By: Janet Harrah
The business press tends to focus on the latest data measuring the U.S. economy. They often report with breathless excitement the smallest movements in indicators, which range from the unemployment rate to the Dow Jones average. Quite often, however, a comprehensive outlook and the associated detailed analysis are overlooked in favor of an emphasis on what is happening right now. While they do give a certain perspective, these up-to-the-minute measures do not always tell the whole story. The Economic Census provides the detail often missing from the latest estimates.
The Economic Census is the U.S. Government's official five-year measure of American business and the economy. It is conducted by the U.S. Census Bureau in years ending in 2 and 7. The 2012 results for smaller geographies (metropolitan areas, cities and counties) from the Economic Census are being released throughout 2015.
My blog posts this year will be presenting results of the 2012 Economic Census for the Cincinnati MSA, starting with data on the region’s manufacturing sector.
The Manufacturing sector comprises establishments engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products.
Establishments in the Manufacturing sector are often described as plants, factories, or mills and characteristically use power-driven machines and materials-handling equipment. However, establishments that transform materials or substances into new products by hand or in the worker's home and those engaged in selling to the general public products made on the same premises from which they are sold, such as bakeries, candy stores, and custom tailors, may also be included in this sector.
Manufacturing establishments may process materials or may contract with other establishments to process their materials for them. Both types of establishments are included in manufacturing.
Source: North American Industry Classification System
The manufacturing sector has a large footprint in the Cincinnati economy. It employed 100,900 in 2012, or more than 10 percent of total employment. Value added, which includes sales to final users in the economy but not sales to other industries, totaled $20.9 billion. When aggregated across all industries value added equals gross domestic product (GDP). In 2013, manufacturing accounted for 16 percent of Cincinnati’s GDP. By most measures (employment, value added, and value of shipments), transportation equipment, chemical and food are the leading manufacturing sub-sectors in the metro area. Together these three subs-sectors account for roughly 50 percent of all manufacturing activity in the region. Table 1 presents summary statistics.
Number of Jobs
The manufacturing sector had 100,900 jobs in 2012. Cincinnati’s manufacturing sector is quite diverse. The metro area has 500 or more jobs in 18 of the 21 major manufacturing sub-sectors and more than 2,000 jobs in 13 of 21 major sub-sectors (Chart 1). The transportation equipment sector led employment with 17,825 jobs followed by fabricated metal product manufacturing with 13,500 jobs. Within the transportation equipment sub-sector, aerospace products and parts account for 9,700 jobs or 55 percent of the sub- sector’s 17,825 jobs.
Number of Establishments
The Economic Census provides data on the number of establishments. The Census Bureau defines an establishment as a single physical location where business is conducted, or where services are performed. The Census Bureau defines a firm as a business organization or entity consisting of one or more domestic establishment locations under common ownership or control. As a result, there are not data available to determine the number of manufacturing firms located in the metro region. Bank of Kentucky would constitute a single firm, but has many establishments located throughout the metro area. The same would be true for other companies such as Kroger and Macys.
In 2012, the metro area had 2,200 establishments with 36 percent or 800 having 20 or more employees. In contrast, 59 percent of the transportation manufacturing sector’s establishments had 20 or more employees (Chart 2).
Payroll and Average Annual Wages
Payroll in the manufacturing sector totaled nearly $5.7 billion in the metro area in 2012. The transportation equipment sub-sector with a payroll of $1.2 billion accounted for 21 percent of manufacturing payroll followed by the fabricated metal products (12%), machinery (11%), and chemical (11%) sub-sectors.
Annual average wages for all workers in the manufacturing sector was $56,483. For production workers only, the average annual wage was 16.7 percent less at $47,029. Across the sub-sectors, average annual wage for all workers ranged from a low of $18,938 for the apparel sub-sector to a high of $69,100 in the chemical sub-sector.
Cost of Materials, Value of Shipments and Capital Expenditures
The Economic Census provides data on total cost of materials; total value of shipments and receipts for services; value added; and total capital expenditures. For small geographic areas these data are only available through the Economic Census. However, these data can be misleading without a clear understanding of their relationships.
In the MSA, the cost of materials for the manufacturing sector totaled $27.4 billion and the value of shipments totaled $48 billion. The aggregate of the cost of materials and value of shipments figures for industry groups and for all manufacturing industries includes large amounts of duplication, since the products of some industries are used as materials by others. This duplication results, in part, from the addition of related industries representing successive stages in the production of a finished manufactured product. Examples are the addition of flour mills to bakeries in the food group and the addition of pulp mills to the paper manufacturing group of industries. Estimates of the overall extent of this duplication indicate that the value of manufactured products exclusive of such duplication (the value of finished manufactures) tends to approximate two thirds of the total value of products reported. Duplication of products within a number of individual industry groups is even more significant, e.g., machinery and transportation industries. These industries frequently include complete machinery and their parts. In this case, the parts made for original equipment are materials consumed for assembly plants in the same industry.
Capital expenditures in Cincinnati’s manufacturing sector totaled $1.4 billion. Capital expenditures include all expenditures during the year for both new and used structures (excluding land) and equipment chargeable to asset accounts for which depreciation amortization accounts are ordinarily maintained.
“Value added” avoids the duplication in the figure for value of shipments that results from the use of products of some establishments as materials by others. Value added is considered to be the best value measure available for comparing the relative economic importance of an individual industry, such as manufacturing, among industries and geographic areas.
In 2012 value added totaled $20.9 billion for all manufacturing. The transportation equipment sub-sector accounted for 24 percent ($5.1 billion) of total value added followed by chemical (15 percent) and food (11 percent) manufacturing. Together these three sub-sectors accounted for 50 percent of total value added.
Value Added versus Employment
As shown in Chart 3, value added and employment can vary across sub-sectors. While the transportation equipment, chemical and food manufacturing subs-sectors account for 50 percent of total value added they account for only 44 percent of employment. In other words, some sectors play above their weight.
Data are available for all cities and counties in Ohio, Kentucky and Indiana with a few exceptions. Any county with 2 or fewer manufacturing establishments (regardless of employment size) are not presented separately. In the case of the Cincinnati metro area, data are not available for Bracken County. Additionally, at the city level data are only available for places with 2,500 or more inhabitants or jobs. If you need data these data for cities or counties or other metropolitan areas, please contact CEAD at firstname.lastname@example.org.
 See the Census Bureau’s website for a complete list of definitions used in the economic census reports http://www.census.gov/manufacturing/asm/definitions/
 This measure of manufacturing activity is derived by subtracting the cost of materials, supplies, containers, fuel, purchased electricity, and contract work from the value of shipments (products manufactured plus receipts for services rendered). The result of this calculation is adjusted by the addition of value added by merchandising operations (i.e., the difference between the sales value and the cost of merchandise sold without further manufacture, processing, or assembly) plus the net change in finished goods and work-in-process between the beginning- and end-of-year inventories. For those industries where value of production is collected instead of value of shipments, value added is adjusted only for the change in work-in-process inventories between the beginning and end of year. For those industries where value of work done is collected, the value added does not include an adjustment for the change in finished goods or work-in-process inventories.