDP over the six years.

Indiana continues to be a top state for recreational vehicle (RV) production, manufacturing almost 80 percent of all RVs in the country. Expansions and investments continue, including KZRV’s plans to expand its operations in Shipshewana by building a $4.83 million lamination facility, creating up to 125 new jobs by 2017.

“The new facility will produce high-quality laminated components and custom aluminum parts that will feed our other towable assembly plants, improving our overall efficiency,” says Aram Koltookian, chief operating officer for KZRV.

As automotive production expands across the Midwest, more suppliers are moving in to support the industry. For example, in May 2014, Fuyao Glass America announced it would build a new automotive glass factory in Moraine, Ohio, creating 800 jobs. In Michigan, Dicastal North America, a subsidiary of a Chinese aluminum wheel manufacturer, plans to open a new plant in Greenville. Other new Michigan operations are Eissmann Group Automotive ($13.55 million, leather interiors) and Brembo North America ($78.4 million, brake rotor castings).

Biomedical Sciences Clusters
The Midwest is also home to several biomedical clusters, including the University of Wisconsin’s University Research Park in Madison. PSC Biotech, a California life-sciences company, will move into a 37,000-square-foot facility in the park to manufacture cancer-fighting drugs. The company plans to hire about 100 workers.

Chicago serves as the U.S. headquarters for Takeda Pharmaceutical and Astellas Pharma, two global Japanese companies. And Minnesota has been long known for its medical device industry, led by such companies as Medtronic and St. Jude Medical. The industry employs more than 28,000 people in Minnesota, second in the country behind California. Minnesota exported $3.3 billion worth of medical and optical equipment and supplies in 2013. Recent news includes the announcement that Cardiovascular Systems is building a $30 million headquarters in New Brighton, Minnesota, and plans to more than double its workforce to about 400 employees within two years.

Missouri was one of the top states in 2013 for technology job growth, including the biomedical field. In St. Louis, Express Scripts intends to expand its campus, investing $56 million and creating 1,500 new jobs. Catalent Pharma Solutions, a global leader in the life sciences industry, recently announced a $30 million expansion at its location in Kansas City, creating about 230 jobs.

“Missouri’s pro-business environment, strong workforce, and economic support made it an easy choice to invest in Missouri,” states John Chiminski, president and CEO of Catalent Pharma Solutions. “We look forward to increasing our presence here and playing a larger role in the state’s growing life sciences industry.”

The October opening of the John and Mary Pappajohn Biomedical Discovery Building at the University of Iowa (UI) will accelerate research in biomedicine in that state, helping scientists further their understanding of the fundamentals of biology and disease, as well as make discoveries to improve human health. It will also present “exciting economic development opportunities” for Iowa, according to UI President Sally Mason.

And Michigan does more than make cars - it also has a growing biomedicine industry. Molina Healthcare of Michigan is expanding its Troy operations with a $20.3 million capital investment. SRI Biosciences has completed construction of an early-phase clinical trial facility in Plymouth. The 9,400-square-foot unit, located in the Michigan Life Science Innovation Center, will carry out early-stage human research studies of new medicines and medical devices.

Aerospace - Another Economic Driver
Aerospace is an important economic driver in several Midwest States, including Missouri, Ohio, and Illinois. Boeing is expanding its St. Louis campus to produce parts for the 777X aircraft, hiring 700 workers. These jobs are in addition to another 1,300 high-tech new jobs Boeing expects to create in St. Louis for other defense projects. Ohio has some of the best aerospace and aviation testing and research facilities in the country, including the U.S. Air Force Research Laboratory in Dayton, NASA’s Glenn Research Center in Cleveland, and Plum Brook Station in Sandusky. Ohio is especially well known for engine manufacturing and is the number-one U.S. supplier to both Boeing and Airbus. In December 2013, GE Aviation opened its $53 million Electrical Power Integrated Systems Center in Dayton, a 138,000-square-foot facility that is designed to simulate and test complete electrical power systems in aircraft.

In Illinois, Rockford’s aerospace cluster continues to expand with the announcement that global aircraft service leader AAR Corporation will build a new facility at Rockford International Airport, creating up to 500 new jobs. The Rockford region is home to more than 200 aerospace companies, including Boeing, Woodward, UTC Aerospace Systems, and GE Aviation, and more than 80 percent of Illinois’ aerospace workforce is located in the area.

“Rockford is the third-largest multi-modal port system in the world, which makes it a great place for aviation and for AAR to grow its presence and reputation in aircraft maintenance, repair, and operations,” says AAR Corporation Chairman and CEO David P. Storch.

Building the Workforce of the Future
As manufacturing industries rebound, there is a strong need for skilled, highly trained workers who are a good match for high-tech, good-paying jobs, especially those in advanced manufacturing fields like aerospace. For example, in Dayton, Sinclair Community College will build a $5 million unmanned aerial systems training and certification center to meet the employment needs of local aerospace companies. Capabilities will include a wind tunnel, 3-D printing machines, flight simulators, and indoor flying space for drones.

“We want to attract manufacturing across the board in aerospace,” says Deborah Norris, vice president of workforce development and corporate services for Sinclair Community College. “There’s a very strong place for aerospace manufacturers of all sizes in this space.”

To maintain Michigan’s skilled trade workforce, the state will have committed $70 million by 2015 to expand training opportunities in high-demand fields. Its MAT2 program matches high school graduates who work at major employers while undergoing community college training in mechatronics, IT, and technical product design. The Skilled Trades Training Fund helps defray the costs of training for participating businesses that commit to hire those who successfully complete classroom training or, in cases of on-the-job or incumbent worker training, retain the employees at the completion of training.

“Talent is today’s main currency of economic development,” says Michael Finney, president and CEO of the Michigan Economic Development Corporation. “Michigan intends to lead the way in manufacturing, and the surest way is to make certain that we match our top-tier engineering universities with top-tier skilled trades training.”

Another untapped labor resource is U.S. veterans. Iowa has created a program called Home Base Iowa that helps veterans and active-duty service members re-enter the workforce and civilian life. The program matches veterans with job opportunities in the state. Thus far, 5,000 jobs have been pledged to the program and some of Iowa’s top companies have already hired more than 260 veterans. The initiative also streamlines occupational licensure for military members and their spouses and makes veterans, and their spouses and dependents, eligible for free tuition at Iowa’s community colleges.

“Through their service, veterans have already proven their hard work, leadership, and patriotism,” states Iowa Governor Terry Branstad. “Home Base Iowa allows veterans to find the right job for them in Iowa, and to become a part of our communities.”

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