Bloomberg: Obama Recession Symbol Elkhart Mends as U.S. Manufacturing Grows

Indiana's Elkhart County became a symbol of what was wrong in the U.S. economy when President Barack Obama traveled there in February 2009 to make an appeal for more federal spending during a “deep and dire” recession.

Today, the county’s rebound is evident in the “Employment Opportunities” sign at truckmaker Utilimaster Corp., the return of laid-off workers at recreational-vehicle producer Jayco Inc., and the restoration of a downtown theater. The manufacturing community, which was losing jobs faster than anywhere in the U.S. as its unemployment rate soared to 20.3 percent in March 2009, is now a leader in the year-over-year drop in joblessness.

Elkhart’s turnaround, largely a result of the revival of its main industry, recreational-vehicle production, reflects a nationwide strengthening in manufacturing, one of the few bright spots in a U.S. economy whose growth has slowed.

“What’s happening in Elkhart is typical of what’s happening across America,” said Morton Marcus, an Indianapolis economist and former Indiana University professor. “It’s just noticeable in Elkhart because the unemployment rate was so high.”

U.S. manufacturing unexpectedly accelerated in June as factories rebuilt inventories, a report this month by the Institute for Supply Management showed. The group’s measures of production, new orders and employment also climbed.

“With the recovery has come a rebound in RVs and autos, so now you are seeing places like Elkhart doing much better, as are towns like Toledo and Youngstown, Ohio, where the auto industry is the dominant influence,” said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio.

‘Worst Situation’

Motor vehicle output nationwide, which includes RVs, has climbed at a 40 percent annual rate per quarter on average since the recession ended in June 2009. As a result, the unemployment rate in the Elkhart County area declined to 10.1 percent in May.

“While we had the worst situation in the country, our recovery is probably the fastest,” said Dick Moore, the mayor of Elkhart, the largest city in the northern Indiana county. “We weren’t passive, and we weren’t stagnant.”

Elkhart has gone from the epitome of economic malaise to a standout during the recovery as much of the nation struggles with slow job growth. American employers added jobs at the slowest pace in nine months in June and the unemployment rate rose to 9.2 percent, sparking concern the economy is faltering.

While the Elkhart area has a long way to go to return to its pre-recession unemployment of 4.7 percent, it’s benefiting from economic-development efforts and a push from Washington.

700 Jobs

This year, new and expanding manufacturers aided by state and local tax abatements have made more than $66 million in capital investments and created at least 700 jobs, said Dave Ogle, director of business retention and expansion for the Elkhart County Economic Development Corp. In 2010, companies invested $96.2 million and added almost 1,800 jobs countywide.

Obama put the national spotlight on Elkhart, making it his first trip as president to push Congress to pass a stimulus plan now valued at $830 billion, mentioning the town eight times in a press conference, then returning to the area six months later to announce Energy Department grants for electric cars.

The city of Elkhart received $41 million in stimulus money, which has been used to rebuild a runway, make sewer improvements and redo roads and sidewalks. About 200 jobs resulted, said Barkley Garrett, who heads the economic-development department.

“Everyone had written us off,” said Garrett. “The things we’ve been able to do in the past two years are pretty amazing.”

RV Capital

Elkhart County, home to about 200,000 residents, makes more than 60 percent of the recreational vehicles sold in the U.S., a $13 billion market, and manufacturers have called back workers let go after the credit crunch in 2008 and early 2009. RV shipments dropped 33 percent in 2008 and another 30 percent in 2009, prompting a 50 percent workforce reduction, according to the Recreation Vehicle Industry Association in Reston, Virginia.

The loosening of lending and the stock market’s recovery helped fuel a 46 percent rise in shipments in 2010, according to RVIA data.

“All the lots down here are full of RVs again,” said Barbara Rowe, 73, recalling how her church in Nappanee opened a food pantry when unemployment skyrocketed. “They don’t mention the food pantry from the pulpit anymore.”

‘Lot of Uncertainty’

Keystone RV Co., a Goshen-based unit of Thor Industries Inc. (THO), cut its payroll to about 2,000 workers during the recession from 3,000. It’s now back to more than 3,000.

“We’ve seen the credit come back very strong,” said Bob Martin, Keystone’s president. “It’s been nice to see many of the companies hire people back and the community come back to life.”

Jayco in Middlebury cut almost half of its 2,300 workers and has since brought back more than 600.

“We’re not striking up the band and having any parties in the street, because there is still a lot of uncertainty out there,” said marketing director Sid Johnson. “But we are pretty pleased with how things have gone.”

The racket at the Utilimaster production plant, where workers assemble truck bodies for companies, including United Parcel Service Inc. (UPS) and FedEx Corp. (FDX), is welcome noise to John Marshall, senior vice president of sales and marketing.

After dropping to about 400 workers from 600 during the recession, the unit of Charlotte, Michigan-based Spartan Motors Inc. (SPAR), soon will peak at about 930 employees.

Positions to Fill

Utilimaster hired 150 workers in the last three weeks of June. It still has 105 positions to fill at its plant in Wakarusa, about 10 miles south of Elkhart, as the company prepares to manufacture its new, lightweight Reach van, in a joint venture with Japan's Isuzu Motors Ltd.

Customers are replacing aging fleets, and Utilimaster is in the middle of a $1.9 million plant expansion.

A tax measure Obama signed last year that included a provision allowing companies to write off 100 percent of some capital investments helped spur sales, Marshall said.

Elkhart resident Dedrick Brown, 30, was making $7 an hour as a fast-food restaurant cook until he got a job on Utilimaster’s assembly line last year. He’s now earning $13.85.

“We bought a house and we’re making our bills,” said Brown, whose wife is expecting their second child.

Kem Krest Corp., a supply-chain management company whose clients include General Motors Co. (GM) and Caterpillar Inc. (CAT), is investing $6 million in a second warehouse and will double its staff to about 200 over the next five years.

Anybody Can Fail

“People are working their tails off because they are no longer thinking their industries can’t fail,” said Chief Executive Officer Amish Shah.

Some federal stimulus money will help pay interest on bonds used to finance part of an $18 million restoration of a 1,700- seat, 1924 theater, which opened in June and held two sold-out Broadway productions of Fiddler on the Roof.

Still, the Elkhart County area had more than 60,000 manufacturing jobs before the recession and has 47,300 now. While that’s up from a low of 36,900 in March 2009, wages mostly have remained stagnant. The average weekly salary unadjusted for inflation rose to $812 in the third quarter of 2010, the most recent data available, from $797 in the fourth quarter of 2007.

Moore, Elkhart’s mayor, estimates it could take 12 years for the city to see employment peak again as it looks to diversify beyond the RV business.

“We’ve still got a lot of empty factories and warehouses that we need to get filled,” he said. “We’re not down and out.”


-Catherine Dodge, Bloomberg