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Manufacturing outlook in area is rosy

By Matthew Kent, Chillicothe Gazette
Published Dec. 5, 2015

CHILLICOTHE - Manufacturing remains an important part of the overall workforce in Chillicothe and is expected to continue its success moving into 2016 as local officials say they foresee anticipated growth not only within the city, but the Appalachian region as a whole.

John Molinaro, president and CEO of the Appalachian Partnership for Economic Growth, is one individual who already predicts good things for the Chillicothe region.

"I think the Chillicothe area has great promise for additional manufacturing development," Molinaro said. "The highway corridors there provide excellent opportunities for capturing growth, particularly in the automotive and transportation sectors ... so I think the county's got tremendous opportunity and the biggest strength the county has is the strength we have all over Appalachian Ohio."

Still, he said there remains challenges, including the fact that the area has difficulty competing for projects because it does not have an efficient number of sites that are adequately served by industrial-scale infrastructure such as power, sewer, gas and water primarily. Molinaro said those items are particularly important since companies looking for locations involving major projects are already seeking parcels that are "ready to go when it comes to utilities and we just have a shortage of available properties in Ross County and across Ohio that meet those standards."

Yet, it remains a major issue within the region as well.

"We have a particularly severe issue in this regard in the Appalachian counties in Ohio," Molinaro said.

Molinaro also pointed to the fact that the relationship between energy prices and labor costs have reversed for manufacturing globally.

"When we started off short in manufacturing, labor was half the cost and energy was 15 percent, including the energy to get products to market," he said. "Today, those ratios are reversed and labor is now 15 percent because we've decreased productivity and increased energy prices globally have increased the cost of transportation and energy together, transportation energy and production energy, is more than half the cost of manufacturing growth."

'Extremely optimistic' about future

Molinaro said the United States is second behind Saudi Arabia with the lowest energy prices in the world currently "and that really gives us a tremendous cost competitive advantage in energy generally." Molinaro also said the Chillicothe area can expect to see more manufacturing jobs created in 2016 if it can provide the sites and buildings that companies need to locate and expand.

"If we continue to see the level of expansion that we have in manufacturing, we will need to be preparing more workers for the jobs in the manufacturing sector that are coming available in the manufacturing sector," he said. "It's also tied into the level of retirements that we're having since so many people currently working in the sector are nearing retirement age, so we need more people with the right skills and we need more sites, but in the near term, the sites are the biggest issue, but the people with the right skills are a tremendous potential for longer-term strengths."

In Ohio, one out of every 10 workers is involved in manufacturing, the third highest rate in the nation and in Appalachian Ohio, that rate is one worker out of seven. Molinaro said APEG has great partners in Ross County to try to expand manufacturing, although he stressed that the continued working relationship needs to occur in an effort to figure how to fill more buildings in what he called "a critical step for continuing our success."

As a whole, he spoke positively about the future moving forward, describing himself as being "extremely optimistic about manufacturing in Ohio and our region." He said he thinks 2015 was a good year for the area, but said one of the challenges was comparing it to the early years of the economic recovery.

Manufacturing remains strong

He added that 2011, 2012 and 2013 accounted for expansion of jobs in manufacturing due to pent up demand from the recession, in addition to the rehiring of people who were laid off during the recession as well.

"In the short-term, those numbers look a little bit better than what we saw in 2015, but that's a natural result of the business cycle," he said. "We've been doing really well given the fact that our overall manufacturing expansion is naturally slowly and now we've gotten past the early days of economic recovery."

Chris Manegold, CEO of the Economic Development Alliance of Southern Ohio, also said that 2015 was a good year for the area. He added that the last few years within the manufacturing sector in Ross County has been strong because of employers like Kenworth, in addition to other factors like the national economy.

Manegold said it remains uncertain what the future holds, although he agreed with Molinaro that it looks good moving into 2016.

"I think a lot of it depends on how the national economy is going to go and if the Federal Reserve boosts its rates, does that scare the market, does that affect consumers? Does that affect international conditions and does that affect the price of oil and does that affect consumers and it's really difficult to predict," Manegold said.

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