Like many companies, Gray Construction spent the last few years laying off workers and sweating over the future. But lately, the Lexington, Ky.-based industrial construction firm has seen concrete signs of a lasting recovery. "I like the next 12, 18, 24 months," says CEO Stephen Gray. "I see continuing opportunity. That gives me the confidence to maybe take a few risks."
As unemployment slowly improves and the economy haltingly grows, the biggest question is whether recent upticks are the beginning of a prolonged recovery, or yet another false dawn. There's still plenty that could go wrong. Rising gas prices could sucker-punch consumers and derail spending. The housing bust could drag on indefinitely, vaporizing even more household wealth. Congress, which faces several big decisions by the end of the year, could enact premature tax hikes or spending cuts that torpedo growth.
But for the first time since 2008, a variety of indicators suggest that the economic gloom may be lifting for good. Consumer confidence keeps drifting upward, with motorists, for now, shrugging off gas prices close to $4 per gallon. Surveys by Vistage, a membership group for small- and medium-sized businesses, show that 75 percent of such firms expect revenue to rise over the next year, and 57 percent plan to hire. Those types of firms are key to a recovery, since it's smaller enterprises, not Fortune 500 firms, that do most of the growing and hiring.
Companies like Gray, which designs and builds manufacturing plants, mostly in the Southeast, may finally be seeing the pickup in business and revenue that signals a lasting recovery. A year ago, for example, Gray counted 389 "qualified leads" that might develop into future business. Today, it counts 494 qualified leads, and over the last year it has landed deals to build facilities for big firms such as Siemens, Caterpillar, and Whirlpool.
Those types of projects represent major spending commitments that last for months and give CEOs the kind of predictability that makes them comfortable hiring. Gray went into the recession with about 400 employees, then cut back to about 310 as the pipeline of projects thinned out. But recent hires have pushed head count back to about 375, and the firm is still expanding.
Gray, the CEO, says his firm is prospering now because of decisions made during the recession. It beefed up sales and marketing, instead of cutting back as in most other departments, to gain an edge going after new business. The company also chose not to chase opportunities outside its area of expertise, such as transportation projects funded by federal stimulus money. Those choices are paying off now. "We drilled into manufacturing," says Gray. "One of the blessings of the recession is it made us look harder at our business, and singularly focus on what we do."
Gray is also benefitting from a revival in U.S. manufacturing that some analysts think may just be getting started. After years of outsourcing that pushed millions of jobs overseas, several factors are now making the United States an attractive place, once again, to locate factories.
A relatively cheap dollar means European and Asian companies can save money by diversifying some of their manufacturing to the United States. Labor costs in places like China and India have been rising, while U.S. labor costs have been drifting down, reducing or even negating the cost advantage of manufacturing in developing countries. And U.S. consumers, while restrained of late, still have spending power that makes it worthwhile for foreign producers to set up shop on their home turf. "One of the biggest myths that has propagated throughout the marketplace over the years is that 'nothing is made in the U.S. anymore,'" Merrill Lynch economists wrote in a recent report. "In our view, the U.S. economy is in the early stages of a long term manufacturing renaissance."
That would obviously be a welcome development, but like everything else in the economy, the future of manufacturing will probably be sharply different from the glory days of the past. Overall employment may never attain the robust levels of the 1990s, for instance, and good pay will require complex skills and technical expertise. Even if the recovery is here for good, it may take some getting used to.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success, to be published in May. Follow him on Twitter: @rickjnewman.