The Midwest labor market is feeling a double-barrel blast from the national housing slump and the continuing woes of Detroit's auto makers.
Across the region, factories that churn out the bricks, tiles and wallboard used to build new homes are feeling the effect of the steep decline in new-home construction in once-hot markets such as California, Arizona, Nevada and Florida.
Chicago-based USG Corp., which makes gypsum wallboard and other building materials, has cut 1,100 jobs in the past 12 months and plans to shut down more capacity in the third quarter. Kohler Co., a maker of home plumbing products, laid off 160 people at its Wisconsin plant.
The drop in jobs related to supplying the housing market follows huge job losses in the automotive sector, which is heavily concentrated in the region. And it comes amid signs of further weakening ahead; on Friday, the Labor Department said 4,000 nonfarm jobs disappeared in August, driven by losses in construction and manufacturing.
General Motors Corp. announced last week it would cut North American production by 10%, sending ripples further down the supply chain. Pretty Products LLC, a company that makes floor mats for cars, just closed its plant in Coshocton, Ohio, where it was one of the town's biggest employers. TI Automotive, which makes brakes and fuel-line parts, said it would close a plant in Ohio, eliminating 195 jobs.
The job losses are exacerbated by lackluster employment growth in the region, and the fallout in the auto and housing markets is showing up in unemployment numbers. The unemployment rate for the five-state region that includes Wisconsin, Michigan, Illinois, Indiana and Ohio was 5.7% in July, the highest of any region in the country, according to the latest government data. Michigan's 7.2% unemployment rate leads the nation.
Although the region didn't experience the huge surge in housing construction and subsequent drop off, it has been affected. "If you have a [housing] slowdown in Southern California, it's going to be felt in the Midwest," says Don Norman, of the Manufacturers Alliance/MAPI, an Arlington, Va., public-policy group.
Indeed, many companies with Midwest factories that make products used in residential construction have cut production and are expected to continue doing so in response to the housing bust. Production in the household appliance sector is expected to drop by 5% this year, and by 6% in 2008, according to a recent report by the Manufactures Alliance.
Whirlpool Corp., the home-appliances giant based in Benton Harbor, Mich., cut 500 jobs in Indiana in the last year and expects demand to be down 2% to 3% for 2007. At the same time, the company is seeing much higher costs for steel, oil-based resins, copper and other metals.
"We're managing through what I call a difficult demand environment in the U.S. and a global material cost shock that we've thus far been able to manage through," Whirlpool Chairman and Chief Executive Jeff M. Fettig said in a meeting with analysts last week.
By KRIS MAHER