Two Indiana Cities Symbolize Both Sides Of Uneven Jobs Recovery

Kokomo, IN, is only 55 miles from Muncie, IN, but the two former auto manufacturing strongholds are on opposite sides of the U.S. job market recovery.

Job growth in Kokomo is surging amid a U.S. manufacturing revival that’s lifting much of  the Rust Belt. Muncie so far has struggled to recover the thousands of jobs it lost in the  recession as it transitions to a service-oriented economy and recruits new types of manufacturers.

The disparity between the two Hoosier cities underscores a job market recovery that remains uneven. The number of full- and part-time workers increased in 260 metropolitan areas in March vs. the year-ago period, and decreased in 101 areas, according to the Bureau of Labor Statistics’ latest figures for metro areas. Nationwide, unemployment was 9.0% in April, down from 9.8% in November, and the economy added an average 233,000 jobs in each of the last three months.

“Clearly, the recovery is broadening out geographically, but it hasn’t found its way into many parts of the country, at least not yet,” says Mark Zandi, chief economist of Moody’s Analytics.   Yet, Zandi says the stark contrast between two neighboring Indiana economies is unusual. Kokomo was the second-largest job gainer on a percentage basis among 372 metropolitan areas in the first quarter, according to Bureau of Labor Statistics data. Average monthly employment rose 7% vs. the first quarter of 2010. Just three years ago, Forbes named Kokomo among the nation’s 10 fastest-dying cities.

In Muncie, job losses are much reduced since the recession, but it was still in the bottom 7% of metro areas in the first quarter, with average monthly employment falling 1% vs. a year ago.

Kokomo and Muncie each have populations of about 100,000. Muncie’s jobless rate was 9.3% in March, down from 12.3% a year ago; Kokomo’s fell to 10.2% from 14.3%. But the
decline in Muncie came from a shrinking labor force, as unemployed workers gave up the job search, moved away or retired. Kokomo’s labor force — the sum of the employed and unemployed — grew.

While both communities have lost thousands of factory jobs in the past decade, Kokomo remains a manufacturing bastion that managed to stop the bleeding last year as large employers reinvented themselves. Nearly a quarter of the area’s jobs were manufacturing-related in March, down from 38% in 1998. At Chrysler’s four Kokomo transmission plants, the workforce fell from 5,900 in 2007 to 4,800 in the downturn.

But after receiving $7.5 billion in U.S. and Canadian bailout money and emerging from bankruptcy in 2009, Chrysler said it will spend $1.2 billion renovating and expanding its Kokomo factories to build a new generation of fuel-efficient vehicles. The company, which last week announced its first quarterly profit since reorganization, has added 400 jobs in the area since early 2010.

“We were on death’s door, and nobody expected the company to survive,” says Chrysler spokeswoman Jodi Tinson. “The prospects for employment in Kokomo have gotten much better.”

Delphi Automotive, the car electronics maker, also laid off Kokomo workers, but a 2009 bankruptcy reorganization kept the company in business and employing 1,400 in the city, says spokeswoman Linda Ferries. The company also won an $89.3 million federal grant to help it develop technology for electric vehicles, an initiative that saved 64 jobs, created another 64 and will yield another 63 by 2014, Ferries says.

Two other major employers — GM Component Holdings and steelmaker Haynes International — similarly endured tough times and are now expanding amid an auto industry rebound, says Jeb Conrad, head of the Greater Kokomo Economic Development Alliance. “We’re seeing impacts across the board,” Conrad says.

At Lucas Home Furnishings, sales rose 30% in 2010 and another 20% this year after plunging in the recession, co-owner Mark Heredos says. The past six months, Lucas has hired eight employees and is now back to its pre-recession staff of 24. “We were dead in ’08 and ’09, and now … we can’t keep up,” he says.

In Muncie, many of the area’s auto-parts makers have closed or fled for regions with lower labor costs, including Delco Battery, and transmission-parts makers BorgWarner and New Venture Gear. Manufacturing makes up about 7% of non-farm payrolls, down from 18% in 1998.

Jerry Conover, director of the Indiana Business Research Center at Indiana University, says Kokomo factories likely represented bigger capital investments and were more dependent on a rich talent pool than those in Muncie.

Muncie still has a base of steel, industrial machinery and auto-parts makers. But some have pared staffing by getting more efficient, says Jay Julian, head of the Muncie-Delaware County, Ind., Economic Development Alliance. Ball State University, Muncie’s biggest employer, with about 3,400, is a stable source of jobs but not a growth driver, says Moody’s Analytics economist Marshall Carter. The area is also becoming more dependent on education, health care and retail for jobs. But the loss of manufacturers led many residents to move away, impeding the recovery of many service businesses, Carter says.

At Toys Forever in Muncie, first-quarter sales of its model and hobby trains, cars and planes were down about 20% vs. a year ago, owner Brandon Mundell says. He says he’s had to cut the hours of his part-time employee to two days a week from three.

Julian says Muncie is attracting a new breed of manufacturer that’s helping revive the community. Progress Rail Services, a unit of Caterpillar, is opening a locomotive manufacturing plant that could create up to 650 jobs by 2012. Brevini Wind USA is staffing up a wind-turbine gear box factory expected to employ 450 by 2013. It picked Muncie because “there’s a lot of gear-cutting talent” in the area, a legacy of the auto industry, project manager Greg Winkler says. “We’re pretty excited about the advanced manufacturing coming to the area,” Julian says.

By:
Paul Davidson and Barbara Hansen, USA TODAY