On Friday, we learned that manufacturers added 31,000 workers in February, continuing to hire new employees at a solid pace. Indeed, the manufacturing sector has increased employment by 264,264 workers since the end of 2016, averaging 18,876 per month over that 14-month time frame.
Since the end of the Great Recession, manufacturing employment has risen by 1,161,000 workers, with 12.61 million employees in February, the highest level since December 2008.
While manufacturers operate much more leanly than before the recession, the upward momentum since then has been quite stunning, with the sector more globally competitive and the outlook quite bright.
Along those lines, manufacturers are very upbeat about the future, with robust growth in demand, production, capital spending and exports seen in various reports, including ours. The unemployment rate in February was 4.1 percent for the fifth straight month, continuing to be the lowest level since December 2000, and the forecast 2018 calls for it to drop further, down to 3.8 percent by year’s end by my estimates.
With the economy operating at “full employment,” it should not be a surprise that manufacturers would cite the inability to attract and retain a quality workforce as their top concern in the most recent NAM survey. More importantly, those workforce challenges have started to lift wages and salaries, with the average weekly earnings for production and nonsupervisory employees in manufacturing up 3.8 percent over the past 12 months, up to $900.55 in February. To put that figure in perspective, comparable average weekly earnings for private sector workers more generally was $757.12 in February, up 3.1 percent year-over-year.
On a sector-by-sector basis, the manufacturing job growth over the past 14 months has been mostly broad-based, especially for durable and export-intensive goods. The attached graphic shows the top sector for growth over that time period, led by fabricated metal products (up 54,500), food manufacturing (up 52,300) and machinery (up 43,300), among others.
Moving forward, my current forecast is for real GDP to grow by 3.0 percent in 2018, its fastest growth since 2005, and for manufacturing production to rise by 2.1 percent. That should bode well for increased hiring this year, as noted above, but it will also likely exacerbate the skills gap challenge and put more upward pressure on wages.