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Breaking news: Grand Rapids still makes things!


By all accounts, Grand Rapids and Buffalo, New York seem almost like twins: our populations, geographies, industrial histories, and even current major employers are almost identical. So why is Grand Rapids doing so much better economically?
Are your ears burning? If so, it’s probably because Buffalo, New York was recently talking about Grand Rapids in its Buffalo Business Journal. There are a lot of people talking about Grand Rapids lately, like Forbes, U.S. News and World Report, Bon Appetit, the New York Times, WalletHub, Thrillist, and a bevy of other websites trying to drum up clicks.

Many of those lists lately rave about Grand Rapids’ business climate, its affinity for entrepreneurship, and it being a “great place to retire” and a “great place to raise a family,” where housing is still affordable and jobs are plentiful. Some online publications even said that people were fleeing Seattle and moving to… Grand Rapids?

But the Buffalo Business Journal article was different; they wanted to know why two cities, that on many accounts are almost identical, have not seen identical rates of Gross Metropolitan Product growth in the period from 2010 to 2015. Forget the word “identical,” the growth rates weren’t even close to each other. Grand Rapids (and I mean the Grand Rapids – Wyoming Metropolitan Statistical Area in this article) had one of the strongest showings in the country at 18 percent, ninth in the country of metros over one million people, while Buffalo registered a disappointing 4 percent growth rate.

Where the Buffalo Roam

If you’re not familiar with Buffalo, nestled in beautiful upstate New York, in the crook of Lake Erie near Niagara Falls, I’ll give you a little primer of the similarities between our two cities:
 
  • Both have right around 1.1 million people.
  • Both sit very close to a Great Lake: Lake Erie and Lake Michigan; so close, in fact, that both areas see quite a bit of lake-effect snow in the winter, with the two metropolises averaging more than 75 inches of snow per year. The climates ARE almost identical.
  • Both sit very close to world-renowned visitor attractions alongside Great Lakes, with recreational amenities that are a short 25-minute drive from town, including boating, hiking, sand dunes, and miles of beaches.
  • Both have grocery store companies as major employers: Meijer, SpartanNash and Gordon’s Food Service in Grand Rapids, and Wegmans and Tops Markets in Buffalo. How eerily strange is that?
  • The largest employers with the most jobs for both are huge healthcare providers: Spectrum Health here and Kaleida Health and Catholic Health there.
  • Both have a long, rich industrial history, in which manufacturing employment has historically been the dominant force in the economy.
  • Both have burgeoning life sciences corridors: the Michigan Street Medical Mile in Grand Rapids and the Buffalo Niagara Medical Campus.
Aerial shots of Buffalo, New York, top, and Grand Rapids, bottom
 
The Grand Rapids Difference

That’s about where the similarities end. Downtown Buffalo has a lot taller buildings than Grand Rapids. Its 378-foot-tall City Hall looks like something out of a Marvel comic book. Its downtown sits right on Lake Erie, which is obviously much larger than the Grand River. Its density, which is greater than Grand Rapids’, has also allowed Buffalo to have a small subway and light rail system.

Imagine if we had a subway system in Grand Rapids?

Buffalo, like Grand Rapids, is the largest city in its metropolitan area. Buffalo’s population sits at about 261,000 people, with Grand Rapids at about 195,000. But Buffalo’s city population peaked around 1950 at 580,000 people, and has declined ever since to its current population of 261,000.

Like many cities in the “industrial rust belt” surrounding the Great Lakes (think Detroit, Milwaukee, Cleveland, Toledo), the urbanized areas shrunk tremendously. Buffalo’s Metropolitan Statistical Area [MSA] population has dropped from 1.3 to 1.1 million since the 1970s.

But that’s not what happened in Grand Rapids. The city’s population climaxed in 2000 at about 197,000, declined a bit in the 2000s, and has rebounded almost to its peak population again at 195,000 today, based on recent U.S. Census estimates. That’s pretty unheard of in the Great Lakes area, to have not lost any appreciable amount of city population.

The Grand Rapids MSA population, however, went from about 600,000 in 1970 to 1.038 million in 2015; that’s almost a doubling of population in that time period. The city of Grand Rapids has stayed at or near its peak, while the metro area has nearly doubled in population.

Now you know why we are actually starting to experience traffic congestion.

Very few Great Lakes metropolitan areas have seen similar growth rates in that period. Only Madison, Wisconsin, Indianapolis and Columbus, Ohio have come close.

Gross Metropolitan Product Growth

Going back to the Buffalo Business Journal article for a minute, they talk about Grand Rapids having an 18 percent Gross Metropolitan Product [GMP] growth rate in the 2010 to 2015 time period, placing it in the top 10 of metro areas and wedged in the midst of heavy hitters like Denver, Nashville and Charlotte, North Carolina. These are major league cities with major league sports teams, impressive skylines, two to three times the population of Grand Rapids, and many more direct flights in and out of their airports. And Whole Foods, they all have Whole Foods.

To put it into numerical terms, Grand Rapids’ GMP went from $41 billion in 2010 to $53 billion in 2015. That’s an increase of nearly $12 billion dollars in economic output, much of it just after a major national recession.

GMP growth also equals jobs, as nearly 100,000 net jobs have been added to the workforce in that time period from 2010 to 2015, fully eclipsing the losses during the Great Recession by 50,000.

We Still Make Things

After poring through all of the economic and jobs data that is provided by the U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, and local economists, the one sector of the economy that stands out in stark contrast between the two cities is…drum roll… MANUFACTURING.



Twenty years ago, manufacturing employment used to make up more than 25 percent of the local Grand Rapids economy. Michigan had an even higher percentage. It was a workforce mix that had many local economists worried in the 90s and 2000s, as global forces caused companies to build plants in lower cost labor markets, like Mexico and various countries in Asia.

A workforce so devoted to one sector tends to feel fluctuations in the economy much more severely, particularly in recessions like the one we emerged from five years ago.

Those economists’ fears came true as Grand Rapids lost nearly 40 percent of its manufacturing workforce -- and nearly 100,000 total jobs -- between 2000 and 2010, according to the Bureau of Labor Statistics. Michigan lost an astounding 500,000 manufacturing jobs in that time period.

The entire country and many political pundits wrote off manufacturing as a sector of the economy that would never again be a part of the American psyche.

But not locally.

Manufacturing: Grand Rapids’ Comeback Kid

Today, the manufacturing workforce has rebounded by more than 50,000 jobs since 2009, a growth rate of 34 percent, according to The Right Place, the local economic development organization. And yet, the percent of the workforce engaged in manufacturing is down to 18 percent of the total Grand Rapids MSA economy, a statistic that puts many economists more at ease.

The local manufacturing economy now accounts for $13.7 billion of the local GMP, putting the Grand Rapids MSA in the 24th spot nationally; number 23 is Pittsburgh and in 25th place is Nashville.

In a follow-up article in the Buffalo Business Journal, they’ve reached the same conclusion: manufacturing is making a comeback in the Grand Rapids area and is still contracting in Buffalo.

In case you think that manufacturing is “uncool,” many of the fastest growing economies in North America have robust manufacturing sector GMPs, including Houston ($83 billion), San Jose/Silicon Valley ($61 billion), Seattle ($43 billion), and Portland, Oregon ($42 billion).

This 18 percent growth locally can be attributed to a number of factors, according to local experts, including The Right Place’s Manufacturers Council. 
 
  • Local companies invested heavily in automation, stronger quality control systems and lean manufacturing processes. They could achieve the same output with better quality and fewer people. It certainly meant fewer jobs in most circumstances in the short term, but it allowed many employers to keep their plants here in West Michigan.
  • Local manufacturers worked to diversify their product offerings away from the automotive and office furniture industries. It’s now made up of medical devices, aerospace and defense, food processing and many other classifications. Even Founders Brewing Company is classified as a manufacturer, and one of the fastest growing companies in the region.
  • Companies worked to grow their customer base on an international scale and increased exports (making products here and shipping them to other countries). More than $7 billion of the local GMP is now exported out of this region, according to The Right Place.
  • In addition to local company expansions, international companies have continued to move into the area and expand their presence here, with over 130 plants in West Michigan now. Some of the largest expansions recently have been from international companies like LG Chem, Plasan Carbon Composites, and Dicastal North America.
  • Highly technical manufacturing requires higher skills. While there are still a lot of “production assemblers” working on the floor, there’s more demand for engineers, supervisors and technicians in the area, pushing the average wage up to $69,000 per year (according to The Right Place).
  • All of these carefully crafted strategies on a both an individual company level and community level have paid dividends.
Other than the sites that I mentioned at the beginning of the article, accolades and high rankings have come in from organizations like Area Development Magazine, CNBC, SBE Council, the Tax Foundation, Manhattan Institute, the Mackinac Center for Public Policy, and many others. 

The Bottom Line

While this news that manufacturing still has a large economic hold on the local economy might be initially disappointing to the “creative class” followers, other sectors of the economy benefit from manufacturing. It’s estimated that up to four spinoff jobs are created for every one manufacturing job created, according to the National Association of Manufacturers. Those spinoff jobs tend to be in technology, healthcare, education and professional services. That’s why our overall economy and job market is growing so fast.

We make things in West Michigan, and some pretty funky things, like hand-made rugs for private jets, miles and miles of dental floss,  really big boats, hundreds of millions of Pop-Tarts, and more beer than you can shake a stick at.

It’s always fun to see all of the growth downtown and tower cranes in the sky, and to see Spectrum Health become the largest area employer with over 22,000 employees, but keep in mind that there’s an astounding 115 million square feet of industrial space in the metropolitan area (the size of 2,000 football fields), currently enjoying a very high 95.5 percent occupancy rate (according to Colliers International).

Just think of all the massive rooftops you see as you fly in and out of the Ford Airport; those local factories are full and bursting at the seams.
 
Jeff Hill works in the real estate, development and residential construction industry in West Michigan. He was the former Publisher of Rapid Growth Media for six years and has a degree in Communications and Economics from Western Michigan University.
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