The slowdown in business and consumer spending will have a direct effect on companies making goods in the county.
While economists forecast an uptick by the second half of 2009, the number of manufacturing jobs is set to shrink next year.
Chapman University estimates the county will lose about 2,800 manufacturing workers next year, a 1.5% decline from 2007 to bring the total number to 173,448.
“Unfortunately the outlook is not bright,” Chapman University economist Esmael Adibi said.
Manufacturing represents about 12% of the county’s workforce and has been shrinking or stagnating for years as companies opt to make their products overseas.
The companies that survive here tend to specialize in goods they can usually sell at a premium to make up for higher operating and labor costs.
Clothes, weapons and medical devices are some of the more common things made here.
Manufacturing continues to face challenges from government regulation, high insurance costs and scarce workers. The trend of companies leaving for cheaper places remains a threat, according to Adibi.
Technology manufacturing should fare slightly better than other sectors next year, according to Adibi. Those jobs are expected to shrink by 325, or less than 1%, to about 49,800.
Companies with products affected by consumer spending,say home furnishings or clothes,will take a bigger hit, he said. Workers in non-durable manufacturing are seen declining by 1.5% to 51,866.
Jobs making durable goods designed to last for years are seen falling 2% to 71,831 workers.
In 2008, manufacturing benefited from a weaker dollar that boosted demand from overseas buyers.
But, unlike this year, the dollar, which has had a strong rebound against the currencies of many trading partners, may not be as much of a factor in 2009.
One of the biggest drags on manufacturing next year could be less demand from foreign trade partners, according to Adibi.
“Now that our trade partners are weakened and the dollar is stronger, the sector will continue to suffer into next year,” he said.
Some areas of manufacturing could do better than others.
Medical device makers that produce critical products for patients, such as Irvine-based Edwards Lifesciences Corp. with its heart valves, are expected to weather the slowdown better than others.
Less optimism is held for military contractors, which face uncertainty next year over what the Obama administration will mean for defense spending.
Cleveland-based defense contractor Eaton Corp., which has sites in Irvine and Costa Mesa, said it expects its military sales to be stable next year with contracts it’s already work-ing on.
Any slowdown in defense spending won’t likely hit Eaton until 2010, according to the company.
Eaton makes control panel parts used on military jets such as the Joint Strike Fighter.
Like many military contractors, Eaton keeps work in the U.S. for security reasons.
One of the fears local military contractors have is that the government’s bail out of the financial industry might reduce funds for military spending.
Defense industry analysts have been mulling over what military programs might be considered excessive with new budget restrictions.
Talk of pulling soldiers out of Iraq has led to speculation about future military sales for companies such as Costa Mesa-based Ceradyne Inc. and its bulletproof vests for troops.
Ceradyne has lowered its forecast on military sales for next year.
Despite better conditions in early 2008, about 3,700 manufacturing jobs were lost in the county for the 12 months through October, according to government data.
Manufacturing workers were let go as companies learned to be more efficient, according to Adibi.
“Productivity has been increasing,” he said. “They’re doing more with less labor.”
COMPANY TO WATCH: ST. JOHN
It’s decision time for Irvine-based St. John Knits International Inc.
The luxury women’s clothier faces a decision on what to do with its 169,555-square-foot Irvine factory at Jamboree Road and Michelson Drive, where it employs some 1,500 workers.
St. John, well known for making knit suits worn by politicians, socialites and professionals in their 40s, 50s, 60s and beyond, sold the building to Houston-based developer Hines Interests LP in 2006.
A Hines proposal for offices was approved earlier this year and requires razing the factory.
St. John Chief Executive Glenn McMahon is mum, saying only that the company plans to keep its headquarters and production local.
Higher profits on the company’s upscale products have allowed St. John to be one of the few to actually make clothes here.
But, like others, St. John faces high labor, healthcare and other costs. In early December, the company said it cut about 3% of its total workforce of 3,500 people.
For the past few years, St. John has found ways to streamline operations and cut costs, including closing a plant in Van Nuys in 2004 and another in San Ysidro earlier this year and moving some jobs to Irvine.
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Jessica C. Lee
