The NUMMI Multiplier Effect

Every one job lost at NUMMI could become five jobs lost statewide.

The Sacramento Bee reports NUMMI shutdown hits Central Valley hard

The imminent closure of Toyota Motor Corp.’s NUMMI auto factory in the East Bay is creating serious spillover effects. It will erase thousands of manufacturing jobs in the Valley, a region where unemployment already tops 18 percent once you get south of Sacramento.

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The NUMMI disaster will hit the Valley in several ways. At least 1,200 Valley residents commute to Fremont to work at NUMMI directly. An unknown number of Valley residents work at Bay Area plants that make parts for NUMMI. And at least 1,000 work for parts manufacturers in the Valley itself, like Pacific Coast.

Throw in the “multiplier effect” – the jobs that vanish when laid-off workers curtail their spending in restaurants, stores, etc. – and the total job loss in the Valley will hit 6,000 over the next few months, said economist Jeff Michael of the University of the Pacific.

Michael estimates the total statewide job loss at 20,000, including the multiplier effect. NUMMI itself employs around 4,500 workers.

Michael said the ripple effects from NUMMI will eliminate about 5 percent of San Joaquin County’s factory jobs. But the impact goes beyond the numbers. The layoffs will stifle the region’s efforts to diversify its manufacturing base beyond food processing and construction materials, he said.

“This is devastating,” said Debbie Duplichan, a rapid-response coordinator at the WorkNet jobs agency in San Joaquin County. “I don’t think anybody truly has their head around what’s going to happen – the economic impact is going to be substantial.”

Unemployment stands at 18.4 percent in the Stockton area and 18.9 percent in Modesto.

It’s troubling to see NUMMI close, not just because of the job losses, but because it is a huge example of how California has become a near impossible place for factories and manufacturing jobs to exist. The costs are just too high. Perhaps during the boom, businesses were willing to pay a factory worker $75,000 per year. Now, they are willing to move to other states where they can pay $40,000 for the same job.

Without a solid blue-collar core, California’s economy has become hollow inside. Long-term, systemic changes are needed to make California’s business climate healthy again.