Why U.S. Steel Layoffs Signal Economic Trouble in the Midwest

Trump's economic sugar rush could be coming to an end, and the Midwest's manufacturing industry is showing signs that there's cause for concern.

The Recombobulation Area is a new weekly column by veteran Milwaukee journalist Dan Shafer. Learn more about it here.

Photo: U.S. Steel Corp. on the Detroit River. NOAA Great Lakes Environmental Research Laboratory [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)]

Significant economic news hit the Midwest this week. 

News broke Monday that U.S. Steel Corp is laying off about 200 people at its Great Lakes plant in the Detroit area. This follows announcements that the company would idle two furnaces, one at Great Lakes in Michigan and the other at Gary Works in Indiana, U.S. Steel’s largest manufacturing plant.

What’s concerning is that this is precisely the type of industry that the Trump administration is purportedly trying to revive, and the opposite appears to be happening. In fact, U.S. Steel’s market value is down more than 70 percent since the president first announced 25 percent tariffs on foreign steel in March 2018, and its stock price is down more than 25 percent over the past month. Bloomberg estimates that Trump’s tariffs have cost the company $5.7 billion.

Donald J. Trump @realDonaldTrump

Our Steel Industry is the talk of the World. It has been given new life, and is thriving. Billions of Dollars is being spent on new plants all around the country!

A recent analysis showed that in the manufacturing industry, the economic sugar rush that came from tax cuts and regulation in Trump’s first two years in office could be slowing. And here in the Midwest, many states were “at or below average” in terms of factory job growth even during that growth period, with much of the industry’s expansion heading west to states like Nevada, Utah and the Dakotas. 

Notably, earlier this year, General Motors closed a plant in Lordstown, Ohio, leaving 1,400 people out of a job. Last November, the Detroit-based auto manufacturer announced 14,000 job cuts, ending production at five factories in North America, including plants in Detroit and Warren, Michigan.

And just this week, packaged food company Del Monte announced it would lay off nearly 500 employees at its Mendota, Illinois, plant and permanently close an 89-year-old plant in Sleepy Eye, Minnesota.

This summer in Charles City, Iowa, a Simply Essentials chicken processing plant closed, and about 500 people were laid off. In Wisconsin, 145 people lost their jobs without warning at Tramontina’s Manitowoc plant, and 158 employees are being laid off at C&D Technologies in Milwaukee.

While factories are closing all over the Midwest, in Wisconsin, it’s also the factory that isn’t hiring that continues to be an ongoing debacle. Foxconn’s plant, finally making its way out of the ground in Mount Pleasant this week, clearly isn’t happening on the scale the exorbitant public funding deal’s backers had hoped, and is yet to meet basic job creation thresholds. 

Statewide, Wisconsin’s manufacturing industry lost 2,800 jobs in one month, according to the most recent data from the state Department of Workforce Development. 

While talk boiled over this week that a recession could be looming, U.S. manufacturing is essentially already in a recession. Multiple reports now show that Midwestern manufacturing has recently slowed to its lowest level in years. 

This is all quite concerning for the middle western states. 

We’ve seen before, time and time again, just how devastating these job losses and plant closures can be to the communities in which they occur. Action can be taken at some level to mitigate the damage, but the end result is often the same. Things just get worse. 

Trump’s trade war clearly isn’t working. It isn’t stopping the long, painful decline of American manufacturing. But frankly, not much has.

Whether it’s the decline of unions or the “skills gap” or the legacy of outsourcing or bad trade deals or any number of reasons used to explain the industry’s shortcomings, the fact remains that, over the long term, the situation is not improving. 

Instead of trying to recapture the region’s industrial past, a true solution involves a fresh and comprehensive revisioning of the Midwest’s future, something that’s going to provide a real path forward for places like Lordstown and Charles City and Detroit and Gary and Mount Pleasant and Milwaukee and so many other towns and villages and cities across these states that have relied so heavily on manufacturing over the past several decades.

As the presidential campaign drives through the Midwest, the manufacturing industry and working class jobs are undoubtedly going to be major talking points. We know the president’s plan of mammoth tax cuts, incoherent trade policy and stifling even legal immigration is not going to put the region on a path to long-term prosperity. It’s going to be important the Democratic candidates vying for the presidency to deliver an economic plan for the Midwest that confronts the reality of the situation in the manufacturing industry head on while forging a path toward a brighter future.

Because, while signs of a recession on the horizon might be coming into clearer focus nationally, those troubling signs are already arriving in the Midwest. 

---

Thank you for reading The Recombobulation Area.

Subscribe to The Recombobulation Area newsletter here and follow us on Facebook and Instagram at @therecombobulationarea.

Follow Dan on Twitter at @DanRShafer.