As Baby Boomers are beginning to retire, jobs are opening up, thus the Silver Tsunami. According to the latest government data, there are now 522,000 open manufacturing jobs in the United States (an all-time high), and a recent report from Deloitte and The Manufacturing Institute (the National Association of Manufacturer’s social-impact arm) projects that 2.4 million manufacturing jobs will go unfilled over the next decade.
Dear Rhode Island business and community leaders:
This is an exciting week in our state. As the week begins, we’re writing you in order to reflect upon Rhode Island’s economic progress to date and to thank you for your contributions to our collective work.
This Week in Rhode Island
First, Governor Raimondo and we on the Commerce team hope you’ll join us in celebrating the opening of the new Wexford Innovation Center — a new hub for entrepreneurship and business growth — on Wednesday (details are below). This is a lot more than just the debut of a building. It’s the culmination of important work aimed at rebuilding Rhode Island’s economy. And it’s the start of a new era that focuses even more on innovation (and that requires even more continuing work in order to succeed).
Also this week, as the first and only state with an operational offshore wind farm, we will be hosting the Rhode Island Offshore Wind Conference in Newport. This convening comes on the heels of the Raimondo Administration’s announcement last month that GEV, one of the largest wind turbine maintenance companies in the world, is creating its US Headquarters — and with it over 120 jobs — here in Rhode Island. So, for all those reasons (and many more), this week seems like a good time to take stock of how far we’ve come together — as well as to consider the journey that is still ahead of us.
Recapping Rhode Island’s Economic Progress to Date
From 2014 to 2018, our unemployment rate dropped more than any other state’s. Our annual average unemployment rate last year was the lowest it’s been since 1988. Our rate is now 3.6%, right at the national average.
In addition, the U6 unemployment rate —which includes discouraged workers who are excluded from common measures of unemployment — fell below the national average in 2018, another sign of economic strength.
In April 2019, Rhode Island experienced the greatest month-to-month job growth in 20 years.
We have exceeded the national average for wage growth from 2014 to 2018.
More than 30 companies have decided to land or expand in Rhode Island under Governor Raimondo’s commerce programs over the past few years.
Promoting the Success of Small Business
Small businesses — the backbone of Rhode Island’s economy — have been helping to drive our economic recovery. Record numbers of businesses have started each year since 2015, and total business filings hit an all-time high last year (9,219).
Programs contributing to this growth include Rhode Island’s first state-financed small business loan program, started by the Raimondo Administration in partnership with the General Assembly. We have made more than 100 loans, more than half to minority-owned and woman-owned businesses.
Another new program, SupplyRI, is connecting 1,700 smaller suppliers to institutions and corporations within the state so the smaller vendors can attain a sustainable customer base right here in RI (and so larger purchasers have a reliable, local supplier network to draw upon).
A small business hotline was created to provide one stop shop resource for business owners for questions about navigating government, seeking capital, or general business resource questions. The hotline can be reached by dialing (401) 521-HELP.
Tax Stability and Reducing Tax
Significant state tax reductions have been enacted since Governor Raimondo took office. Rhode Islanders are benefiting from cuts in the corporate minimum, energy sales, unemployment insurance, and car taxes. In 2020, Rhode Islanders are projected to save well over $175 million due to lowered taxes (that’s a single year figure). These tax savings are the result of the partnership between the Governor and General Assembly leaders including the Speaker and Senate President.
Innovation and Entrepreneurship
The new Wexford Complex will house a replication or the world-renowned Cambridge Innovation Center, with its track record of fostering new and early-stage ventures, as well as new offices for Johnson & Johnson and Brown University’s School of Professional Studies.
Another important incubator, Innovate Newport, opened a few months ago (like Wexford, with support from the state). We encourage you to check it out when you have the chance.
Thankfully, some of the national rankings have been reflecting our progress. Just two months ago, US News & World Report ranked Rhode Island #20 for its economy, up from 29 last year (May, 2019). Also in May, Wallet Hub ranked Rhode Island the 10th best state for jobs (up from 21).
You may have heard that CNBC lowered Rhode Island in its ranking to 50th last week. That was definitely disappointing. It is worth noting that, in the midst of the overall decline, Rhode Island’s CNBC rank improved in three important categories this year: Technology & Innovation, Access to Capital, and Cost of Living. However, due to year-to-year changes by CNBC in how the categories were weighted, two of the categories in which RI made progress were weighted less significantly than in previous years. As a result, Rhode Island’s successes on these fronts were diminished. It’s also the case that, despite the launch of the Raimondo Administration’s major Rhode Works infrastructure program, CNBC continues to place RI last for infrastructure. Clearly this ranking system is, in some key areas, lagging behind our progress. Another observation that puts our ranking in context: this year’s CNBC listing dropped Massachusetts by 6 spots (while RI fell by 5).
That said, we are evaluating all of the rankings systems’ observations and insights to understand what they tell us about where we’re doing well and where we can do better. We certainly need to increase and improve our efforts in some areas and, working together, we will.
Planning for the Future
We are in the process of launching work on the next phase of our state’s economic development plan. This effort will build upon previous ones. It will draw lessons from a variety of sources including national assessments of Rhode Island’s economy as well as local stakeholders’ observations. It will be guided substantially by the Economic Development Planning Council that the General Assembly has established via legislation. We welcome your input to this important process, which is an opportunity to take our collective work to the next level.
In closing, Rhode Island has made a great deal of progress over the past few years. But we cannot simply rest on our laurels. Working together, we need to take seriously – and take on – the challenges that remain in our economy. With renewed determination, our efforts must involve collaborating across institutional boundaries in order to: strengthen our education and training systems, reduce barriers to business starts and business success, and further invest in our economic future.
The Commerce team and I want to thank our public and private sector partners – including the General Assembly, fellow state agencies, chambers of commerce, and more – for their continuing commitment to Rhode Island’s economic success.
With warmest regards and best wishes for the remainder of the summer,
Service Organizational Control (SOC) – In the modern world, it has become common practice for organizations to outsource certain functions for business processes to third parties, rather than performing all processes “in house.” When an organization decides to outsource a core business process to a third party, the risk of the service organization often times becomes the risk of the user entity. Therefore, now more than ever, it is important to understand the different forms of Service Organizational Control reports and the types of risk that are addressed by each one. If you want to learn more here are a few links to several free white papers that discuss SOC reporting in more detail:
With 80 companies responding, the PMPA Business Trends Index
for May 2019 came in at 140, making it our 6th highest month ever recorded.
While sales outlook dropped to a negative reading for the first time since
October 2016, our Sentiment indicator for Profitability rose, while Lead time
remained level. Forward looking
sentiment for Employment declined from 97% positive to just 87% positive.
Network Security – Our Shops are the
According to MITECH, a new survey shows 77 percent of organizations
in transport and automotive markets have been hit with IoT-focused cyberattacks
during the past twelve months. Of those that experienced a cyberattack, 91
percent had an impact on the organization, including operational downtime and
compromised customer data and/or brand or reputational damage. Perhaps most
alarming, many organizations are not properly prepared for future threats, with
only 6 percent indicating that they have what they need to combat cyberattacks.
NFIB Posts Its Best Reading Since
The National Federation of Independent Business reported
that the Small Business Optimism Index rose to the best reading since October,
up from 103.5 in April to 105.0 in May. It was the fourth consecutive monthly
increase in sentiment, and despite softening from August’s all-time high
(108.8), small businesses remain upbeat overall.
Manufacturing Optimism (Take #2)
Last week, the MetLife & U.S. Chamber of Commerce Small
Business Index Q2 report showed strong optimism among small business owners
across the nation.
According to the Q2 report:
- 59% of small businesses viewed the U.S. economy as “in good health,” up six points from last quarter.
- 27% of small business owners plan to increase investment in their company over the next year.
- 69% of manufacturers feel positive about the national economy, up 16 points from last quarter.
“This quarter’s report is further evidence that small
businesses are flourishing.
Manufacturing Optimism Dips:
were feeling cautious in the second quarter, according to the NAM’s quarterly
Manufacturers’ Outlook Survey. It’s no wonder—the survey was in the field
during the uncertainty about tariffs on Mexico and the Section 232 auto
Number: 79.8 percent of manufacturers rated their outlook as positive, a drop
from 89.5 percent in the first quarter of 2019. As you may recall, 2018 was the
best year on record for the NAM’s quarterly surveys.
Here are some other findings of interest:
- 68.8 percent of respondents rated the inability to find high-quality workers as their top concern.
- 56 percent reported uncertainty due to the USMCA, the elusive U.S.-China trade deal, the threat of Section 232 auto tariffs and the tariffs on Mexico (since resolved).
- Plus, nearly half are concerned about the rising prices of raw materials.
Economist Chad Moutray said:
“All things equal, I would expect these numbers to improve if we get the U.S.–Mexico–Canada Agreement across the finish line, strengthen our trading relationships by removing the threat of 232 auto tariffs and get a trade deal with China done.”
the 4th Industrial Revolution
manufacturers recognize the potential value of advanced technologies and
digital innovation – particularly robotics, the Industrial Internet of Things
(IIoT), cloud computing, advanced analytics, 3D printing, and virtual and
augmented reality – they are still deliberating how and where to invest and
balancing the hype with their own level of preparedness. Meanwhile, they’re
also well aware of the significant changes 4IR will bring to a new
The Senate passed the 2019 National Defense Authorization Act. The bill includes Senator Whitehouse’s bipartisan USE IT Act to support carbon utilization and direct air capture research, and his bill with Senators Jack Reed (D-RI) and Dan Sullivan (R-AK), the SEA FUEL Act, to improve the U.S. military’s energy security and reduce carbon emissions called the SEA FUEL Act.
Senator Whitehouse, Senator Dan Sullivan (R-AK), and Senator Bob Menendez (D-NJ) unveiled the Save Our Seas 2.0 Act to combat marine debris. A one-page summary about the legislation is attached to this email.
Senator Whitehouse reintroduced legislation that would extend tax credits for the renewable energy industry.
The Legislative session ended with some positive and negative results. I would like to commend Speaker Mattiello, House Finance Chair Marvin Abney and the leadership team for formulating a good budget for the business community. This was a tough budget to negotiate through. I believe that the Speaker’s leadership was a major factor in producing a pro-business budget.
Major items that were discarded were the Medicaid tax bill, service tax bill, the lobbyist tax bill and marijuana legislation was not approved. RIMA made our position against passage of these items and we are pleased that these additional tax revenues were removed.
We asked for full funding of Real Jobs. On this issue, we fell short of achieving our goal. In addition, the Commerce economic program was downsized. These types of decisions have many factors involved. The data supporting these decisions is extensive. I do know that due diligence of these issues was done. I hope that these decisions will not impact our training capability nor our ability to grow our economy.
The ReBuild Rhode Island Program legislation passed that now allows for S-corporations and LLC to participate. RIMA testified in support of this change.
The FY 2020 Budget allows tax relief for pass through entities by allowing a pass-through entity to pay the state income tax at the entity level the same as a C-Corporation and deduct it from the federal income tax passed through to the owners. This legislation was presented by House Majority Leader Joe Shekarchi.
The first time in many years, the business community will not face a minimum wage increase as the Senate bill died in House Labor Committee.
RIMA working with Rep. Deb Ruggiero put together legislation on Sustainability. This legislation passed both the House and Senate. We will be explaining this legislation to our manufacturers in the near future. Manufacturers who wish to participate at no-charge and can show how they are doing sustainability within their company and will receive a document noting such by the State of Rhode Island. Those of us whose customers monitor our efforts for recycling, carbon reduction, energy reduction and many other items will now be able to show your customer a state document noting your company’s efforts.
Manufacturers Welcome Suspension of Proposed Tariffs on Mexico Imports Indefinitely.
Late last Friday, President Donald Trump announced that proposed tariffs on Mexico were “indefinitely suspended,” and NAM President and CEO Jay Timmons immediately responded saying that “manufacturers welcome the news that millions of jobs won’t be jeopardized.” Markets responded positively to the news, as did manufacturers across the country.
An overwhelming majority (98.6%) of American manufacturing
companies are small businesses, and 75.3% of those businesses have fewer than
20 employees, according to new data released on May 23 by SCORE, mentors to
America’s small businesses. Last year, small
manufacturing businesses generated 11.6% of the U.S. economic output and
employed 8.5% of the U.S. workforce, but 89% of manufacturers report that they
cannot fill all job openings The reasons
given for not filling the positions were:
• Shifting skill sets due to advancing technologies;
• Misperceptions of manufacturing jobs;
• Retirement of baby boomers.
“Manufacturing businesses drive the U.S. economy,” said SCORE CEO Ken Yancey. “They might be factories or bakeries, and they might utilize machine power or hand-make their products, but what they have in common is that the vast majority of manufacturers are small business owners.”
US Factory Gauge Falls
A measure of U.S. manufacturing activity unexpectedly fell in May to the lowest level since October 2016, in a sign President Donald Trump’s trade war with China is weighing on the economy as he considers further tariffs. The Institute for Supply Management’s purchasing managers index declined to 52.1 from 52.8, missing the median forecast of 53 in Bloomberg’s survey but holding above the 50 mark that indicates expansion. Three of five components declined, including production, inventories and supplier deliveries, according to a report Monday.
Material availability and a lack of skilled workers were cited as concerns, amid growth, by three hundred custom manufacturers and sourcing professionals in North America, according to a 2019 Manufacturing Report recently released by online manufacturing marketplace MFGWatch.“Based on our data analysis, it’s our belief that 2019 will be a promising year for manufacturing and that business will continue to be strong along with the rest of the U.S. economy. There were some surprises in the survey findings, however, as well as some rising challenges that may slow progress,” said Ronald L. Hollis, president and CEO of MFG. More than 44% of survey respondents said they plan to hire more workers and buy new technology this year to keep pace with demand. While 34% of buyers will focus more on technology infrastructure and not their workforce, the survey showed that 33% plan to increase both this year. Survey results show 44% of suppliers are concerned about tariffs and 42% of buyers say tariffs and shipping costs are impacting their supply chains, according to an MFG news release.
Bloomberg National Federation of Independent Business
Optimism among small U.S. businesses rose to a seven-month high in May as companies increased capital spending plans, suggesting firms remain confident economic growth will continue. The National Federation of Independent Business optimism index increased 1.5 points to 105 on more upbeat views of the economy, employment, capital outlays and sales, a report showed Tuesday. Analysts had forecast a 1.5-point decline in the gauge.
“Uncertainty levels remain high but owners are focused on a very busy Main Street,” report authors William Dunkelberg and Holly Wade wrote. “The surge in optimism was supported by solid gains in reported capital spending, hiring, inventory investment and profit trends.” The fourth straight improvement in optimism, the longest streak in two years, is the latest sign of brighter assessments by small business owners despite trade-policy uncertainty. NFIB’s gauge, based on responses from 650 member firms surveyed in May, remains at one of its highest levels of the expansion and not far from the record 108.8 level in August.
There were 12,839,000 employees in manufacturing in May 2019, the most since December 2008 (the Great Recession). In addition, firms continue to cite a difficulty in obtaining talent as a top concern, with elevated job openings data.” Chad Moutray, NAM, Full employment and shortage of candidates for manufacturing employment is a sign of good times, compared to the opposite.
United States factory production expanded in May for the first time since December on gains across sectors that signal the manufacturing sector is holding up amid trade uncertainty. Manufacturing output rose 0.2% after falling 0.5% in the prior month, according to Federal Reserve data Friday that matched the estimate in Bloomberg’s survey of economists. Total industrial production, which also includes mines and utilities, increased 0.4% after an upwardly revised 0.4% decrease. The report follows data from China Friday showing industrial output growth in the world’s second largest economy slowed to the weakest pace since 2002, reflecting headwinds from the U.S. trade war.
In fact, despite a multitude of challenges–slowing global growth, the partial government shutdown, trade policy uncertainties, a strong U.S. dollar–the U.S. economy grew a solid 3.1 percent at the annual rate in the first quarter. This was off slightly from the previous estimate of 3.2 percent growth, and it remained the strongest first quarter of growth since 2015.
Moving forward, the U.S. economy is expected to expand by around 2.2 percent in the second quarter, slowing from the pace at the beginning of the year. The current estimate is for 2.5 percent growth for 2019.
Manufacturing surveys from the Dallas and Richmond Federal Reserve Banks continued to indicate expansions in their districts, even as sentiment dipped into negative territory in the Texas report. Hiring and capital spending were encouraging in both releases, and as with other regional Federal Reserve surveys, respondents remained positive in their outlook.
Meanwhile, the IHS Markit Flash U.S. Manufacturing PMI dropped from 52.6 in April to 50.6 in May, the weakest pace of growth since September 2009. Despite some slowing, manufacturers in the U.S. remained upbeat in their production outlook, even with some slippage in that measure. Input prices have also decelerated, with raw material costs expanding at the weakest pace since June 2017. The story was similar in the Kansas City Federal Reserve Bank’s district, which also reported a softer expansion in May for the second consecutive month.
Looking abroad, manufacturing activity in the Eurozone has now contracted for four straight months, led by weaknesses in Germany, which experienced sizable declines in orders, exports and output. In contrast, French manufacturers reported some stabilization in May.