2019 – Manufacturing Jobs are Here But How Do we Fill Them?
The US economy is enjoying a remarkable period of growth including significant contributions from manufacturing. The industry directly contributes over 10 percent GDP and more than 8% of all employment. Additionally and indirectly manufacturing has a multiplier effect on the economy and jobs - manufacturing jobs create 2.5 additional jobs in the US economy. However this long growth period has created one of the tightest labor markets in recent history, where the number of open jobs exceeds the number of people looking for work. According to the Bureau of Labor Statistics, in October 2018, there were 522,000 open jobs in US manufacturing and based on the forecasts below the situation is going to get worse!
2019 Manufacturing Revenue, Employment & Capital Forecasts
According to the November 2018 ISM survey of more than 800 companies, manufacturers are forecasting continued U.S. economic growth in 2019 with increases in revenue, employment and capital expenditures.
- On average 2019 revenue is expected to increase by 5.7% (following 5.8% in 2018)
- Prices paid for materials are expected to increase more than 3% (a slower pace than 2018)
- Capital expenditures are expected to rise by less than half the pace of 2018
- U.S. tariffs on imports remain a concern and two-thirds of manufacturers are seeking new supply chains - about half as a result of retaliatory levies. Half of factories and nearly a quarter of non-manufacturers say tariffs have forced them to raise prices for customers.
- On employment, the U.S. Bureau of Labor Statistics November report says manufacturing added 27,000 jobs. Over the last year manufacturing employment has increased by 288,000 but three quarters of both manufacturers and service companies had difficulty finding workers over the past six months and about 57 percent raised wages to recruit new employees. In October 2018 the unemployment rate held at 3.7% and wage growth accelerated to 3.1%, the fastest since early 2009).
2019 looks pretty rosy – except for the latter point so let’s explore that issue.
Manufacturing’s Skills Shortage has Become a Big Problem
Many individual companies are reporting tight labor conditions and difficulty recruiting - here’s a Cleveland company’s story for example.
But let’s look at it nationally - according to this 2018 Deloitte and the Manufacturing Institute report the skills shortage will become an even bigger problem in 2019 and the following years. They say that between 2018 and 2028 there will be 4.6 million new US manufacturing jobs to fill. That figure includes more than 2.6 million baby boomers working in the industry who are expected to retire over the next 10 years and about 2 million from natural growth. The problem is there aren’t enough workers ready to take on these new roles. The study says that positions relating to digital talent, skilled production, and operational managers may be three times as difficult to fill in the next three years and estimates 2.4 million positions will be unfilled between 2018 and 2028.
Why has this Skills Shortage Happened?
What’s going on here? What's different now? The manufacturing industry has always adopted new technologies as they offered competitive advantage or ROI. Now, in what has been called, “a fourth Industrial revolution” multiple new digital technologies are simultaneously transforming manufacturing globally - automation, robotics, analytics, additive manufacturing, artificial intelligence, eCommerce, the Industrial Internet of Things (IIoT), Blockchain and more...
Despite much publicized fears and predictions that these technologies would eliminate jobs, the Deloitte/Manufacturing Institute report found the reverse - more jobs are actually being created by these technologies than they replace. They say, “in fact, job openings have been growing at double-digit rates since mid-2017, and are nearing the historical peak recorded in 2001” and they note, “a widening gap between the jobs that need to be filled and the skilled talent pool capable of filling them.”
What Should You Do Now?
Obviously that depends on your company’s situation but the Deloitte/Manufacturing Institute report discusses short term solutions including the impact of higher wages, more flexibility in hiring and outsourcing Please read the report for yourself as they also explore these longer term solutions in detail:
- Taking advantage of the emerging workforce ecosystem
- Turning toward automation to supplement human jobs that are going unfilled
- Tapping into the resources from the retiring generation of baby boomers
- Developing in-house training that engages a multi-generation workforce
- Creating public–private partnerships
- Bolstering apprenticeship programs
Can Technology Help?
Technology may be the cause but can also help, at least partially, with this manufacturing jobs problem. For example, by keeping retiring experts on staff for longer in either full-time, part-time or consulting capacities and making part of their exit plan to pass on their knowledge in an artificial intelligence (AI) system and/or product configurator system.
Not only can technology help but Morgan Stanley's "Techs Next Big Wave: Manufacturing" report predicts that manufacturing will account for 40 percent in information technology spending over the next decade . They especially cite manufacturing investing in Artificial intelligence, Augmented Reality, Internet of Things and Robotic technologies as, "creating a virtuous cycle that could drive IT spending and lead to productivity savings equal to 5% of global GDP.
Conclusion and Recommendations
If the US manufacturing industry is going to achieve a) its future potential continued growth (including its contribution to US GDP and jobs) and b) remain globally competitive, it will require a larger workforce with many new skills. To the Deloitte report recommendations we’d add 2 for industrial suppliers:
- Adopt and apply the new technologies pertinent to growing your particular business – for example see the blog posts below - but beware seeing each technology as separate silos in separate projects. Rather see each of these digital transformations as continually evolving processes with new intelligence being added and new synergies developing between them.
- Choosing technologies to keep up with and apply
- Industrial Internet of Things (IIoT) and digital twins
- 5th Generation Mobile Communications (5G)
- Additive manufacturing (AM) aka 3D Printing
- Artificial Intelligence (AI)
- Augmented Reality, Virtual reality, Mixed Reality (AR, VR, MR)
- Digital Marketing and eCommerce including CAD content
- CAD/CAE simulation and configurators (including CPQ)
- Use that adoption to attract new talent and skills as well as retain the intrinsic knowledge of retiring staff.
As always, our conclusions and recommendations aren't comprehensive, we're not trying to have the last word, just start a conversation. So please share your comments below or, if you'd like our opinion on your use of industrial digital marketing online (our specialism) please call us or click either button below.