In June 2016, employment in Connecticut's manufacturing sector fell to a three decades low—down to 156,200 jobs as the sector, like much of the state's economy, continued its post-recession struggles.
Momentum shifted in the second half of the year, with manufacturers adding 1,000 jobs in six months as output in durable goods manufacturing expanded, albeit modestly.
Sector employment and economic output have grown steadily ever since. As of October this year, 161,800 people were working in Connecticut's manufacturing sector, and the challenge has shifted from too few jobs to not enough skilled workers to meet growing demand.
"There's a strategy that the state is working on for economic development in general and my plan is to plug into that," Colin Cooper, the state's newly appointed chief manufacturing officer, said at the Oct. 25 Made in Connecticut manufacturing summit in Trumbull.
"Initially, I'll be focused more on tactical issues—the highest priority in manufacturing being workforce development, finding qualified people. Companies are growing and they need to add people."
Several factors are driving the skills shortage in manufacturing. The state's shrinking labor force, population loss, and a surge in retirements among the baby boomer generation are hampering manufacturers' ability to meet growing demand.
The 2019 Connecticut Manufacturing Report, released by CBIA and its CONNSTEP affiliate at the Oct. 25 summit, found workforce is the priority need for 60% of the state's manufacturing companies.
The report also shows that manufacturers are investing heavily in their businesses and employees, with training and worker retention the main investment choice for 26% of companies, followed by property and facilities (17%) and research and development (16%).
Manufacturing today employs about 10% of Connecticut's total workforce, mainly highly skilled, highly productive workers earning an average $96,279 annually—well above the state's $74,561 yearly per capita income.
"One of the things that really jumps out at me is the average manufacturing salary compared with the state's average salary of roughly $75,000," David Lehman, commissioner of the state's Department of Community and Economic Development, told summit attendees.
"We need to do a better job marketing that at the high school level or even earlier than that, because these are phenomenal jobs. As a state we need to do a better job directing people to what are significantly above average jobs in terms of compensation and benefits."
The manufacturing sector accounts for approximately 11% of Connecticut's annual $284 billion gross domestic product, including $17 billion in exports, $12.6 billion in defense contracts, and $14.9 billion in wages and compensation.
Manufacturers pay more than $320 million annually in state corporate and sales and use taxes and invest almost $1.5 billion in capital expenditures each year.
Most critically—the sector drives other parts of the state's economy, creating up to four additional jobs for every manufacturing job and generating $1.35 in additional economic activity for every dollar spent.
Last year, sales grew at more than one-third (35%) of Connecticut manufacturing companies. Almost half (48%) reported holding steady during 2018 while 17% posted declines. That compares with 43% of all Connecticut businesses that reported growth, 44% with no change, and 13% with declining sales.
A significant majority are operating profitably, with the percentage of manufacturers reporting profits last year at a post-recession high. Seventy-five percent were profitable in 2018 (compared with 70% of all businesses), 13% broke even (versus 10%), and 12% posted losses (17%).
Most manufacturers also have a positive outlook for this year, with 72% expecting to return a profit, 16% saying they will break even, and 12% forecasting losses.
What's driving profitability? Connecticut manufacturers are benefiting from a strong national economy and global demand for aerospace products, with increased productivity gains (through technology and efficiency), tight cost controls, and greater workforce retention also featuring as major factors.
"We are really bullish on Connecticut's manufacturing future," said Marty Guay, vice president of business development at Stanley Black & Decker, who spoke on a technology and innovation panel at the summit with CONNSTEP's Jeff Orszak, RSM's Marni Rozen, and Hartford Steam Boiler vice president Jack Webb.
Cooper recounted a recent meeting with the chief executive of a European-based aerospace manufacturer that has seen rapid growth since establishing a foothold in Connecticut a few years ago.
"He was just effusive about doing business in Connecticut," Cooper said. "I know for some of us that may be somewhat surprising, but when you look at Connecticut on a world scale, the skills, knowledge, and ability of the workforce here are unparalleled—especially in aerospace.
"We have a lot of strengths here. We have proximity to customers and markets. We have good access to capital. We have a vendor base here that's knowledgeable and supportive. We have strong educational institutions and a lot of work has been done over the last 10 years to grow those."
Shrinking Connecticut markets and growing costs—particularly state taxes, labor, and energy—were the most significant loss factors in 2018. Trade tariffs also factored into losses for both exporters and companies that import raw materials.
The state's high business costs, tax burden, and workforce challenges are hindering growth in the manufacturing sector. Thirty-eight percent of manufacturers say business costs and taxes are the primary anti-growth factors while 16% cite the lack of skilled workers.
A majority of manufacturers are concerned about Connecticut’s economy—just 6% see the state's economy expanding in the next 12 months, while 33% see no change and 60% forecast contraction.
In contrast, 72% expect the U.S. economy to grow over the next 12 months, 17% see unchanged conditions, and 11% predict a contraction.
However, Connecticut manufacturers are becoming increasingly anxious about the direction of the national economy—58% are somewhat or very concerned about the negative impacts of tariffs and trade disputes, 19% say they are unconcerned, and 23% are neutral.
Less than a third (29%) of Connecticut manufacturers have customers within the state, 49% ship and/or sell to other states, and 22% export goods and services to international markets.
Canada is the primary export market for 20% of Connecticut manufacturers, followed by Great Britain (13%), China (11%), Mexico (11%), Germany (7%), Saudi Arabia (5%), France (4%), and Australia (4%).
Chris DiPentima, president of Leggett & Platt's Middletown-based Pegasus branch, spoke on the Oct. 25 summit panel with Lehman and Cooper. He said he was surprised at the percentage of Connecticut manufacturers that were doing business outside the state.
"That's dispelling a myth that we had 10 or 15 years ago that most everyone in the state of Connecticut, on the aerospace side, did business with Pratt & Whitney or the old Hamilton Sundstrand or Sikorsky, and on the defense side with Electric Boat," he said.
"Folks are doing a lot of business outside the state of Connecticut and I think that bodes well for potentially recruiting people to Connecticut."
Lehman said the state has a "significant ecosystem here with aerospace and defense and advanced manufacturing."
"We need to continue building on that," he said. "When I think about the core industries we have as a state, manufacturing is one of them. We want to be playing offense and recruiting companies to further build out that ecosystem."
"It's a very collaborative environment in Connecticut," added Cooper. "It's always amazed me how manufacturing companies come together to share information.
"On a lot of levels, we're all competing against each other, but it's very collaborative, from workforce initiatives to business development initiatives."
DiPentima added that the Connecticut Manufacturers' Collaborative, created last year through the leadership of CBIA and CONNSTEP, illustrated that collaboration by bringing together the state's major manufacturing organizations as a single, unified voice.
Manufacturers are investing heavily in their businesses and employees, including training and retention (26%, based on the report), property and facilities (17%), and research and development (16%).
Innovation is a dominant theme within the sector, with the report showing that 53% introduced a new product over the last year. Seventy-four percent made those products in Connecticut, while 25% have partial manufacturing operations within the state.
Of the 49% of manufacturers planning on introducing a new product or service in the next 12 months, half plan on locating full production operations in Connecticut while 30% will partially handle that production here.
Nearly a third say they need assistance making their production lines more efficient using new technologies.
"We're moving from jobs that are dull, dirty, and dangerous to high-tech jobs—where people work with their heads, not with their hands," said Guay.
"We're really excited about this transformation. For us, it's something of a Big Bang. We're all in."
Webb said manufacturers must work together to implement technology, calling Industry 4.0 initiatives—including recruiting, retraining, and retaining workers—"incredibly challenging."
"There are many pitfalls, including vendor selection, partner selection," he said. "How do they operate together? That's a critical piece. Automation is not easy."
"How we make manufacturing companies smarter, more productive is what this is all about," added CONNSTEP's Jeff Orszak.
"CONNSTEP's charge is helping companies understand the opportunities that are appropriate for their business and guiding them through the assessment and planning processes."
Collaboration and engagement are driving the future of manufacturing in this state and are key factors for addressing the sector's challenges.
Lehman said Cooper, as the state's first chief manufacturing officer, will be given "a broad mandate to work across multiple state agencies in driving collaboration with the private sector."
"One of the things I've been really surprised by is the level of engagement from the business community, in particular manufacturers, Lehman said.
"If there's one thing I could ask this group to do is continue to be vocal. We need the business community to continue to advocate to the legislature and beyond about the importance of business to this state.
"At times I feel we lose the mark here a little. We need to make sure everyone realizes the importance of having sound fiscal policy, sound regulatory policy, and legislation that really encourages businesses to invest here.
"The reality is you can't have good jobs without great companies."