RPT-ANALYSIS-How's the downturn playing in Peoria?
(Repeats story originally published on Aug. 20)
* Layoffs by Caterpillar diluted by other businesses
* Health care industry now a major player
* Concerns about effect of healthcare reform weigh
* More white collar jobs help city thrive
By James B. Kelleher
PEORIA, Illinois, Aug 20 (Reuters) - Peoria's main employer, Caterpillar Inc (CAT.N), has laid off, bought out or retired about 34,000 workers globally over the past year as demand for its earth-moving equipment declined along with economic growth.
Yet the city, three hours south of Chicago, is not suffering the same fate as other manufacturing towns in the U.S. "Rust Belt", like Detroit and Elkhart, Indiana, which have been hit hard along with their leading employers.
Peoria's unemployment rate in June was 9.6 percent, compared with the 16.8 percent rate in Elkhart, capital of the U.S. motor home industry, and 14.9 percent rate in Detroit, where the auto industry has had to scratch and claw to survive.
With a population of 370,000 in greater Peoria and 113,000 in the actual city of Peoria, this piece of the heartland looks nothing like it did in the 1980s when it was blindsided by another big downturn and the local unemployment rate reached 18.9 percent.
House prices here have remained remarkably stable. In June, the median price was $130,500, up 7.9 percent over two years.
Between 1981 and 1985, Peoria's labor force shrank from 171,000 to 146,548. Legions of workers laid off by Caterpillar, its suppliers and other manufacturers like breweries left the region.
The last thing many did on their way out of town was stop by the bank and drop off the keys to houses they could not unload.
"We probably had 5,000 properties on the market, which did not include many of the repossessed properties the banks owned and could not sell," says Dallas Hancock, head of the Peoria Area Association of Realtors. "Realtors didn't even want to list them. They couldn't sell the ones they had."
MOVE OVER CATERPILLAR
This time around, because Caterpillar and its hometown have been part of a broad transformation in the United States that altered the country's manufacturing base, the changes in Peoria have been less painful.
As manufacturing jobs were outsourced, other industries moved in to make up the deficit. One of them was health care.
Once a town of blue-collar workers, Peoria has become a regional health-care hub as the providers who set up here to serve Caterpillar's unionized workers expanded, turning rural facilities into feeders for the city's clinics and hospitals.
Helicopters from OSF St. Francis Medical Center, the city's second-largest employer, ferry the sickest patients from all over central Illinois to Peoria. Such patients often require more extensive care, which means greater profits.
The health care and education sectors now account for more local jobs than manufacturing as a whole and employ double the number of local workers as Caterpillar.
The city's new leading industry is recession resistant. In the past year, as Caterpillar cut jobs and local spending, Peoria's two competitive medical heavyweights, St. Francis and Methodist Medical Center of Illinois, have spent nearly $500 million updating their facilities, which now dominate the downtown skyline.
Peoria's new reliance on health care, which employs nearly 1-in-6 local workers, means it is more vulnerable than many other places to the uncertainties surrounding U.S. healthcare reform, the key domestic policy drive of President Barack Obama's administration.
"If you look at how they expect to pay for health-care reform right now, pretty much a significant chunk comes by cutting rates to providers," said Michael Bryant, chief executive officer of Methodist Medical Center, the city's second-largest healthcare employer. "So that obviously is going to have an impact."
But for now, healthcare and education are helping Peoria weather the recession better than many other manufacturing towns.
"Even the bad times aren't as bad now that Caterpillar isn't as important as it was," said Robert Scott, an economist at Bradley University, a local school with 6,000 students.
Illinois Central College and a campus of the University of Illinois Medical School have also helped keep Peoria humming.
WHITE COLLARS AT CAT
Caterpillar survived the 1980s recession and an onslaught of foreign competition from the likes of Japan's Komatsu Ltd by becoming more efficient and relying less on humans and more on machines. As it expanded its global reach, it employed fewer people in the United States.
In 1983, the company was producing equipment in 12 countries. Today, it manufactures in 23. But Peoria, which in the past has taken the brunt of jobs cuts, had fewer than a quarter of the company's worldwide total.
Another thing happened as Caterpillar evolved. The jobs that remained in Peoria changed to more white collar positions and fewer blue. Of the company's 16,000 full-time local employees today, a quarter are engineers and nearly a third hold advanced degrees. Another 350 hold doctorates.
"Caterpillar stopped being a company that hired a tremendous number of common laborers to make our products," said Glen Barton, Caterpillar's chief executive from 1999 to 2005.
Caterpillar was not alone. The U.S. manufacturers that successfully navigated their way through globalization have all pursued similar paths. Those that clung to old ways are gone or struggling to restructure.
Peoria is not without poor neighborhoods, which can be traced back to the exodus of manufacturers in the 1980s and 1990s. But around them, the signs of prosperity flash.
Swank restaurants like June and multimillion-dollar homes on Grand View Drive, dubbed the world's most beautiful drive by Theodore Roosevelt 100 years ago, make the point. The downturn is different this time around in Peoria. (Reporting by James B. Kelleher, Editing by Peter Bohan and Toni Reinhold)
* Layoffs by Caterpillar diluted by other businesses
* Health care industry now a major player
* Concerns about effect of healthcare reform weigh
* More white collar jobs help city thrive
By James B. Kelleher
PEORIA, Illinois, Aug 20 (Reuters) - Peoria's main employer, Caterpillar Inc (CAT.N), has laid off, bought out or retired about 34,000 workers globally over the past year as demand for its earth-moving equipment declined along with economic growth.
Yet the city, three hours south of Chicago, is not suffering the same fate as other manufacturing towns in the U.S. "Rust Belt", like Detroit and Elkhart, Indiana, which have been hit hard along with their leading employers.
Peoria's unemployment rate in June was 9.6 percent, compared with the 16.8 percent rate in Elkhart, capital of the U.S. motor home industry, and 14.9 percent rate in Detroit, where the auto industry has had to scratch and claw to survive.
With a population of 370,000 in greater Peoria and 113,000 in the actual city of Peoria, this piece of the heartland looks nothing like it did in the 1980s when it was blindsided by another big downturn and the local unemployment rate reached 18.9 percent.
House prices here have remained remarkably stable. In June, the median price was $130,500, up 7.9 percent over two years.
Between 1981 and 1985, Peoria's labor force shrank from 171,000 to 146,548. Legions of workers laid off by Caterpillar, its suppliers and other manufacturers like breweries left the region.
The last thing many did on their way out of town was stop by the bank and drop off the keys to houses they could not unload.
"We probably had 5,000 properties on the market, which did not include many of the repossessed properties the banks owned and could not sell," says Dallas Hancock, head of the Peoria Area Association of Realtors. "Realtors didn't even want to list them. They couldn't sell the ones they had."
MOVE OVER CATERPILLAR
This time around, because Caterpillar and its hometown have been part of a broad transformation in the United States that altered the country's manufacturing base, the changes in Peoria have been less painful.
As manufacturing jobs were outsourced, other industries moved in to make up the deficit. One of them was health care.
Once a town of blue-collar workers, Peoria has become a regional health-care hub as the providers who set up here to serve Caterpillar's unionized workers expanded, turning rural facilities into feeders for the city's clinics and hospitals.
Helicopters from OSF St. Francis Medical Center, the city's second-largest employer, ferry the sickest patients from all over central Illinois to Peoria. Such patients often require more extensive care, which means greater profits.
The health care and education sectors now account for more local jobs than manufacturing as a whole and employ double the number of local workers as Caterpillar.
The city's new leading industry is recession resistant. In the past year, as Caterpillar cut jobs and local spending, Peoria's two competitive medical heavyweights, St. Francis and Methodist Medical Center of Illinois, have spent nearly $500 million updating their facilities, which now dominate the downtown skyline.
Peoria's new reliance on health care, which employs nearly 1-in-6 local workers, means it is more vulnerable than many other places to the uncertainties surrounding U.S. healthcare reform, the key domestic policy drive of President Barack Obama's administration.
"If you look at how they expect to pay for health-care reform right now, pretty much a significant chunk comes by cutting rates to providers," said Michael Bryant, chief executive officer of Methodist Medical Center, the city's second-largest healthcare employer. "So that obviously is going to have an impact."
But for now, healthcare and education are helping Peoria weather the recession better than many other manufacturing towns.
"Even the bad times aren't as bad now that Caterpillar isn't as important as it was," said Robert Scott, an economist at Bradley University, a local school with 6,000 students.
Illinois Central College and a campus of the University of Illinois Medical School have also helped keep Peoria humming.
WHITE COLLARS AT CAT
Caterpillar survived the 1980s recession and an onslaught of foreign competition from the likes of Japan's Komatsu Ltd by becoming more efficient and relying less on humans and more on machines. As it expanded its global reach, it employed fewer people in the United States.
In 1983, the company was producing equipment in 12 countries. Today, it manufactures in 23. But Peoria, which in the past has taken the brunt of jobs cuts, had fewer than a quarter of the company's worldwide total.
Another thing happened as Caterpillar evolved. The jobs that remained in Peoria changed to more white collar positions and fewer blue. Of the company's 16,000 full-time local employees today, a quarter are engineers and nearly a third hold advanced degrees. Another 350 hold doctorates.
"Caterpillar stopped being a company that hired a tremendous number of common laborers to make our products," said Glen Barton, Caterpillar's chief executive from 1999 to 2005.
Caterpillar was not alone. The U.S. manufacturers that successfully navigated their way through globalization have all pursued similar paths. Those that clung to old ways are gone or struggling to restructure.
Peoria is not without poor neighborhoods, which can be traced back to the exodus of manufacturers in the 1980s and 1990s. But around them, the signs of prosperity flash.
Swank restaurants like June and multimillion-dollar homes on Grand View Drive, dubbed the world's most beautiful drive by Theodore Roosevelt 100 years ago, make the point. The downturn is different this time around in Peoria. (Reporting by James B. Kelleher, Editing by Peter Bohan and Toni Reinhold)
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