Manufacturing's Keystone: Skilled Labor

Posted: July 24, 2012

THERE HAS BEEN plenty of talk lately about how the Marcellus Shale, and natural-gas production in the U.S. in general, is boosting the U.S. economy and creating jobs. What is being overlooked, however, is the secondary — and perhaps longer-lasting — impact of natural-gas production in Pennsylvania: the potential for a substantial increase in base manufacturing and port activity in the Philadelphia region.

We are at the beginning of a revival of U.S. manufacturing that will likely be a growth engine for the country for decades. Washington County, south of Pittsburgh, for example, is currently the third-fastest job creator in the country as a result of the Marcellus Shale development, according to the U.S. Bureau of Labor Statistics. What's more, economic forecasting firm IHS Global Insight says Pennsylvania is expected to be second among states (behind Texas) for unconventional gas production in the U.S. by 2020 and experience a job growth rate of 14 percent by 2015.

In addition to these domestic factors, there are a number of global trends that are driving manufacturing back to the U.S.: Labor and energy costs are rising in China and other Asian countries, as are overseas transportation costs. Companies are showing a growing preference for using suppliers closer to their U.S. customers so they can respond more quickly to changes in the marketplace. Events such as the tsunami in Japan last year, political volatility in many parts of the world and weak intellectual property and contract law in emerging economies increase risks and indirect expenses of a globally oriented supply chain.

The economic benefits from natural-gas production will be leading indicators for growth in strategic communities tangential to the footprint of the Marcellus. Businesses that service oil and natural-gas developers, companies that manufacture products requiring significant energy (such as metal fabricators) and firms that provide transportation and logistics services could benefit the most. We see Radnor-based Preferred Sands, for example, becoming a national leader in providing products for natural-gas exploration.

Evidence of additional economic activity in the region is being seen with Delta Airlines investing in Philadelphia refineries. And the energy-intensive industry of shipbuilding has gotten a lift with new orders at the Aker Shipyard in Philadelphia.

Additional opportunities for growth exist here today in the Philadelphia region, even in the midst of the ambiguity of elections, monetary and fiscal policy uncertainty, leadership voids in Europe and the U.S., and Asian growing pains. The region has access to rails, ports, people and capital — and is within a day's drive of 40 percent of the U.S. population.

The region can benefit from our position as a "keystone" — if we take the right steps. However, this window of opportunity will only be open for so long. With Europe on its heels, and Asia struggling with declining growth rates and other internal and political matters, the time to act is now.

Our political, business and labor leaders should work together to expedite the resurgence of manufacturing and logistics companies in the Philadelphia area. To do this, we will need to re-create a skilled blue-collar workforce. This will require marshaling our vast educational resources — colleges, universities and technical schools, partnering with businesses and labor unions — to further develop training programs to create an ongoing supply of workers who can sustain global compensation competition.

In times of greatness, our leaders have historically recognized Philadelphia's role as a keystone, and today's environment presents an opportunity for the current generation of Philadelphia leaders to make a positive impact.

Thomas Bonney is founder and managing director of CMF Associates, a Philadelphia-based consulting firm.

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