This document provides an overview of manufacturing trends and opportunities in Pennsylvania from the perspective of the National Institute of Standards and Technology Manufacturing Extension Partnership (NIST MEP). Some key points summarized: - Manufacturing activity and productivity in Pennsylvania are slowing, while the state faces challenges like an aging workforce and declining business dynamism. - Pennsylvania manufacturing employment has grown more slowly than other midwestern states like Ohio and Michigan in recent years. - Small manufacturers, which make up the majority of Pennsylvania's manufacturing firms, continue to lag in productivity compared to large manufacturers and face challenges adopting new technologies. - The top manufacturing clusters in Pennsylvania include fabricated metals, machinery, transportation equipment, chemicals, and food processing

1. Manufacturing in PA:
Trends & Opportunities
Kenneth P Voytek
Chief Economist
NIST MEP
November 2016

2. MEP Overview
Manufacturing Activity is Slowing
2

3. MEP Overview
Productivity and Employment are Leveling Off

4. MEP Overview
A Negative Trade Balance Among the Most Advanced Technology
Products
-$120,000.0
-$100,000.0
-$80,000.0
-$60,000.0
-$40,000.0
-$20,000.0
$0.0
$20,000.0
$40,000.0
$60,000.0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Balance of Trade/Adv Tech ProductsSource: U.S. Census Bureau
4

5. MEP Overview
A Majority of Manufacturing Costs is in the Supply Chain
52%
53%
52%
57%
59%
48%
50%
52%
54%
56%
58%
60%
1992 1997 2002 2007 2012
Share of Manufacturing Costs in Purchasing Materials
Share of Manufacturing Costs in Purchasing Materials
Up 7 Percentage Points
5

6. MEP Overview
Job Openings are Outpacing Hiring in Manufacturing
0
0.5
1
1.5
2
2.5
DEC
2000
APR
2001
AUG
2001
DEC
2001
APR
2002
AUG
2002
DEC
2002
APR
2003
AUG
2003
DEC
2003
APR
2004
AUG
2004
DEC
2004
APR
2005
AUG
2005
DEC
2005
APR
2006
AUG
2006
DEC
2006
APR
2007
AUG
2007
DEC
2007
APR
2008
AUG
2008
DEC
2008
APR
2009
AUG
2009
DEC
2009
APR
2010
AUG
2010
DEC
2010
APR
2011
AUG
2011
DEC
2011
APR
2012
AUG
2012
DEC
2012
APR
2013
AUG
2013
DEC
2013
APR
2014
AUG
2014
DEC
2014
APR
2015
AUG
2015
DEC
2015
APR
2016
Hires to Job Openings Ratio
Source: U.S. Bureau Of Labor Statistics
6

7. MEP Overview
The Changing Face of Manufacturing Employees
79%
71%
70%
64%
66%
68%
70%
72%
74%
76%
78%
80%
1959 1989 2016
Share of Employment in Production Jobs
Share of Employment in Production Jobs
11.9%
15.6%
21.7%
24.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1994 2004 2014 2024
Share of Workers > 55 Years Old
Share of Workers > 55 Years Old
7
Source: US BLS

8. MEP Overview
Factors Driving Reshoring across Countries
8

9. MEP Overview
Smaller Establishments are an increasing share of the
Manufacturing Landscape
62.4% 63.9% 64.3% 67.1%
17.4% 17.1% 16.8%
15.8%
8.6% 8.5% 8.4% 7.7%
6.9% 6.6% 6.7% 6.1%2.7% 2.4% 2.4% 2.1%
1.9%
1.6% 1.5% 1.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1979 1989 1999 2014
1-19 emp 20-49 emp 50-99 emp 100-249 emp 250-499 emp >= 500 empSource: U.S. Census Bureau
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10. MEP Overview
The Changing Face of Manufacturing: Getting Smaller;
Need to Get Smarter
$30,000
$80,000
$130,000
$180,000
$230,000
$280,000
$330,000
1972 1977 1982 1987 1992 1997 2002 2007 2012
Small Manufacturers (less than 500
employees)
Large Manufacturers (500 or more
employees)
 Facts about small manufacturers in 2012:
• Represent 99 percent of all manufacturing establishments
• Employ about 8.2 million people – 73 percent of all manufacturing
employment, and
• Account for about 62 percent of the total value-added by all U.S.
manufacturers
 The Challenges for Small Manufacturers:
• In 2012, productivity per employee in large establishments was 63
percent higher than productivity in small establishments. In 1967,
productivity per employee was “only” 26 percent higher.
• Over the last 10 years, productivity across smaller firms grew at a slightly
faster rate than large firms (39% vs. 34%)
• Market Failures exist in several dimensions: firm, inter-firm,
consulting/services, public failure.
Sources: U.S. Census of Manufacturing & the Bureau of Economic Analysis
Constant2012$
10

11. MEP Overview
Manufacturers Report a Host of Challenges
69.9
52.8
46.6
44.7
20.1
14.3 14.1
10.3
6.9
71.9
59.2
45.3
19.1
25.5
10.4
13.1
18.0
8.0
0
10
20
30
40
50
60
70
80
Cost Reduction Growth Product
Development
Employee
Recruitment
Sustainability Technology Needs Managing Partners Financing Exporting
FY 2015 FY 2009Source: NIST MEP Client Survey
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12. MEP Overview
Manufacturing is Important to the Pennsylvania Economy
• Accounts for 10% of all jobs (>563K jobs). Supports an additional
852K jobs are supported in PA thru indirect and induced jobs.
Multiplier @ 1.5
• Only three sectors with more jobs: Retail trade, Health care & Social
Assistance, and Government
• Accounts for 13% of GRP (largest direct contributor to GRP)
• Pays more, on average, than other jobs in PA (Mfg earnings per emp
are $75.5K versus $65.4K)
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Source: EMSI, The Economic Impact of Manufacturing in Pennsylvania, The Institute for Public Policy and Economic Development,
Wilkes University

13. MEP Overview
The Challenges Reported by PA Manufacturers Vary Across
Regions & Over Time
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
FY 2015
Catalyst DVIRC IMC Mantec MRC NEPIRC NWIRC
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
FY 2009
Catalyst DVIRC IMC Mantec MRC NEPIRC NWIRC
13Source: NIST MEP Client Survey

14. MEP Overview
Pennsylvania Manufacturing Growth is Lagging
575,244
629,438
465,011
577,326
441,623
474,712
434,869
563,308
687,883
603,407
572,669
518,457
451,885
470,074
-2%
9%
30%
-1%
17%
-5%
8%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Pennsylvania Ohio Michigan Illinois Indiana New York Wisconsin
2009 Jobs 2016 Jobs % Change
Manufacturing Employment
Source: EMSI
14
# of
Jobs %
Change
in Jobs

15. MEP Overview
Declining Business Dynamism in Pennsylvania Manufacturing
0
100
200
300
400
500
600
700
800
900
1000
0
1000
2000
3000
4000
5000
6000
7000
Qtr3
1992
Qtr1
1993
Qtr3
1993
Qtr1
1994
Qtr3
1994
Qtr1
1995
Qtr3
1995
Qtr1
1996
Qtr3
1996
Qtr1
1997
Qtr3
1997
Qtr1
1998
Qtr3
1998
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1999
Qtr3
1999
Qtr1
2000
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2000
Qtr1
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2004
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2004
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2005
Qtr3
2005
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2006
Qtr3
2006
Qtr1
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Qtr3
2007
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Qtr3
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Qtr1
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Qtr3
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Qtr3
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Qtr1
2011
Qtr3
2011
Qtr1
2012
Qtr3
2012
Qtr1
2013
Qtr3
2013
Qtr1
2014
Qtr3
2014
Qtr1
2015
Qtr3
2015
# of Mfg Establishments Expanding
# of Mfg Establishments Contracting
Source: U.S. Bureau of Labor Statistics
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16. MEP Overview
Where’s Manufacturing in Pennsylvania?
16
Source: EMSI
Source: EMSI

17. MEP Overview
Where is Manufacturing Important?
17
Source: EMSI

18. MEP Overview
Change in Manufacturing Jobs by County, 2009-2016
18
Source: EMSI

19. MEP Overview
Pennsylvania’s Growing Manufacturing Industries
19
Source: EMSI

20. MEP Overview
What’s hot and not so hot.....
20
Source: EMSI

21. MEP Overview
The Key Pennsylvania Manufacturing Clusters
21
Source: http://www.clustermapping.us/

22. MEP Overview
Profit Margin Predictors For SMEs
1.607
1.512
1.238 1.221
1.133
0.678
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Operational Excellence Growth Customer Diversification Strategy Recurring Revenu Log Revenue (Size)
Odds
Ratio
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23. MEP Overview
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