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Manufacturing Declines in St. Louis; Financial Industry Looks Promising

June 3, 2009

While Detroit gets most of the attention as the center of the American auto industry, the St. Louis area, which had prided itself in being the largest auto manufacturer outside of Detroit, is also taking a big hit.

St. Louis arch over the Old Courthouse

This pattern of once-dominant manufacturing industries is typical of the "Industrial Metropolis" communities that St. Louis represents in Patchwork Nation. These densely packed cities are also more diverse than the rest of the nation and tend to have a higher median income than the national county average.

The St. Louis region was home to several "Big Three" plants: one Ford, two Chrysler and one General Motors. But Ford shut down its Hazelwood plant in 2006. Chrysler idled the St. Louis South minivan manufacturing plant in October and said in May that it plans to close the plant as the company restructures after filing for bankruptcy.

Chrysler's second plant, the St. Louis North Assembly Plant that manufactures Dodge Ram pickups, will also be closed in the third quarter of 2009, the St. Louis Business Journal reported.

The remaining plant, a GM plant in Wentzville that makes full-size vans, will be idled for six weeks more than the normal summer shutdown as a result of declining sales. GM was required to submit a downsizing plan by June 1 to the federal government, but the Wentzville plant is not slated for closure.

The auto industry isn't the only industry cutting back. Manufacturing employment in the St. Louis metropolitan statistical area declined by 9,800 jobs from March 2008 to March 2009, according to the Missouri Department of Economic Development.

This pattern of once-dominant manufacturing industries is typical of the "Industrial Metropolis" communities that St. Louis represents in Patchwork Nation. These densely packed cities are also more diverse than the rest of the nation and tend to have a higher median income than the national county average.

St. Louis is described as a slow-growth region but not all the region's industries are looking as dire as manufacturing. There have been employment gains in health care and education, and the plant and medical science industry is propped up by Monsanto Company with headquarters outside the city and several research facilities in the region.

The area also has a disproportionate number of investment banking firms for a city of its size, said Jim Alexander, the vice president of business recruitment at the St. Louis Regional Chamber and Growth Association. This is an advantage for the region as large firms look for talented, but cheaper, employees in an area where the cost of living and doing business is low.

"St. Louis is a target for them because we have a critical mass of companies and a critical mass of people and you can hire them to do the same job here in St. Louis [for] more than 40 percent less than in New York," said Alexander.

The cost of living in St. Louis is below the national average while the state has the fourth-lowest cost of living from 2008 fourth quarter reports, according to the state's economic development department.

Overall, Alexander said, the area's economy mirrors national employment by industry, creating a diverse economy that should help it weather the national economic downturn better that other cities that depend on one or two industries.

The area was once home to many business headquarters, and still is home to 21 of the Fortune 1,000 largest U.S. companies. But some have moved out, including Anheuser-Busch, which was sold for $52 billion to the Belgium company InBev in 2008.

Much of the employment in the region is located outside St. Louis' city boundaries, borders that were set in 1876 when the city and county were divided. Neighboring St. Louis County makes up 20.1 percent of the state's economic share, St. Charles County 6.1 percent while the city only accounts for 5.4 percent, according to 2007 data.

And many of the residents in a city that was once home to around 850,000 before flight to the suburbs have now moved outside as well, leaving St. Louis city's population at around 348,000 compared to a population of over 2.7 million in the metropolitan statistical area.

Mayor Francis Slay, a Democrat re-elected to a third term in April, has called for the city to become part of St. Louis County. As it exists now, the fragmentation and decentralization that exist in the city and surrounding counties leads to competition for tax revenue.

"The city must reform its charter," said Slay after his election. "The city, the inner suburbs and the outer suburbs must combine services and I strongly believe that we must begin to lay the groundwork for the City of St. Louis to enter St. Louis County."

Another characteristic that sets St. Louis apart from other cities is that the state of Missouri controls the city's public schools, which were taken over by the state after it lost accreditation in 2007 and the St. Louis Police Department which has been under state control since the Civil War.

"Important aspects of a city are typically crime and education and those are not under the direction of the mayor of St. Louis," said William Rogers, a professor of economics at the University of Missouri-St. Louis.

Like the rest of the country, the region has taken a hit from the housing market. Most of the foreclosures in the area are in north St. Louis County and the northern part of the city, areas that have a largely black population.

"I see an opportunity to stabilize right now as far as the actual housing crisis. We still have a little ways to go, especially with the economy being the way that it is," said Eric Madkins, director of housing and foreclosure intervention at the city's Urban League. "I'm seeing some things stabilize but I'm thinking that we're still going to see still some increase moving forward."

The region has a connected network of housing and community aid organizations that have been helping cushion the blow from the housing crisis, Madkins said.

By Anna Shoup, Online NewsHour

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