After 25 years of service, Art Hardin is out of a job and doesn'tknow where to turn.
He was one of 872 workers laid off last month when Quebecor WorldInc., the world's largest commercial printer of magazines, catalogsand newspaper circulars, shut its printing plant in Downstate Salem.More than a tenth of the town's population was left unemployed, andthe rest were left unnerved.
Auto-parts plants and other manufacturers in southern Illinoistowns have been cutting jobs this year to preserve profits as theU.S. economy stumbles.
"It's next to impossible to find a job down here," said the 57-year-old Hardin, who helped load pallets stacked with monthly issuesof Good Housekeeping and Cosmopolitan magazines.
"There aren't plants or factories sitting around on every corneraround here."
While manufacturing's slowdown isn't limited to smaller towns suchas Salem, it's particularly acute in rural areas because a singlefactory can make up such a big part of a small town's economy.
"For every one of these manufacturing jobs that you lose, there'sseveral on the service side that may be affected," said Salem MayorLeonard Ferguson. "It has a snowball effect."
Salem's real estate agents, child-care providers and car dealersare feeling the pinch.
The shutdown at Montreal-based Quebecor represented 11 percent ofthe town's population of 7,900 and 4.2 percent of the Marion Countyworkforce of 20,854. Those workers enter a labor market with an 8.1percent unemployment rate before the plant closing.
Manufacturers across the United States fired 389,000 workers inthe second quarter, the most since the first quarter of 1991 when449,000 factory workers lost their jobs in the midst of the lastrecession, according to the Labor Department. That's a reflection ofsluggish consumer and business demand.
U.S. industrial production fell 0.7 percent in June, extending aslump in manufacturing to nine months, the longest since a 10-monthdecline in 1982, a recession year.
The National Association of Purchasing Management's factory indexdropped to 43.6 in July from 44.7 in June. A reading below 50 signalscontraction, and the index has stayed in the 40s for a year.Manufacturing is "bouncing along the bottom," said Neal Soss, chiefeconomist at Credit Suisse First Boston in New York.
"The shutdown of a branch plant is a common headline in ruralAmerica," said Mark Drabenstott, director of the Center for the Studyof Rural America at the Federal Reserve Bank of Kansas City.
The slowing Illinois economy is making conditions more difficultfor businesses in the state. The Illinois economy, the fourth-largest in the country, turned in its worst performance in nine yearsin July, a University of Illinois report showed.
The university's Flash Index--a weighted average of growth ratesin consumer spending, personal income and corporate earnings--fell to98.3 in July from 98.4 in June. A reading below 100 indicates thestate's economy contracted.
"A period of watchful waiting continues with the state economyhovering between recovery and recession," said J. Fred Giertz, aUniversity of Illinois economist and the author of the monthlyreport.
A drop in personal income tax and sales tax payments dragged theindex to its lowest reading since July 1992, a new low for a secondconsecutive month. The state's corporate tax collections roseslightly after falling in June.
"The economic environment in the U.S. continues to bechallenging," said Joseph Galli, chief executive of Newell RubbermaidInc., in a conference call with investors.
The Freeport-based company said its second-quarter profit fell 44percent, hurt by declining sales of Little Tikes toys and Graco babystrollers. In May, Newell said it would eliminate 3,000 jobs, or 6percent of its workforce, over three years to save $100 million ayear.
The manufacturing slowdown has helped push the Illinois joblessrate above 5 percent for four consecutive months after reaching afive-year high of 5.4 percent in April.
Quebecor shut the Salem plant to consolidate operations and savemoney, a recurring development in manufacturing this year.
National Textiles LLC, which produced fabric and yarn used by SaraLee Corp.'s Hanes underwear and Champion sportswear, is firing 480 asit closes its knitting plant in Gaffney, S.C., population 13,900.
Northwestern Steel & Wire Co., said in May it was going out ofbusiness and cutting 1,300 jobs in Downstate Sterling, population15,300. The company made rod, wire and semi-finished steel. Steelproduction in the United States has fallen about 20 percent in thepast year, according to the American Iron and Steel Institute.
Many rural towns focused economic development efforts onattracting large factories in the 1970s and 1980s, offering taxincentives to garner jobs, Drabenstott said.
Once the value of the plant is depreciated and the tax benefitsexhausted, "it is easy for the corporation to conclude that theymight as well get in this game again someplace else," he said.
"That's often a poor path to sustainable economic development," hesaid. "You are very much at the whim of a company whose headquartersis elsewhere." Towns should instead try to expand their own smallbusinesses and encourage local entrepreneurs, he said.
Quebecor's departure has shaken other businesses in Salem, thehometown of populist presidential candidate William Jennings Bryanand John T. Scopes, the Tennessee teacher who went to jail in the1920s for teaching the theory of evolution.
Dennis Suarez, who owns the Neighbor 2 Neighbor real estatecompany in Salem, said sales are down 10 percent to 15 percent fromthe same period last year. The Quebecor plant's closing "has trulyslowed down business here," he said. "This should be the best time ofthe year for us, but all big-ticket items--cars, real estate--they've all realized a big drop." In response, Suarez has cutspending on advertising for the three-year-old firm.
Earl M. White opened his Maxwell Motors car dealership just as theplant was closing. The shutdown has "negatively impacted us in termsof greater revenue and profitability," White said. "Families areconcerned about finding suitable employment."
Pat Jamison, director of a local day care provider, has lost "acouple" of customers.
"We haven't been affected that much, but it still hurts. It's alittle scary," she said. "Another lady was looking to open a day carein Salem. But she's having trouble getting funding because thatfactory closed. The lenders are concerned there isn't the demand thatthere used to be."
Bloomberg News
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