When France's Nexans announced in December that it would close its 135-employee factory in Mexico, Mo., the news capped a bad year. The loss of the wire manufacturer marked the rural town's third major plant closure in 2002, helping to erase gains in manufacturing employment over the past decade. "It's a big blow," says local Chamber of Commerce Executive Vice-President Sue Caine.
Rural America is hemorrhaging manufacturing jobs because of rising global competition and the slow U.S. economy. Over the past four years, government figures show, rural communities lost 573,000 such jobs, or 12% of their manufacturing employment. Most of the decline occurred in 2001 and 2002.
Worse, it's outright plant closures -- not just cutbacks -- that are increasingly responsible for the losses. Research by the Federal Reserve Bank of Kansas City reveals that almost half the nation's rural job cuts in 2002 were due to factory shutdowns, nearly double the share in 2000. In metro areas, only a quarter of losses resulted from closures, a level that has held steady. When a rural factory closes, workers have few places to turn. "A lot of these jobs are not coming back," says Kansas City Fed economist Jason Henderson.
Between 1990 and 1998, rural areas gained manufacturing jobs. Attracted by cheaper land prices, lower labor costs, and government financial assistance, manufacturers added 18,000 rural jobs, according to Bureau of Labor Statistics data. Meanwhile, urban manufacturers slashed 314,000 jobs.
At the time, manufacturing looked like a good deal for rural America. Historically, small towns have had trouble attracting new industries, which have traditionally congregated in urban areas, where there is a higher concentration of professional workers and universities that spin off new technologies. But during the '90s, rural towns drew mature industries that, because they operate on tight profit margins, needed cheap land and labor. These included textiles, apparel, processed foods, auto components, industrial machinery, and electronic equipment. "The common denominator is that these are standardized jobs that don't require as highly educated a workforce," says Clemson University economist David L. Barkley.
Now, though, small-town America is shedding manufacturing jobs at a faster clip than cities. The jobs are going to places where land and labor are even cheaper: industrializing countries such as Mexico and China. Competition from such nations existed during the 1990s, of course, but the rising value of the dollar in the second half of the decade -- which made imports less expensive -- followed by the recession, pushed many rural factories over the edge, says Barkley.
That's the case with Nexans' Missouri plant, which makes magnetic wire for small electric motors. Demand for its product has fallen due to the recession and the fact that domestic engine makers have moved production to China, says Nexans Vice-President Mark Chouinard. Nexans is moving the 14-year-old plant's operations to a more efficient Kentucky facility that is closer to remaining customers. Nexans is also hedging its bets. In 2000, it opened a plant in Tianjin, China, Chouinard says.
Similar decisions are being made elsewhere in Missouri. In January, VF Corp. disclosed that it would shutter its 750-employee blue jeans factory in Lebanon, Mo., and move those jobs to Latin America. The closure eliminates about 15% of the best-paying blue collar jobs in the county. Longtime plant workers Warren and Freda Evans expect to take lower-paying jobs to make ends meet. "We'll have to start out at the bottom of the ladder," Freda Evans says. Expect more people in rural America to face that prospect.
By Robert Berner in Chicago