Rural U.S. towns struggle as big employers shut down

BARAGA, Michigan Thu Nov 12, 2009 1:10pm EST

1 of 8. Allen Frazier carries a tray of fish he cleaned while processing them in Naubinway, Michigan October 15, 2009.

Credit: Reuters/John Gress

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BARAGA, Michigan (Reuters) - After more than an hour talking about how awful business has been of late, Pete Van Straten, 52, jerks a thumb at the telephone sitting on the desk behind his younger brother, George.

"Have you heard that phone ring in the last hour?" he asks a visitor. "Two years ago that phone was ringing off the hook and we couldn't keep up with orders. Now, it's dead."

Based on the shores of Lake Superior in Michigan's Upper Peninsula region, Van Straten Brothers Inc has built everything from forklifts to bridges for the lumber and construction industries. Those industries have been hammered by the recession.

The biggest blow to the Van Stratens has come from their main customer, Terex Corp -- the world's No. 3 maker of earth-moving equipment and the biggest employer in Baraga County. Terex is closing its local factory by year's end.

The brothers have cut down their staff to 12 from 60 and say they are in survival mode for the business their father started out of his garage in the 1960s.

"We're hunkering down," Pete said. "We've always been debt free, so we're hanging on. But we can't hold on forever."

What's going on in Baraga and the rest of the Upper Peninsula, or UP, mirrors the slow burn that the recession has made through hundreds of small rural U.S. towns.

For such communities, the loss of a large local employer casts a long shadow. Tax revenue falls, hitting local services from schools and healthcare to police forces and firefighters.

Spiraling unemployment also spawns hopelessness.

As the Terex plant winds down -- it used to employ 259 people and is down to 90 -- Baraga village manager Roy Kemppainen expects the local jobless rate to top 30 percent.

That is way above the national jobless rate, which hit a 26-1/2-year high of 10.2 percent in October. High national unemployment, despite signs of recovery in the economy, prompted President Barack Obama to announce on Thursday that he would host a meeting on jobs next month of company chief executives, trade union leaders, small business owners and economic experts.

Unemployment in rural communities is often related to a big local employer shedding jobs.

"To big corporations a plant like that is just a line on their balance sheet they can cross out," Kemmppainen said. "But it employs our people and supports our community. Things here are going to get tough."

"Some rural communities have been reliant on just one industry for many years," said Orrin Bailey, CEO of Michigan Works!, The Job Force Board, which runs retraining programs for workers in the UP. "Diversification is the key to survival."

PULP MILL JOBS

The UP is a wooded region of small towns, taking up almost a third of Michigan's land but with just 3 percent of the state's population of 10 million. Tourism, logging, mining and fishing are all mainstays for jobs.

As bad as job losses have been, the region is still faring better than the rest of Michigan, which has been devastated by slumping sales and turmoil at Detroit's Big Three carmakers.

But doing better is just relative.

In September, cardboard box maker Smurfit Stone shut down its pulp mill in Ontonagon, a town 50 miles west of Baraga, for the second time in a year, leaving residents worried the county's biggest employer -- some 200 people work there -- may close for good.

Smurfit-Stone spokesman Mike Mullin said the mill was experiencing "market-related downtime."

"The mill closure has been devastating for this community," said Bill Chabot, clerk of Ontonagon township. "It seems every time we've turned around over the past year we get kicked."

Ontonagon also lost a nursing home that employed more than 70 people, due partly to reduced funding from the cash-strapped state, and may have to close an emergency ambulance service.

Jerry Koski owns a business that sells custom-built log homes around the country. But like the Van Straten brothers, his phone is not ringing. He may have to cut his staff of four.

"I can survive because I have my pension," said Koski, 68, a retired surveyor. "But if I have to let them go where will my employees find jobs paying $25 an hour?"

"You can't build a community on minimum wage," he said.

Local realtor Karen Lahti said Ontonagon's future may lie in providing services to newcomers the town tries to attract.

"Retirees and people with holiday homes will form a large part of our economy in the future," she said.

In Naubinway, a small town in Mackinac County, many of the jobs are seasonal and poorly paid.

Allen Frazier, 61, works a seasonal job cleaning fish and makes $400 a week. His wife has a state government job and works in the southern part of Michigan because there is no work for her here. The combination of rent down south and a mortgage in Naubinway has strained their finances.

"At this rate I'm going to lose my house," Frazier said.

(Editing by Peter Bohan and Frances Kerry)

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