Forecast: Colorado manufacturing will prosper in ‘17, despite setbacks

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Celebrating the best of 2016 manufacturing, as we did last month, was easy. So many companies and success stories, so little space.

CU’s Leeds School of Business Colorado Business Economic Outlook 2017 provides great context for a forecast for the year ahead. The highpoints of the Leeds report:

  • Manufacturing employment will grow 1.6 percent, adding 2,300 new jobs, about the same as 2016’s year-over-year growth. It would be the seventh straight year of employment growth in manufacturing.
  • Employment in food manufacturing will reach “22,600 workers or over 42 percent of the nondurable goods subsector employees forecast for 2017,” making it the largest subsector in the manufacturing ecosystem. (“Other durables” is actually larger, comprised though of several subsectors.) Food surpassed Computers and Electronics in 2016 as the largest subsector.

We continue to document the surge in food brands and manufacturers in Colorado. That more growth is forecast isn’t a surprise. But it’s noteworthy that Colorado manufacturing continues to buck the national trend, enjoying productivity and employment growth (U.S. manufacturing has shed 5 million jobs in manufacturing since 2000.)

A lowlight: Total manufacturing employment in Colorado will increase from about 144,00 jobs to 146,000. Government employment will grow from 424,000 jobs to 428,000, second only to Trade, Transportation and Utilities. Has launching and incubating new manufacturing companies ever been more important?

Here’s my forecast for 2017, and a wish list for developments that would bolster the state’s sector:

Forecast: Food and beverage will continue to be the fastest growing manufacturing industry sector, but the story shifts to manufacturing infrastructure in 2017 — as in, can we keep growth brands here? Wish: Two things: that Pueblo and Colorado Springs develop strategies to tap the food boom; and that all eyes turn to the industry supply chain. Food and beverage companies need money, technology and automation, raw materials, and immigrant labor.

Forecast: Dow 20,000 is a high point. Stocks will fall as interest rates rise — and manufacturing stands to gain. It’s counterintuitive, but a normalizing financial sector will hopefully encourage more risk-taking. Investors are cherry-picking deals in the current environment, leaving investment-worthy companies in limbo. Let large caps correct and instead fund and incubate 1,000 companies in the next five years. Wish: Development of a manufacturing accelerator to match new ideas with money — a Techstars for manufacturing.

Forecast: In ’17, we’ll determine whether investments in technology centers and so-called ‘makerspaces’ are bearing fruit. Millions are being spent to establish centers of advanced manufacturing in Colorado. Everyone’s in the game, including the Colorado Advanced Manufacturing Alliance, Manufacturers Edge, state and local government, higher education, and industry. In ’17, we should get a better feel for what models work best, how many companies are benefitting, and when public funding is involved, the return on taxpayer investment. Wish: An accounting of public investments to date.

Forecast: ’17 is also a pivotal year for cut-and-sew centers on the eastern plains — the Rural Colorado Apparel Manufacturing network, or RCAM. Can a nonprofit compete in the highly specialized, competitive, transformative U.S. apparel sector? We’ll know soon. Wish: A concerted effort to recruit national brands to manufacture here, but importantly, more public-private collaboration on a workforce model designed for apparel and outdoor industry. Rally support for Colorado lifestyle industry and not just lifestyle.

Forecast: More high-profile craft breweries will sell controlling interests to strategic or equity investors, but the bigger story is 2017 will be the industry-wide shift in how breweries operate. Expect less new packaged beer on the shelf and more neighborhood taprooms. To what end the industry? Wish: A beverage-industry conference to focus efforts on supply-chain needs for brewers, cider and wine makers, and distillers.

Forecast: Reshoring is evolving. Companies may bring jobs back to the U.S., but more will add new jobs here. Wish: Let’s bury the notion that penalizing companies to move offshore, or negotiating one-off deals, is a strategy to grow manufacturing. Instead, invest in developing a world-class domestic supply chain. That’s a strategy.

Forecast: Investments in workforce development will begin to pay tangible dividends, justifying the enormous investment to alleviate the so-called ‘skills gap.’ Wish: Certainty that the growing number of qualified employees have job opportunities. (See “we must launch and incubate 1,000 new companies in the next five years,” above.)

We’ll reset and correct in 2017. We’ll take one step back and two forward. Only change is certain. See you in ’17.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com