For the 33rd straight month, Orange County’s manufacturers expanded output—albeit modestly—as measured by Chapman University’s quarterly survey of purchasing managers.
“Output is still expanding, and that’s good,” survey director Ramon Sfeir noted. The managers’ expectations for production, commodities prices, hiring and other activities are folded into a composite index, which registered 60.2 for the third quarter, down a tick from second quarter’s 61.7 but safely above 50, which is treading water. Manufacturing activity here about tracks the state but lags the nation.
“Still, some sectors are doing quite well,” Sfeir said. “Computer and electronics makers are doing well, transportation is doing fine, also. Aerospace is good, as well.”
Hiring Flat
But all manufacturing sectors are not alike. Makers of apparel, printing and plastic products cited soft demand, some reporting a need to boost sales calls. And then there’s employment. The county employed 900 fewer people in manufacturing in May than in April and 3,400 less than May 2016, according to the State of California Employment Development Department.
“Several said they’re having a hard time hiring qualified personnel,” Sfeir noted. “Wages are pretty good in manufacturing, but with the sophisticated machinery now, you really need highly skilled people. At 3.2% unemployment, it’s not easy to find people who are.”
Economists like Sfeir note that from mechanics to machinists to millwrights, jobs in manufacturing share that trait—they pay well and multiply well—on average in California $83,000 a year, and for every manufacturing job, 2.5 additional jobs are created, according to the California Manufacturers and Technology Association.
Tim Goff said “demand is strong for his firm’s products,” and “Southern California is a little stronger than the nation.” Goff is chief marketing officer at Spectrum Brands HHI, a Lake Forest-based firm that employs about 450 at its national headquarters but none on a local assembly line. At one time Spectrum made Kwikset door locks and levers in Anaheim.
“We still manufacture some products in the U.S. (Texas and North Carolina),” Goff said. “But we left Anaheim in 2001. Too expensive.”
No Help From Up North
Even respondents who waxed optimistic in the Chapman survey didn’t speak of a need to add capacity, much less build facilities. Meanwhile, other states have seen a mini manufacturing revival, thanks in large part to tax incentives. Not so here. In 2014 Sacramento trimmed the sales tax on some equipment purchases to 3.3% (the state levy is 7.25%), but even that law has an annual spending cap and sunsets in 2022. Other measures, such as relaxing the Golden State’s strictest-in-the-nation 95% raw materials requirement for “Made in the USA,” labeling have stalled out.
Over 120 purchasing managers responded to Chapman’s quarterly review, conducted out of the Argyros School of Business and Economics’ Anderson Center for Economic Research.
