An annual Manufacturing Business Conditions Survey conducted by the Minnesota Department of Employment and Economic Development (DEED) and the Federal Reserve Bank of Minneapolis found that most Minnesota manufacturers expect mostly unchanged conditions in 2023, and most saw improved or unchanged conditions in 2022. A release issued by DEED on January 13th outlined the following key findings: 

• 73% expect unchanged exports;
• 55% expect the same production levels;
• 51% expect constant productivity;
• 44% expect unchanged employment levels; and
• 41% expect the same level of profits.

A large percentage of manufacturers expect an increase in wages and benefits for employees, with 60% of respondents expecting wages to increase between 3% to 5%, while close to 40% anticipate a rise in benefits in the same amount.

“Manufacturing is the backbone of Minnesota’s economy. DEED continues to work closely with manufacturers to help them meet their workforce needs and train new and current employees,” said DEED Commissioner Steve Grove, who later in February announced he would be leaving DEED to serve as CEO and publisher of the Star Tribune as of March 3. “Through DEED’s new Automation Loan Participation Program, and our Automation Training Incentive Program, we’re also partnering to push cutting-edge solutions to today’s productivity challenges.”

“This partnership with DEED allowed us to reach 389 manufacturing operations across the Federal Reserve’s Ninth District,” said Joe Mahon, regional outreach director at the Federal Reserve Bank of Minneapolis. “This provides a vital source of information for us on economic conditions and on the impacts those conditions are having on businesses in the communities we represent.”

Survey results show that, compared to 2021, most manufacturers showed improved or unchanged conditions in 2022. Fifty-two percent of respondents indicated an increase in the number of orders and 51% experienced unchanged productivity. Forty-one percent indicated constant levels of employment and production levels, and 36% of respondents reported unchanged profits. Additionally, 45% reported an increase in investment in plant/equipment.

A new question on the survey inquired about supply chain bottle neck problems compared to the year before — 64% of respondents indicated that problems got worse with labor issues at suppliers and 60% reported transportation/logistic issues.

“Manufacturing is the backbone of Minnesota’s economy. DEED continues to work closely with manufacturers to help them meet their workforce needs and train new and current employees.” 

— Steve Grove, outgoing DEED Commissioner, January 13, 2023

Manufacturing accounted for $53 billion or 13% of the state’s gross domestic product and provided more than 313,000 jobs or 11.3% of statewide employment in 2021. Workers took home $23.4 billion in wages from Minnesota manufacturing jobs in 2021, the second-largest total payroll among private sector industries. Average annual wages for workers in manufacturing are $74,630, 11% higher than across all industries in Minnesota.

Automation Financing Program Debuts

In November, DEED announced a new program to support automation at manufacturers, the latest component of the $97 million State Small Business Credit Initiative (SSBCI). As part of the Automation Loan Participation Program, DEED says it will make companion loans to cover financing gaps and expand financing opportunities for businesses purchasing machinery, equipment or software to increase productivity and automation.

“Facing the tightest labor market in America, we know Minnesota businesses can’t create a larger workforce out of thin air,” said Grove at the time. “A key strategy has to be automation — which is why DEED’s new Automation Loan Participation Program will help manufacturers automate more quickly to drive innovation and productivity gains that will help our economy grow.”

DEED loans through the new program can be worth up to $500,000 and need to be made in conjunction with private financing. The new program is designed to support manufacturing, distribution, technology, and warehousing businesses with 500 or fewer employees. These businesses have historically been less likely to pursue automation and are more likely to be unable to secure full financing for automation improvements from other lenders. 

The new loan program joins other DEED initiatives to help manufacturers implement automation. DEED’s Automation Training Incentive (ATIP) program provides grants to small businesses for the purpose of training existing workers on new automation technology. Grants of up to $35,000 are available to small businesses in the manufacturing or skilled production industry to train workers on new technology. 

Minnesota Governor Tim Walz and the state’s Department of Employment and Economic Development (DEED) launched the Build What Matters campaign in late October 2021 to make the case that Minnesota is where startups, existing companies and workers can succeed. What makes the program unique is the involvement of businesses in getting the word out. Executives from HabitAware (a smart bracelet manufacturer), Digi-Key Electronics and Xcel Energy helped launch the program, among others.

In mid-January, DEED Commissioner Steve Grove moderated an online event as part of the Build What Matters campaign that involved more Minnesota company representatives. “We have a long history of building things that change the global economy for the better,” he noted. “Here at DEED we continue to work collaboratively with many sectors in order to carry on that tradition and move Minnesota’s workforce and economy toward a brighter future.”

After the event, DEED made available excerpts of the panel discussion, which include the following:

Ryan Weber, Managing Partner & Co-founder of Great North Labs

“In the startup ecosystem, Minnesota is very strong, and that’s an important indicator for the overall climate of the state and how we attract startups and new workers. The last five years have been especially powerful in terms of startup accelerators and corporate support to bolster startups. We’re seeing bigger and bigger funds being raised here, and that sustainability plus the wonderful quality of life are really driving growth. DEED’s Launch Minnesota program definitely helped me connect with Greater Minnesota entrepreneurs. We’re organizing ourselves to further accelerate growth, and the future is truly bright for innovation and startups.”

Dr. Adel Ali, Dean of the College of Science and Engineering at St. Cloud State University

“We’re all working together to prepare the workforce for the future. It’s happening by design here in Minnesota and that’s unique. It’s everyone from high schools to community colleges to large universities pulling together and creating new programs. We have to work together to educate and train workers so graduates have skills, including the soft skills, that employers need now and in the future. Innovation isn’t limited to the next best gadget. It’s also about new ways of partnering across industries and how we come up with ideas together.”

Tosh Brinkerhoff, President & CEO of Rotochopper 

“Automation has benefitted our manufacturing company and the community. We’re not displacing the workforce, but rather investing in the workforce as we look for talent with the necessary skillsets and expertise to program and manage that automation. We’re actually helping address labor force issues with some higher-paying technical jobs.”

Jason Smith, President of AIT

“There’s an extremely high level of tech in St. Cloud as well as in Minnesota overall, and this is definitely linked to our strong education system and the collaboration between trade schools, businesses, manufacturing companies, and faculty and students at universities. As someone who started a business in Minnesota, I was able to find the high level of expertise I needed from groups like DEED and others to navigate that process of creating a business plan, finding funding, etc., and get off and running to become a successful business.”

Patti Gartland, President of Greater St. Cloud Development Corporation

“In Minnesota, our focus on workforce development and the quality of life here — plus our commitment to cross-sector collaboration — really set us apart and are critical for attracting and retaining talent and businesses. We also know we need to bring all the voices and perspectives together to come up with the most innovative solutions. We will continue focusing on prosperity and opportunity for all in Minnesota.

Meanwhile, DEED and the Minneapolis Federal Reserve Bank conducted a recent Minnesota Manufacturing Business Conditions Survey to gauge manufacturers’ recovery in 2021 and their outlook for 2022.