Startups, Hipster Market Drive Resurgence of New York City Manufacturing

The news seems very bleak indeed, after several manufacturers have recently opted to pull out of the New York City area, prompted by high costs and taxes, complex regulations, and other issues related to doing business there. Companies that have recently either shutdown or relocated elsewhere, shedding thousands of local jobs in their wake, include Damascus Bakery, Frederick Goldman, Inc., Matzo Baker Streits, and AP&G.

But when taking a step back, the outlook for New York manufacturing is not as bad as it looks. According to recent statistics, the total number of manufacturing jobs in New York City have actually increased since 2011. The number of production jobs in the five boroughs rose from a record low of 75,700 in 2011 to 78,000 in 2015, the New York State Department of labor reported. According the New York-based Center for an Urban Future, 1,100 manufacturing jobs were added during a twelve-month period beginning in April 2015.

How do you explain the discrepancy between the rising total number of manufacturing jobs increasing in New York as large manufacturers leave the region? The answer is that there is more demand for high-tech, niche production in the area, as the manufacture of traditional mass market-scale goods becomes less attractive in one of the world’s most densely populated urban zones.

Damascus Bakery’s pita bread production and AP&G’s manufacture of adhesives and sealant products, for example, were not seen as viable. But entrepreneurial-driven, niche-production such as 3D printing, metal and wood customization, and food processing is proving to be profitable for a growing number of firms, according to the Center for an Urban Future.

In short, startups making specialty products for local customers, which often have strong ties to the local hipster culture, are replacing old-school New York production with roots in the Industrial Revolution era.

A case in point is the surge in food production to meet growing demand for locally grown and processed food products. Employment in the food-related manufacturing sector in New York has surged by 27% from 13,929 jobs in 2005 to 17,682 in 2015, according to the New York-based Center for an Urban Future. New York is also the world’s largest hub for 3D makers and 3D printers, totaling 3,739 and 516, respectively.

In consideration of New Yorkers’ demand for specialty product production, 3D printing company Shapeways considered New York a particularly good fit for its manufacturing operations. Its business model is based on attracting creative types to join its “community of makers, designers, and entrepreneurs using digital manufacturing, and to bring their ideas to the physical world.” Its customers seek to support independent designers and creators, the company said.

“As 3D printing enables the personalization and democratization of product design and creation, our global community expects and deserves that the resultant physical product represents their local aesthetic and arrives in their hands with speed,” Tom Finn, COO of Shapeways, told EBN. “Moving to New York was a natural decision because we serve a community whose expectations have been shaped by leading e-commerce companies, such as Amazon.”

Shapeways also took into account New York’s proximity to world class transportation hubs for quick and rapid distribution of its products in the U.S. and worldwide.

“The proximity to our customer base as well as to large transport HUBs, enables Shapeways to provide a similar speedy service: getting consumers the products they're excited about, into their hands quickly and efficiently,” Finn told EBN.

More niche-like production that meets demand for localized production may indeed be the wave of the future, thanks largely to the hipster set in New York. And yet, it is highly unlikely that such specialized production will make New York City a production powerhouse largely unrivaled around the world like the city once was over a century ago. Over 150,000 jobs would need to be created to make up for the 265,200 manufacturing jobs in 1990 that plummeted to a relative meager total of 75,700 in 2011, according to the New York State Department of Labor. The manufacturing sector accounts for just 0.8% of the 513,500 recently added private sector jobs in New York during the past five years, while it represents just 2.1% of all private sector jobs there, compared to 5.7% in 2000 and 9.1% in 1990, according to the New York-based Center for an Urban Future.

“Even the most optimistic manufacturing experts that we interviewed caution that many traditional manufacturers will continue to struggle,” according to a report in the New York-based Center for an Urban Future. “What we heard, again and again, is that New York’s competitive advantage in manufacturing today—and its best hope for growth in the future—is undoubtedly with small firms that operate in niche markets and take advantage of modern production processes.”

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