Tag: skills gap

Kansas City Fed Reported Increased Manufacturing Activity in November

The Federal Reserve Bank of Kansas City said that manufacturing activity picked up somewhat in its district in November. The composite index rose from 4 in October to 7 in November, its highest level in four months. Along those lines, the pace of production (up from 3 to 9), shipments (up from zero to 7) and employment (up from 6 to 9) improved for the month. In addition, export sales (up from -9 to 8) were positive for the first time since April. Yet, growth remains far from robust, with new orders (down from 2 to 1) decelerating for the fourth consecutive month and just barely above neutral. (continue reading…)

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Kansas City Fed: Manufacturing Activity Expanded at a Slower Rate in June

The Kansas City Federal Reserve Bank said that manufacturing activity expanded at a slower rate in June; nonetheless, growth was positive for the sixth straight month. The composite index of general business activity fell from 10 in May to 6 in June. Several indicators eased for the month, including production (down from 14 to 2), shipments (down from 5 to 2), new orders (down from 11 to 8) and the average workweek (down from 14 to 7). To illustrate this, 34 percent of respondents said that their production had increased In June, down from 40 percent in May.

The largest negative in the report was exports (down from 6 to -11), with 16 percent of those taking the survey suggesting that their international sales had fallen in June. In addition, hiring (down from 10 to 1) slowed to a crawl, with 23 percent suggesting that they had added employees but 17 percent noting declines.

Still, there continue to be some encouraging signs for the months ahead, albeit with somewhat weaker sentiment than earlier data. The forward-looking composite index has edged down from 21 in April to 13 in May to 12 in June. Yet, at least 35 percent of survey respondents anticipate sales, shipments, and output to be higher six months from now, and 28 percent plan to add workers. Capital spending (up from 19 to 23) was expected to pick up slightly. Pricing pressures declined a bit for the month, but remain elevated with 48 percent of survey-takers anticipating increased raw material costs ahead.

Several of the sample comments noted workforce challenges. As one manufacturer put it, “It is not so much a question of short supply of workers, but rather a question of workers who are reliable and possess a strong work ethic.” Others noted the limited availability of possible employees with the right skills in their community and challenges with competition for workers in terms of compensation.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Monday Economic Report – June 9, 2014

Here are the files for this week’s Monday Economic Report:

The latest NAM/IndustryWeek Survey of Manufacturers—being released today—found that roughly 86 percent of manufacturers were either somewhat or very positive about their own company’s outlook, essentially unchanged from three months ago. Yet, the underlying data show higher levels of anticipated activity across the board over the next 12 months. For instance, sales are expected to grow 4.1 percent on average over the next year, up from an average of 3.6 percent in the last survey and the fastest pace in two years. Capital spending and hiring plans were also anticipated to increase, with almost half of respondents planning to add workers in the coming months.

Nonetheless, the survey also found that manufacturers remain frustrated with the slower-than-expected pace of economic growth this year and with the political process. The top challenges continue to be health care costs, the tax and regulatory environment and the skills gap. Along those lines, the Federal Reserve’s Beige Book reported that manufacturing activity expanded across the country in its analysis, with rebounds noted in many of its districts. In addition, several businesses are having difficulty finding skilled workers, a challenge that has concerned manufacturers for some time. For instance, a recent study from Accenture and the Manufacturing Institute found that more than 75 percent of manufacturers have a moderate to severe shortage of skilled resources.

Several data releases last week support the view that the economy is rebounding. For instance, the number of nonfarm payroll workers rose by 217,000 in May, with an average of 231,000 over the past four months. This helped push nonfarm payrolls over its pre-recessionary levels for the first time—a feat that took roughly five years. The news for manufacturers was more mixed. While manufacturing has averaged just shy of 12,000 additional workers per month since August, the pace has slowed this year, and May’s 10,000-worker gain stemmed mainly from durable goods firms. We would like to see broader-based job increases in the sector moving forward, with monthly hiring growth between 15,000 and 20,000 on average.

Meanwhile, the Institute for Supply Management’s Purchasing Managers’ Index (PMI) has risen each month since January, up from 54.9 in April to 55.5 in May. The data were mostly positive, with higher levels for both new orders (up from 55.1 to 56.9) and production (up from 55.7 to 61.0). The output index exceeded 60—signifying strong monthly gains—for the first time since December. At the same time, new factory orders increased for the third straight month, up 0.7 percent in April and building on healthy figures for both February and March. This release was another sign of recovery in manufacturing sales after weather-related softness in December and January. Yet, the underlying data also indicated some weaknesses beyond defense capital goods spending. Excluding defense, new durable goods orders would have shrank by 0.1 percent for the month. As such, there is room for improvement even with the recent rebound in activity.

While total construction spending increased for the third straight month, manufacturing construction declined 1.1 percent in April, and it has been down slightly since December. Still, the longer-term trend remains more encouraging, up 7.3 percent year-over-year. On the trade front, manufactured goods exports have seen marginal gains so far in the early months of 2014 relative to 2013, but we have seen increased exports in each of the top-five export markets so far this year. Still, export growth has been disappointing of late, and due to a significant increase in goods imports in April, the trade deficit rose to its highest level in 12 months. One positive continues to be energy, with the petroleum trade deficit narrowing on increased exports and fewer imports.

This week, we will get new data releases for consumer confidence, job openings, producer prices, retail trade and small business sentiment. In particular, we will see if Americans are becoming more confident and if the rebound will translate into increased purchasing. The expectation is that May retail sales will bounce back from slower April numbers. Regarding inflation, producer prices in April were higher mainly due to increased costs for food—namely, meat, eggs and dairy products. Energy costs were also up a bit. Analysts will be looking to see if core inflation creeps ever closer to the Federal Reserve’s 2 percent goal, which is anticipated.

Chad Moutray is the chief economist, National Association of Manufacturers. 

nam industry week - jun2014

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Workforce Development Makes Bipartisan Breakthrough in Congress

Yesterday Senators Tom Harkin (D-IA), Lamar Alexander(R-TN), Patty Murray (D-WA) and Johnny Isakson (R-GA) along with Representatives John Kline(R-MN), George Miller(D-CA), Virginia Foxx(R-NC) and Ruben Hinojosa (D-TX) introduced the Workforce Innovation and Opportunity Act which replaces the Workforce Investment Act and creates a modified workforce development system.

The legislation is a significant breakthrough based on language from a House bill passed last year and a Senate bill passed out of the HELP committee last summer. WIA was originally passed in 1998 and has been due for reauthorization for over a decade, but it has continually stalled due to political wrangling.  The bipartisan, bicameral legislation works to prioritize funding towards industry-recognized credentials, a top priority for manufacturers in worker training programs. The legislation also eliminates programs, reduces the size of the workforce boards, and streamlines reporting requirements.

The skilled workforce shortage is a significant problem facing American manufacturers.  Over 80 percent of manufacturers report a moderate or serious shortage of qualified applicants for skilled and highly skilled production positions, reducing net earnings by up to 11 percent.  Promoting training that is in-demand and recognized by employers as necessary to success will go a long way towards solving that problem.

The NAM and its members look forward to working with both the House and the Senate as this legislation moves forward.

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Philly Fed: Manufacturers Continue to Expand Strongly in May

The Federal Reserve Bank of Philadelphia said that manufacturing activity continued to expand strongly in May, albeit at a slightly slower pace than in April. The Business Outlook Survey’s composite index of general business activity decreased a bit from 16.6 in April to 15.4 in May. There were also some easing in growth rates for new orders (down from 14.8 to 10.5) and shipments (down from 22.7 to 14.2). Despite the slight deceleration, over one-third of the survey respondents said that new orders were higher in the month, and the composite index has averaged 13.7 from March to May, matching the average for the second half of 2013.

The labor market variables were mixed. Hiring growth (up from 6.9 to 7.8) accelerated modestly. Whereas, the average employee workweek (down from 5.0 to 2.9) narrowed somewhat. In a series of special questions, roughly one-third of manufacturers in the Philly Fed region that they had significant labor shortages, with 45.7 percent citing skills mismatches with their needs. In terms of how they addressing the skills gap, the top actions include: increasing recruitment efforts (65.7 percent), providing additional training to existing staff (55.7 percent), partnering with educational institutions to align curriculum to talent needs (38.6 percent), increasing wages (34.3 percent), and expanding recruitment outside the region (25.7 percent).

Looking ahead six months, manufacturers in the Philadelphia Fed district were more upbeat in May, with the forward-looking composite index increasing from 26.6 to 37.4. Over half of those taking the survey said that they expect new orders and shipments to increase in the coming months, 30.5 percent plan to add new workers, and 32.5 percent expect to spend more on capital investments. Still, it is notable that more than half of respondents anticipate keeping their employment and capital spending levels unchanged. Regarding pricing pressures, 36.5 percent anticipate raw material costs moving higher, with 59.0 percent expecting them to be unchanged.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Dirty Jobs No More – Manufacturing is a Career on the Cutting Edge

You may know him from “Dirty Jobs,” but today Mike Rowe was on Capitol Hill today testifying on anything but. Rowe hit the Hill today to speak before the House Resources Committee hearing, on “American Energy Jobs: Opportunities for Skilled Trades Workers.”

His resource center, mikeroweWORKS, launched in 2008, mirrors many of the initiatives undertaken by the NAM and the Manufacturing Institute. We’re all about challenging thing stereotypes that surround manufacturing and ensuring that our nation knows that a manufacturing job means a good paycheck, benefits, and a career on the cutting edge. The skills gap that has left hundreds of thousands of jobs unfilled is making America less competitive. The NAM and the Institute are working to get our nation’s youth the skills and certifications they need to achieve their goals. And while we do that, we’re changing people’s perception of manufacturing, a step at a time.

People like Mike Rowe, who lend their voice to this critical effort, deserve our applause and appreciation. Together, we can show the world that manufacturing in the U.S. is sleek, technology driven, and a pretty great place to make your career.

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Kansas City Manufacturers Noted Continued, but Slower, Expansion in April

Manufacturers in the Kansas City Federal Reserve Bank’s region noted expansion for the fourth straight month in April, albeit more slowly than in March. The composite index of business activity declined from 10 to 7 for the month, with easing observed in other key variables, as well.

For instance, the index for production declined from 22 in March to 12 in April. Still, one should not over-interpret this decline, as March’s figure was a strong rebound from winter-related softness observed from December to February. The positive news was that 38 percent of survey respondents reported increased output in April, with 17 percent noting decreases. Likewise, new orders (down from 13 to 9) and shipments (down from 16 to 14) were still encouraging despite the decelerated figures in April. One downside in the report was exports, which stagnated.

On the employment front, the average workweek extended somewhat (up from 3 to 6) and hiring moved from being flat to small net increases (up from zero to 3). Yet, the sample comments make it clear that manufacturers in the District continue to struggle to recruit new talent. “We are challenged finding good people with the right skill sets,” one individual wrote.

Regarding the longer-term outlook, manufacturing leaders in the Kansas City Fed area continue to be mostly optimistic about the next six months. Nearly half of them anticipate increased orders, shipments, and production in the coming months, and over one-third plan to bring on new workers and to invest in more capital spending.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Marlin Steel Moves Forward to Close the Skills Gap

“These is my team, I’m dedicated to their success. We’re all in this together.…  We’re doing our part in Baltimore, we’re doing our part in Maryland. The American manufacturing renaissance is happening, and we’re an example of it.” ~ Drew Greenblatt, President of Marlin Steel and Executive Committee Member of the NAM.

Marlin Steel, a Baltimore based manufacturer of wire baskets and precision metal work has been honored by the Hitachi Foundation for their transformative business practices. Across the United States, manufacturers are struggling to find the skilled workers they need to compete – Marlin Steel has developed a “skills matrix” that has worked wonders for the company and its employees. Greenblatt has invested in his employees and it has paid off in spades. The program  includes: Incentivizing employees by tying training to pay increases and promotions; Emphasizing cross-training, so that employees fit in a flexible production system, allowing them to respond quickly and efficiently to changing customer demands; and Creating a career ladder that boosts retention of high-quality employees.

The Hitachi Foundation, along with the Precision Metalforming Association has produced an outstanding video that tells the story of Marlin Steel and its workers. They’re closing the skills gap through innovation and investing in themselves. It’s well worth watching – more than once in my opinion.

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Empire State Survey: Manufacturing Continues to Stall in the New York Fed District

The New York Federal Reserve Bank said that manufacturing activity improved somewhat in December, but it still remained stalled overall. The Empire State Manufacturing Survey’s composite index increased from a slight contraction (-2.2) in November to a slight expansion (1.0) in November. Indeed, overall activity had generally decelerated over the past few months, with the main index down from its recent peak of 9.5 in July.

New orders contracted for the second straight month, with one-quarter of the respondents saying that their sales declined in December. Just over half reported that their new orders were unchanged for the month. Likewise, the average workweek shortened further, with the index down from -5.3 to -10.8. Hiring was unchanged at zero. Overall, 73.5 percent of those completing the survey said that their employment levels had not changed in December.

On the positive side, shipments activity improved, up from -0.5 to 7.7. The percentage of survey-takers with increasing shipments rose from 24.8 percent to 33.4 percent.

Despite the poor current manufacturing figures, business leaders continue to be mostly positive about the next six months, albeit with some easing in sentiment in December. The forward-looking composite index decreased from 37.5 to 35.7. The expected data on new orders, shipments, hiring, and capital spending all declined for the month, but overall, they suggest cautious optimism for the new year. For instance, over 40 percent of respondents anticipate higher sales in the next six months, with only 13.9 percent forecasting them lower.

Hiring is predicted to grow modestly, with 24.1 percent of respondents planning to add to their workforce. Still, over 60 percent plan to make no changes to their employment levels over the next six months. For those who are looking for talent, finding qualified workers appears to be “increasingly difficult.” In a series of special questions, the inability to find qualified workers was cited by 70.4 percent of respondents as a major problem, making it second only to employee benefit costs (85.2 percent). Other top challenges included taxes (66.7 percent), government regulation (61.7 percent), and weak sales (40.7 percent).

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Kansas City Fed: Manufacturing Activity Grew in September, But at a Slower Pace

The Kansas City Federal Reserve Bank said that the pace of growth in manufacturing activity slowed in September. The composite index of general business activity declined from 8 in August to 2 in September. The good news is that the index has reflected expansion – albeit a very modest one – in four of the past five months (May to September), with contraction in the seven months prior to that (October to April). As such, there continues to be progress for manufacturers in the district in terms of new orders and production, but these improvements are far from robust.

Much of the data in September reflected a pullback from August’s measures. For instance, the index for new orders dropped from 15 to 8. Data for shipments and production were similar. One factor that hurt the sales figure was a decline in exports growth, with the new export orders index down from 4 to -6.  On the hiring front, employment was unchanged in September (down from 4 to zero), suggesting that firms continue to be hesitant to bring on new workers.

With that said, the sample comments show the paradox in hiring that we hear from many of our manufacturing members. While hiring growth remains slow, those businesses that are adding new employees note challenges with attracting and retaining workers (e.g., the skills gap). Several respondents made comments along those lines, including the following:

  • “General labor is very difficult to find in order to fill our manufacturing positions. Educated workers are even harder to find.”
  • “… we are having to train people that come to us with no experience or skill.”
  • “Have difficulty in hiring engineers and accountants.”
  • “Our industry has lost labor force to the oil and gas industry, which is not really paying more hourly but is giving a lot more overtime.”

Other commenters echoed frustrations with the slow pace of growth. For instance, one individual said, “We keep hearing the economy is getting better, but we have not seen an improvement.” Similarly, another manufacturer labeled their sales as “flat” with “some upward price pressure on our raw materials.”

Despite these comments, the forward-looking questions continue to suggest cautious optimism for the next six months. The expectation composite index rose for the second month in a row, up from 7 in July to 9 in August to 18 in September. Numbers for new orders, production, shipments, employment, and capital spending were all higher. Nonetheless, the average employee workweek was expected to increase only marginally (up from 1 to 3), indicated some tentativeness moving ahead. Pricing pressures are expected to pick up, as well.

Chad Moutray is the chief economist, National Association of Manufacturers.


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