U.S. Midwest Jobs Return as Applesauce Lifts Obama

(Corrects name of Materne North America in 23rd paragraph of story published yesterday.)

From northern Michigan’s iron mines to Pennsylvania’s natural-gas fields, the industrial heartland of America is humming with jobs again as a region once left for dead recovers faster than the rest of the U.S.

The turnaround may shape this year’s race for the White House as President Barack Obama seeks to reverse Republican gains in the Midwest. The title of his State of the Union address, “An America Built to Last,” evoked a theme of manufacturing’s revival meant to resonate on the campaign trail.

The economies of Michigan, Indiana, Ohio and Pennsylvania -- all states Obama won in 2008 -- have improved faster than that of the U.S. since the recession’s depth in April 2009, according to the Philadelphia Federal Reserve. Michigan is expected to lead all 50 states during the next six months, the Fed data show.

“We’re going back to a region we abandoned a long time ago to get energy again from rocks that were already drilled a thousand times,” said Clay Williams, chief financial officer for Houston-based National Oilwell Varco Inc. (NOV), which started in Oil City, Pennsylvania, in 1862. “We’re going back to our roots.”

Economic recovery in so-called Rust Belt states may bolster re-election chances for Obama, who pushed the U.S.-backed bailout of General Motors Co. (GM) and Chrysler Group LLC, both based in Michigan. He visited the state in a three-day campaign swing following his speech, and was greeted by guest editorials in Detroit newspapers from Republican National Chairman Reince Priebus and Michigan GOP Chairman Robert Schostak criticizing his record on the economy.

Penokee Hills Comeback

Yet from Detroit and Pittsburgh to Peoria, Illinois, and the town of Mellen in Wisconsin’s Penokee Hills, employers plan to add jobs and facilities. Automakers are ramping up production as demand returns, energy companies are exploiting oil and natural-gas sources, commodity prices are supporting a return to long-closed iron and copper mines, and agriculture companies are finding new export markets.

National Oilwell Varco, the largest U.S. maker of oilfield equipment, is hiring workers in Ohio and Pennsylvania and opening operations that distribute tools and service equipment to companies extracting oil from shale deposits, Williams said in an interview. The company has beaten the Standard & Poor’s 500 Index, about 135 percent to 43 percent, since July 1, 2009.

Improvement in unemployment, which dropped 19 percent in Ohio and 29 percent in Michigan from April 2009 through the end of last year, is a key driver for the Midwest recovery, said Jason Novak, senior economic analyst for the Philadelphia Fed.

Economic Health

Michigan, Ohio and Indiana all ranked among the top eight performers for improvement of economic health in the Bloomberg Economic Evaluation of States from the third quarter of 2009 through the third quarter of last year, the most recent period available.

Automakers are increasing production after U.S. light- vehicle sales rose at least 10 percent for two straight years for the first time since 1984. This month, GM announced it had regained the title as the top-selling global automaker, which it lost to Toyota as it slid into bankruptcy.

The Obama campaign is banking on the U.S. auto industry’s comeback to damp the appeal of Republican presidential candidate Mitt Romney in Michigan, where his father was a popular governor, as well as to reverse Ohio’s swing to Republicans in the 2010 mid-term elections.

Fracking Payoff

Ohio added 72,400 jobs last year. That included 18,300 manufacturing positions after losing 419,400 such jobs from 1999 to 2009, federal data show.

Vallourec SA announced in February 2010 that it would build a rolling mill in Youngstown next to its V&M Star facility to produce seamless tubes for hydraulic fracturing, or fracking. The plant is to be completed this quarter and employ 350 people, the company has said.

U.S. Steel invested $100 million in its Lorain Tubular Operations to serve oil and natural-gas customers, creating about 150 temporary construction jobs and 100 full-time positions, spokeswoman Courtney A. Boone said in an e-mail.

Ohio’s unemployment was 8.1 percent in December, down from 9.5 percent a year earlier and the lowest since December 2008, according to the Ohio Bureau of Labor Market Information.

A study commissioned by Ohio’s oil and gas industry projects that by 2015 drilling could help fuel $12 billion in spending while creating and supporting more than 200,000 Ohio- based jobs.

‘Another Chance’

“People in the eastern part of this state -- who have been living, in many ways, in poverty with the shutdown of great industrial production in Ohio -- they may have another chance,” Republican Governor John Kasich said at a Columbus energy summit in September.

The recovery isn’t just about autos and shale -- it’s all sorts of related industries, said Steve Steinour, Huntington Bancshares Inc.’s chief executive officer.

“We’re seeing now a revival that no one had expected in this sort of time frame,” said Steinour, who is to speak today at the Detroit Economic Club on the theme “Is the Midwest Leading the Economic Recovery?”

Huntington, a Columbus, Ohio-based bank that recently opened its first branches in Detroit, is in the midst of a $2 billion lending binge in Michigan, where unemployment dropped to 9.3 percent in December from 11.1 percent a year earlier.

The state has created a seven-person team focused on exporting products to other countries, including a pilot program to identify 100 companies that can sell consumer goods to China, said Mike Finney, chief executive officer of the Michigan Economic Development Corporation. Other industries also are improving.

Applesauce a Savior

“Mining is something that’s picking up fairly aggressively here,” said Finney, referring to iron-ore operations adding jobs in Michigan’s Upper Peninsula. Also, “the agriculture sector here is really doing well.”

Agricultural co-op Cherry Growers Inc. is adding production lines with about 94 jobs during the next three years in Grawn to manufacture applesauce snacks for New York-based Materne North America. The Gogo SqueeZ treats produced in the northern Michigan factory are sold throughout the U.S. at Wal-Mart, Target and Whole Foods.

The new jobs, which rely heavily on automation, are a good fit for unemployed autoworkers, Cherry Growers President Brian Mitchell said in an interview. The $8.5 million expansion, funded in part by Huntington and Finney’s public-private partnership, has already generated 55 positions, he said.

Michigan gained 66,000 jobs in 2011, according to a Jan. 13 state report. It was the first gain in the state since the turn of the century. The Research Seminar in Quantitative Economics at the University of Michigan predicts a net increase of 26,000 jobs this year, 28,500 in 2013, and 46,800 in 2014.

Thanks, Marcellus

The Rust Belt rebound also means office space is nearly full in Pittsburgh as natural-gas exploration companies and others move in, Steinour said. Pittsburgh on Jan. 19 received improved outlooks on its credit ratings from Moody’s Investors Service and Standard & Poor’s -- going to stable from negative - - after shoring up its pension funds.

Pennsylvania has seen increases in jobs and tax revenue with the development of the Marcellus shale. Activity has risen to 1,751 wells drilled in 2011 from 195 in 2008, according to the state’s Environmental Protection Department. Republican Governor Tom Corbett has said he wants his state to be the “Texas of the natural-gas boom.”

The state is vying with Ohio and West Virginia to attract Royal Dutch Shell LP’s so-called cracker plant, which breaks down natural gas into other chemicals. The company, which may announce a decision this quarter, has said it plans to invest at least $3.5 billion in the plant.

New Iron Age

Other Midwestern states are seeing their own moribund industries revive. In Wisconsin, the state Assembly on Jan. 26 sent to the Senate a bill designed to streamline the state’s mining-permit process that supporters say will clear the way for Gogebic Taconite LLC to create about 700 iron-mining jobs near Lake Superior in the town of Mellen.

In Illinois, where unemployment fell to 9.8 percent last month after hitting 11.2 percent in January 2010, Peoria’s Caterpillar Inc. (CAT) is expanding to meet demand for shovels and trucks that miners use to dig coal, copper and ore.

Caterpillar, the world’s largest maker of construction and mining equipment, announced plans in November to invest $300 million to expand a Decatur factory that builds trucks, and $340 million to manufacture tractors in East Peoria.

“We’ve always heard this Rust Belt thing about our region, even just a few years ago,” said Huntington CEO Steinour, speaking of the disparaging image of closed factories and declining industry. “But you don’t hear it so much now, and we might not have to hear it much in the future.”

To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Mark Niquette in Columbus at mniquette@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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