Manufacturers Continue to Weather Economic Uncertainty
By Brian Burton, IMA President & CEO, bburton@indianamfg.com, 317-713-5924
Predictability and certainty create an environment for capital investment, and capital investment encourages job creation. In today’s climate, predictability and certainty can sometimes be in short supply. The US and Indiana economies continue to recover from pandemic lows. However, headwinds persist in key areas such as supply chain shortages, lack of available workforce, and economic and political uncertainty. Congress continues to debate over the $1 trillion infrastructure package and the $3.5+ trillion budget reconciliation bill. Each bill would have a dramatic effect on employers and the economy.
Locally, the Indiana General Assembly will soon complete its legislative session. Normally we would be telling you that the legislature had adjourned and finished its session last spring; but because of the delay in census data used for redistricting that happens every 10 years, the session is extended. The legislature has been in recess since spring and has not adjourned for the final time, ending the session. For those of you who watch the operations of our legislature, this makes for one of the officially longest sessions in Indiana’s history. The legislature began on Organization Day on November 19, 2020; and will most likely adjourn on November 15th, 2021. That means the legislature will have been in this session for 361 days or 11 months and 26 days. Certainly, an unusual experience.
With all of this uncertainty, the economy continues to grow post pandemic. The US economy grew 6.7% at the annual rate in the second quarter of this year. The economic forecasts predict 5.8% growth in 2021 overall, and real GDP growth of 3.8% in 2022. Manufacturing output is also seeing gains, increasing from $2.444 trillion in the first quarter of 2021 to $ 2.525 trillion in the second quarter.
One area that increasingly challenges employers is the ability to find qualified workers. The manufacturing sector is not immune. The manufacturing skills gap in the US could result in 2.1 million unfilled jobs by 2030, according to a new study by Deloitte and The Manufacturing Institute. The cost of those missing jobs could potentially total $1 trillion in 2030 alone.
This shortage is driving wage growth. Total employment in Indiana in 2020 dropped by 158,975 jobs or -5.17%. In 2020, manufacturing saw a contraction of employment by 36,639 or -6.77%. But wages are increasing. Total employment average wages increased to $51,975, up $3,164, an increase of 6.48%. In 2020 manufacturing wages saw a more modest increase of 2.8%, up $1,772 to $65,092.
Despite these many challenges manufacturers continue to drive growth and progress. Easing of supply chain, technological improvements to mitigate workforce challenges and changes in processes will be critical to meet our current and future challenges.
