State of Manufacturing by the Numbers
Manufacturing is often seen as the reason for a thriving middle class in the United States. Entering 2017, there was a lot of uncertainty behind what the manufacturing industry as a whole was going to do. Some segments of the manufacturing industry have seen some decline in labor, due to automation and foreign outsourcing. Yet, according to the National Association of Manufacturers $2.18 trillion was contributed by manufacturers to the U.S. economy in 2016. That figure has risen from 2009, when manufacturers contributed $1.70 trillion. It is hopeful that this trend upward will continue in the manufacturing sector.
On top of this, according to CNS News, U.S manufacturing profits are up 19.9% from Quarter 1 2016 to Q1 2017. Adding more positive news to the manufacturing outlook, the Bureau of Labor Statistics JOLTS report (Job Openings and Labor Turnover Summary) showed that in the month of March alone, there were 322,000 workers added to payrolls in the manufacturing industry. They reported that there hasn’t been a month with manufacturing workers being in this high of demand since April 2008. When all was said and done, the Bureau stated that there was a total of 922,000 manufacturing hires made during the first three months of this year—up significantly from the 828,000 hires at the beginning of 2016. At the same time, however, the JOLTS reported that there were 394,000 manufacturing jobs vacant at the end of March that manufacturers were looking to fill. This vacancy tied July of 2016 total for largest number of open jobs the sector has seen since April 2006. These statistics highlight the growing gap of qualified workers with the necessary skills to fill these openings.
According to the US News, “data suggests the manufacturing industry has broadly turned a corner and jobs in the sector are in high demand.” Focusing on filling many of these open positions is still a priority for many manufacturing companies. With this being said, in early June, President Trump signed an executive order to “expand apprenticeships and vocational training”, as VP Mike Pence stated in a blog post on the White House website. It is important to educate and attract young individuals in the industry of manufacturing, as they are the future of manufacturing.
Manufacturing is also seeing some added growth due to renewed demand for domestic manufacturing. For many years, companies moved their manufacturing overseas due to the cheaper labor costs. However, labor costs are starting to rise--specifically up 10% in China last year alone--and that is bringing many manufacturing jobs back to the United States. According to a survey conducted by Boston Consulting Group, it found that “37% of manufacturing executives are planning to move production back to the United States, or giving serious consideration to such a move”. In addition to the rising labor costs, other reasons that could bring manufacturing back to the US include quality, cost of transportation, and accessibility to customers.
Also, according to a survey done by ISM, US purchasing and supply executives are “optimistic about rising demand for their goods and services”, due to solid consumer confidence. According to the survey, it showed that manufacturers this year expect a 5.2% boost in capital expenditures, 1.3% rise in employment, and a 4.4% rise in revenues. The general trend was that more than 70% of the companies surveyed boosted capital because of the “general business outlook”. Expanding on the growth in the manufacturing industry, machine tool and equipment orders highlight that manufacturing is continuing to grow. New orders for machine tools totaled $319.7 million during July, according to the Association for Manufacturing Technology. Although the total value is below the June new order totals, it did outpace the year ago (+22.7%) and year to date value (+10.1%). Specifically, orders from the defense sector, medical sector, and agriculture sector were notably stronger in July.
In general, the first half of the year showed many positive signs for the outlook of manufacturing. A general concern moving forward is finding skilled labor to be able to claim the unfilled manufacturing jobs that are available. As the skills gap widens, the manufacturing industry might start to see negative effects as a result. On top of this, with more manufacturing jobs coming back into the US, the younger generation of millennials are going to have to be the ones that take over these jobs. With all this being said, the outlook for the manufacturing industry seems positive moving forward into the second half of the year and beyond.