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Recovery not building return of construction, manufacturing jobs - EARN Maryland Program

 

June 16, 2013
By Alexander Pyles, Daily Record Business Writer, The Daily Record

Champe C. McCulloch fondly remembers 2006, when construction employment was at an all-time high in Maryland and contractors feasted on a booming housing market, commercial projects and government contracts.

Even months after the official December 2007 start of the national recession, more than 180,000 people were employed in the construction industry, and Maryland’s unemployment rate actually decreased, to 3.3 percent, with just more than 97,000 workers claiming unemployment in the Free State.

That April 2008 jobs report was the high-water mark for the state’s workforce, construction or otherwise, as the unemployment rate rose to 8.5 percent by February 2010, before those losses started to be tempered by modest gains.

“No sector got hit as badly as construction did,” said McCulloch, president of the Maryland chapter of the Associated General Contractors of America.

With the latest U.S. Bureau of Labor Statistics jobs figures showing the unemployment rate in Maryland at a four-year low of 6.5 percent, elected officials are touting a recovery that has returned more than 91 percent of the jobs lost during the economic downturn — a number that does not account for population growth, but might still suggest a return toward normalcy.

Yet an analysis of federal labor statistics maintained by the state Department of Labor, Licensing and Regulation shows that, despite scratching back to employment levels that more closely resemble 2008, things have changed.

“They’re not the same jobs,” Labor Secretary Leonard J. Howie III said in a recent interview. “People have to be willing to expand their horizons. They have to be willing to expand their skill set to be eligible for the jobs that are available.”

A recovery, of sorts

The industry sector that includes mining, construction and natural resources boasted more than 182,000 jobs in April 2008, a total that remained relatively stable through the year.

Five years later, the industry has not recovered, with job levels hovering just under 150,000 — an 18 percent decline since 2008.

“While residential [construction] seems to be coming up, and noticeably so, the commercial is not,” McCulloch said.

The industry has sustained itself on federal contracts agreed to before sequestration and on higher education and health care construction jobs.

“Those are sort of coming to their conclusion,” he said.

State officials realize that. At a meeting of the Maryland AGC last week, Lt. Gov. Anthony G. Brown lamented the decline in construction and employment and hoped the state’s new public-private partnership law — which he said would help companies enter into long-term lease agreements with the state in exchange for construction and operations work — would create 4,000 jobs a year. But even that won’t generate a full rebound.

“Public-private partnerships are not a complete solution,” Brown said.

McCulloch said a lack of “reasonable” financing options further complicates the industry’s outlook. If favorable financing is not available, developers struggle to calculate a return on investment that is worth the risk.

“As long as the banks are continuing with pretty stringent lending policies … that makes it difficult,” McCulloch said. “That means that fewer projects are ultimately going to be profitable enough to move forward.”

Will the industry ever recover to 2006 — or even 2008 — levels?

“That is the question that I think anybody would like to be able to answer with any degree of confidence,” he said.

Trickle-down effect

Construction may have been the industry hardest hit by the recession, but manufacturing suffered, too. There are more than 22,000 fewer manufacturing jobs than there were in April 2008, according to labor data. That’s no coincidence, said Gene Burner, president of the Manufacturers’ Alliance of Maryland.

The drop-off in construction caused many of the manufacturing losses, he said, with RG Steel LLC at Sparrows Point last year being the most obvious example. The company laid off about 2,000 workers when it declared bankruptcy and idled its mills.

Without a need for steel on big construction sites, work at Sparrows Point was unnecessary.

“When commercial construction went down the tubes, that was the market,” said Burner, who represents manufacturing companies. “You lost a large one like that, but you pick up other kinds. You go over to the Montgomery County corridor, there’s a ton of biotech startups. You’ve got a lot of stuff going on over there and a lot of people over there, but it’s not the people from [former Sparrows Point steelmaker] Bethlehem Steel.”

Those jobs aren’t coming back, Burner said. But the manufacturing industry is evolving, with a new focus on things like advanced manufacturing and three-dimensional printing. Many of those jobs are waiting to be filled by a willing — but unqualified — workforce.

“One of the things we’re seeing is that there’s some gaps there,” said Jeff B. Fuchs, chairman of the Maryland Advisory Commission on Manufacturing Competitiveness. “The face of manufacturing continues to change, and many of the jobs that existed pre-recession simply don’t exist in that form anymore.”

Job retraining

That creates a need for a mass retraining of the workforce, Fuchs and others said. The General Assembly passed legislation this year pushed by Gov. Martin O’Malley that created Employment Advancement Right Now, an industry-focused program that is expected to work in conjunction with businesses and schools to train workers to fill the jobs available to Maryland’s workforce.

The program specifically targets construction, traditional and advanced manufacturing, cybersecurity and health care industries. O’Malley touted the program last week at Maritime Applied Physics Corp., an advanced manufacturing company in Baltimore.

“Companies like MAPCorp are doing the cutting-edge advanced manufacturing that we need to grow and strengthen our economy,” O’Malley said in a statement. “The EARN job training initiative will help Maryland workers develop the skills they need for today’s high-demand industries.”

New and improving technology has created greater manufacturing efficiency, but it’s also stunted job growth, Howie said.

“If you look at the type of technology out there and the skills required … no matter what industry you go to, you probably need fewer people to do the same thing,” he said.

That’s not necessarily a bad thing, Fuchs said. Maryland manufacturers need to take advantage of that technology to remain competitive and, hopefully, grow.

But that’s only half of what needs to be done to force a manufacturing resurgence, Fuchs said. The state needs to focus on bringing new manufacturing businesses to Maryland from overseas, he said, and needs the infrastructure, regulatory environment and tax structure to support the industry.

“I think that requires the additional dimension of policy,” Fuchs said. “We can’t be satisfied with just increasing manufacturing productivity. These manufacturing jobs are very important to the state’s economy. They have this huge multiplier effect that are bigger than most sectors.”

A new normal

While manufacturing and construction perhaps best exemplify the loss of old jobs, other industries have suffered, too. Real estate and rental leasing — down 1,700 jobs in the last five years — and legal services — minus 1,000 jobs — have had a tough go of it since April 2008.

The largest gains, meanwhile, have come from the health care and social services industry, which added more than 37,000 jobs since April 2008. State and federal government have created 21,600 jobs.

But the traditional manufacturing and construction jobs — tickets to a middle-class status for so many — are limited. And while elected officials and industry leaders have tracked economic changes and are trying to stimulate recovery, none interviewed for this story was able to confidently predict what the future workforce would look like.

“The new normal will be something different,” Howie said. “I don’t know what that will be.”

 
Martin O'Malley, Governor Leonard J. Howie III, DLLR Secretary Anthony G. Brown, Lt. Governor

MARTIN O'MALLEY
GOVERNOR

LEONARD J. HOWIE III
DLLR SECRETARY

ANTHONY G. BROWN
LT. GOVERNOR

 
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