Manufacturing and Housing in the Rust Belt States
Job and wage growth are the economic drivers of housing demand. In this blog, we look at the employment and wage trends in the manufacturing industry and how the strong job growth in manufacturing has impacted housing demand in some Rust Belt states. Download the State Employment Monitor.
2.5 Million Net New Jobs as of February 2019
First, let’s look at the overall trend in payroll employment. In February 2019, net payroll employment increased by 2.5 million jobs compared to the level one year ago, a 1.7 percent increase. Since April 2013, the economy has been generating at least 2 million jobs annually. At two job –earners per household, these job gains translate to a demand of 1.25 million housing units.
All states gained jobs, except for Minnesota and Rhode Island. By state, the strongest job growth occurred in the West region led by Nevada (3.5%), Utah (2.8%), Arizona (2.7), Idaho (2.7%), Wyoming (2.0%), and South Dakota (2.0%) and in South states such as Florida (2.3%), Georgia (2.2%), Texas (2.2%), West Virginia (2.2), and Tennessee (2.0%).
Compared to one year ago, employment rose in February 2019 in all the Rust Belt states, an area that includes parts of New York (0.99%), Pennsylvania (0.71%), Ohio (0.81%), Michigan (0.87%), Indiana (1.34%), Illinois (1.01%), and Wisconsin (0.33%).
Nationally, manufacturing was the fourth largest source of jobs, creating 244,000 jobs in February 2019 from one year ago. Payroll employment rose in most industries (3-digit), except for utilities, information services, and retail trade. The largest sources of jobs were health care & social assistance (+447,300); accommodation & food services (+316,600); and professional & technical services (+286,600). Construction jobs also increased (+222,000) as well as real estate, rental, and leasing (+65,500) even as the housing market slowed in 2018.
Manufacturing Employment Recovers Starting in 2017
As of February 2019, there were 12.8 million employed in manufacturing, up from about 11 million in the early part of 2010. Despite recent job gains, the number employed in manufacturing is still well below the 17 million at the beginning of 2000, with the share of manufacturing to total nonfarm employment sharply down to nine percent from 13 percent in 2000.
Manufacturing employment rose strongly starting in 2017 after the sector lost 14,000 jobs as of December 2016. Manufacturing employment increased by 194,000 as of December 2017 and by another 267,000 jobs as of 2018, after contracting by 14,000 in 2016.
By sub-sector, the bulk of new manufacturing jobs were in transportation equipment (+59,700), machinery (+40,000), fabricated metal products (+33,400), computer electronics (+27,400), and chemicals (+24,500). However, jobs were shed in textile mills (-500), textile product mills (-2,000), apparel (-8,100), and printing and related services (-11,900).
In February 2019, manufacturing employment increased sharply from one year ago in Michigan (+13,300) and Ohio (+10,100), with manufacturing jobs also growing in Illinois (+9,100), Indiana (+4,700), Wisconsin (+2,800), and New York (+300).
On average, manufacturing jobs pay slightly higher above the average weekly wage for private industries, at $1,114 ($58,081/year) compared to $952 among private industries ($49,640/year), but lower than construction jobs which pay $1,185 ($61,789/year). Manufacturing wages increased at a slower pace in February 2019, at 1.3 percent, compared to wages in other industries such as information services which rose at 7.1 percent.
Impact of Manufacturing Job Growth on Housing
Manufacturing job growth appears to have propped up housing demand in the Midwest areas. As of the fourth quarter of 2018, home prices were trending up in Michigan, Ohio, Indiana, and Wisconsin were up from one year ago by about six to seven percent, about the same as the U.S. rate of six percent. Only Illinois had slower price appreciation of 2.6 percent.
However, with home prices rising at a faster pace than wage growth, the manufacturing job gains have yet to make a significant dent on homeownership. The homeownership rates in Midwest states are still trending downwards, except for Wisconsin. Home prices in the four states (Michigan, Ohio, Indiana, Wisconsin) se states have been appreciating in the range of six to seven percent while manufacturing wages have increased by less than two percent, making a home purchase unaffordable or less affordable for manufacturing workers.
 The Rust Belt states includes parts of New York, Pennsylvania, Ohio, Michigan, Indiana, Illinois, and Wisconsin.