On October 5, 2018, the United States National Association of Manufacturers (NAM) celebrated National Manufacturing Day, an event that seeks to get young people interested in manufacturing careers. It was a day to remember for another reason, as NAM released the third quarter results of the Manufacturers’ Outlook Survey. According to the results, 92.5 percent of manufacturing leaders felt optimistic about the future of their company, and there’s reason to be optimistic with nearly 18,000 manufacturing jobs added to the rolls in September.
What are the key takeaways from the report?
- 92.5 percent of respondents felt positive about their own company’s outlook.
- 91.3 percent of small manufacturers, 92.5 percent of medium-sized manufacturers, and 93.1 percent of large manufacturers felt positive about their company’s future respectively.
- Respondents across all company sizes expected a 4.9 percent growth rate for production over the next 12 months.
- Survey takers forecasted an average growth rate of 5 percent for overall sales over the next 12 months with a 3.2 percent increase in the price of their company’s products.
Why are manufacturers so positive?
It would be overly simple to write off this positivity as a byproduct of the Tax Cuts and Jobs Act (TCJA) of 2017. While that legislation may be largely responsible, there are additional factors that have lead to this noticeable resurgence in US manufacturing.
It’s worth mentioning that, as a whole, manufacturers surveyed for this report have been largely upbeat since the tail end of 2016, averaging 92.6 percent optimism over the last seven quarters. Additionally, improvements in the global economy have lead to increased demand that has necessitated hiring additional employees.
This positivity is also a result of consumer income increasing as many households are seeing financial life return to normal after the effects of the 2008 economic downturn. Economic sectors that were hit especially hard by the recession (and lack of consumer discretionary income) have made a significant recovery, particularly the transportation equipment, wood products, and electrical equipment and appliance industries.
The TCJA, of course, has played a significant role in drumming up optimism in the manufacturing industry. Without getting into the specifics, the legislation reduced the effective tax rate for companies in the United States to 21 percent from 35 with the idea that those tax savings would then be reinvested in the business. So far, manufacturing companies seem to be doing just that with respondents who planned on increasing capital investment doing so at a rate of approximately 6.3 percent.
Is there anything to worry about?
Despite the overall optimism conveyed in the responses, it isn’t all milk and honey on the minds of manufacturing leaders. In years past, manufacturing leaders frequently cited the “business climate” (taxes, regulations, etc.) as the biggest threat to their business. These considerations have changed significantly, however, as the US Stock Market continues to experience the longest bull run in history coupled with record-low corporate tax and unemployment rates.
According to this quarter’s NAM survey, manufacturers’ primary challenges center around rising wages, retaining quality workers, higher raw material costs, trade uncertainties, and rising healthcare/insurance costs as their looming threats.
Manufacturers surveyed were especially worried about the manufacturing skills gap and its effect on their ability to attract and retain employees. This skills gap is largely a result of automation, however, that’s not the whole story. While automation may have eliminated some manufacturing functions completed by human workers in the past, the machines that replaced those human workers require technical professionals with advanced skills to keep the production lines moving. These professionals can take years to train and are in short supply, leaving managers unable to find the talent they need.
Look for technical professionals?
If you’re a manufacturer who is feeling the effects of the manufacturing skills gap, Black Diamond Networks is here to help. We’re a nationwide staffing company with more than 20 years of experience finding candidates with some of the most niche skills in engineering and manufacturing. Connect with an account executive today by visiting www.blackdiamondnet.com or giving us a call at 1.800.681.4734.