Labor and Employment

Companies’ health care costs are rising steeply, leading finance chiefs to look for alternative ways of attracting and retaining employees, according to The Wall Street Journal (subscription). 

What’s going on: “Health-insurance costs, which are among the largest expenses for many U.S. companies, are projected to rise around 6.5% for 2024, according to consulting firm Mercer.”

• “The surge … may add significantly to costs for employer plans that Mercer said already average more than $14,000 a year per employee. Many companies are expected to take on most of the increases … ”

​​​​​​​ Why it’s happening: In addition to inflation and higher interest rates, rising health care price tags are the result of a combination of higher labor costs in hospitals and elsewhere in the health care system, a rise in elective care (which declined during the global pandemic) and a demand for new drugs.

The response: Finance officers are largely seeking ways to manage the growing costs without “add[ing] pressure to employees’ budgets as health care costs rise,” according to the Journal.

• Whether that will be possible in the longer term will depend mainly on the state of the labor market and how high prices rise.
• Some companies are considering sharing the increased cost burden with employees, while others are pushing preventive care as a way to save money down the road. 

The last word: “Manufacturers feel a deep commitment to providing high-quality health care to their employees despite the increased costs of doing so,” said NAM Director of Domestic Policy Julia Bogue.

• “The NAM recently released ‘Manufacturers on the Front Lines of Communities: A Deep Commitment to Health Care,’ which details industry-wide health benefits and trends, as well as federal policy proposals that could jeopardize manufacturers’ ability to continue offering health care plans.”

Industrial production and retail sales both rose in September and exceeded growth expectations, according to MarketWatch and CNBC.

What’s going on: Industrial production increased 0.3% for the month, above the 0.1% gain expected, MarketWatch reports.

• Meanwhile, retail sales rose 0.7% for the month, more than twice the 0.3% rise estimated by Dow Jones, according to CNBC.

The details: In industrial production, “[m]anufacturing rose 0.4% and motor vehicle production rose 0.3%, held down by the ongoing strike against three automakers,” MarketWatch reports.

• For retail, “the biggest increase [was] at miscellaneous store retailers, which saw an increase of 3%. Online sales rose 1.1% while motor vehicle parts and dealers saw a 1% increase and food services and drinking places grew by 0.9%, good for a yearly increase of 9.2%, which led all categories,” according to CNBC.

What it means: The retail numbers “indicate that consumers more than kept up with price increases,” CNBC said, though that could change as employment growth is expected to slow.
 

Economists polled by The Wall Street Journal (subscription)—including NAM Chief Economist Chad Moutray—say they now believe that the U.S. will likely avoid a recession.

What’s going on: “In the latest quarterly survey by The Wall Street Journal, business and academic economists lowered the probability of a recession within the next year, from 54% on average in July to a more optimistic 48%. That is the first time they have put the probability below 50% since the middle of last year.”

• Economists on average expect gross domestic product to increase 2.2% in Q4 of this year from a year earlier, which is “a sharp upward revision” from the last survey.

Why it’s happening: Playing a role in the revised outlook are declining inflation, an interest rate that the Federal Reserve has held steady at its past two meetings, a robust job market and surprisingly strong recent economic growth.

A “soft landing”: While that growth and job creation are both expected to weaken in the first half of next year, “the latest forecasts suggest confidence in the Fed’s ability to achieve a so-called soft landing, in which inflation falls without a recession.”

• However, recent events—such as the Israel–Hamas war—could alter the accuracy of these predictions, given the potential effect on energy prices.

Our take: “Despite weaknesses in manufacturing demand and production and a multitude of challenges globally, consumers and businesses continue to spend, providing resilience to the U.S. economy,” Moutray told us.

• “Even with recent cooling, the labor market and wage growth remain solid, and firms continue to make investments in the domestic market. While real GDP is likely to slow in the next few quarters following a very strong Q3, the ‘soft landing’ scenario has become more probable in recent months.”

Logistics companies are increasingly using “flexible workers” to fill open positions, according to The Wall Street Journal (subscription).

What’s going on: More operators, competing with other employers that allow workers to make their own hours, are offering scheduling and shift flexibility.

• They’re using specialized software to do it, one source told the Journal, adding that the practice is one of the ways logistics firms are hiring in the runup to the holiday season.

Why it’s important: This “flexibility in a field known for rigid schedules and grueling workloads is a sign that the practices of app-driven operators are seeping into more traditional workplaces, particularly in a tight market for blue-collar workers.”

Vetted and ready: Not just anyone can fill a warehouse-worker slot, in part “because industrial jobs require specific training and expertise, logistics experts say.”

• To ensure those they bring on are qualified, logistics companies have begun using warehouse-tailored gig-worker apps, in which “[w]orkers set their availability in advance … and go through a background screening process” with the app company.
• Logistics companies often use traditional staffing agencies “particularly for the peak holiday season. But some are looking to fill jobs when they need people in a more targeted way, such as Monday mornings to catch up with e-commerce orders that came in over the weekend.”

A supplement, not replacement: Even companies that plan to stick with full-time employees are seeking ways to use the gig model to their advantage.

• “PepsiCo is testing a platform that allows warehouse workers to easily swap shifts from their smartphones, among other functions, said John Phillips, senior vice president of customer supply chain and global go-to-market.”

Prices paid by consumers for a variety of goods and services rose faster than expected last month, according to CNBC.

What’s going on: “The consumer price index, a closely followed inflation gauge, increased 0.4% on the month and 3.7% from a year ago, according to a Labor Department report Thursday. That compared to respective Dow Jones estimates of 0.3% and 3.6%.”

Core CPI: Core CPI, which excludes often-volatile food and energy costs, were in keeping with economist expectations, inching up 0.3% on the month and 4.1% year over year.

The details: Housing costs accounted for most of the inflation uptick.

• The shelter index—which composes about a third of the CPI weighting—rose 0.6% in September and 7.2% from September 2022.
• Food and energy costs rose 0.2% and 1.5%, respectively.
• Prices for services, “considered a key for the longer-run direction for inflation,” rose 0.6% excluding energy services.

What it means: “These data are not likely to change the trajectory of monetary policy, with the Federal Open Market Committee likely to pause [interest-rate hikes] once again at its Oct. 31–Nov. 1 meeting,” said NAM Chief Economist Chad Moutray. “Interest rates are not likely to see a cut until mid-to-late 2024.”
 

To say there was a lot for students to see and do at chemical manufacturer BASF’s MFG Day event at River Parishes Community College last Friday would be an understatement.

• The activities at the Gonzales, Louisiana, college were made possible by a partnership between with the school and the Manufacturing Institute, the NAM’s 501(c)3 workforce development and education and affiliate.

A rewarding experience: Hundreds of middle and high school students gathered on the campus for a chance to learn about manufacturing and how rewarding careers in the industry can be. 

• Representatives from approximately 10 manufacturing companies and various departments at the college set up demonstration and interactivity stations where the students could find out more about the different careers and training programs available in their community.
• BASF was platinum sponsor of this year’s MFG Day, a flagship initiative of the Manufacturing Institute that introduces students, parents and educators to the manufacturing industry.

Hands-on activities: Students got the chance to conduct science experiments (including one in which they made putty and learned how different chemicals react to create the substance), simulate firefighting, experience virtual and augmented reality welding systems, try out process control simulators and more. 

Readying the future workforce: Partnerships between academia and industry are helping to deliver the right workers to the right jobs, Louisiana Economic Development Secretary Don Pierson told the students and other audience members during the day’s kickoff event.

• The LED’s “FastStart workforce development [program], that integrates with community colleges and four-year universities across our state, help[s] guide and then make the recipe to deliver exactly what BASF needs, exactly what Shell needs, exactly what ExxonMobil needs” in its workforces, Pierson said.

Read the full story here.
 

The “Big Three” carmakers are being forced to keep laying off workers as the United Auto Workers union continues its strike, according to CBS News.

What’s going on: To date since the strike began, General Motors, Ford and Stellantis have had to lay off a total of 4,835 employees.

• “While we are doing what we can to avoid layoffs, we have no choice but to reduce production of parts that would be destined for a plant that is on strike,” Ford Vice President for Americas Manufacturing and Labor Affairs Bryce Currie said in a statement this week, CBS reports. “Strike-related layoffs are an unfortunate result of the UAW’s strategy.”
• In addition, many auto suppliers have suspended the employment of hundreds of workers because of the strike.

Why it’s important: Economic losses to the auto industry through the first three weeks of the strike totaled approximately $5.5 billion, Michigan-based economic consultancy Anderson Economic Group estimates.

• That figure includes $2.68 billion in lost revenue for the carmakers, $579 million in direct wages for workers, supplier losses of $1.6 billion and dealer and customer losses of $1.26 billion.

The NAM’s take: “The strike is causing tremendous economic harm throughout the economy,” said NAM Vice President of Economic Policy Brandon Farris. “It isn’t just the automakers, but every employee that has been laid off and many of the small and medium manufacturers that supply them.”

• “Many of those manufacturers may never recover,” he continued. “The NAM strongly urges a quick resolution. The longer the strike lasts, the harder it will be to undo the drastic economic harm caused to employees and manufacturers.”

As United Auto Workers President Shawn Fain prepares to give an update on labor-contract negotiations this afternoon, the UAW’s three-week-old strike at plants across the Midwest is hurting auto suppliers, according to The Washington Post (subscription).

What’s going on: “More than 3,000 supplier employees have been affected so far, a Washington Post tally shows, while an industry association says nearly 30 percent of its supplier members have resorted to layoffs.”

• More than 60% of suppliers said they expected to begin layoffs this month. Others say these cuts could “broaden over time” if the strike continues
• The strike has reverberated beyond the automotive sector, too. U.S. Steel recently announced 300 temporary layoffs after it was forced to idle an Illinois furnace because of the walkouts.

Why it’s important: “The [strike’s] fallout shows the outsize role the auto industry plays in the U.S. economy, to which it contributes about 3 percent of gross domestic product.”

• What’s more, the widespread shuttering of smaller auto suppliers—which number in the thousands and are often the main source of employment in the areas where they operate—would make it harder for General Motors, Ford and Stellantis to resume normal operations after the strike.

Manufacturers say: “The longer the strike, the more likely thousands of citizens across Michigan will face layoffs, and not just UAW members,” John Walsh, president and CEO of the Michigan Manufacturers Association (an NAM state partner), wrote in The Detroit News (subscription).

• “Layoffs, in turn, will affect restaurants, stores and local businesses. The economic impact will be felt throughout our families and our communities.”

After months of slow growth, China’s economy is showing signs of picking up speed, “offering a glimmer of hope” for the U.S. and Europe, according to The Wall Street Journal (subscription).

What’s going on: “Factories in September reported their first expansion in activity since the spring, while railway and flight bookings point to a bumper week ahead for tourism as China takes a break to celebrate its weeklong National Day holiday.”

The big picture: While economists say it’s too early to call an economic turnaround—owing in large part to China’s continuing property-market slump—there are signals that things are improving.

• “An official gauge of activity in the nation’s manufacturing sector rose to 50.2 in September from 49.7 in August, China’s National Bureau of Statistics said Saturday, the first time since March that its purchasing managers index crept over the 50 mark that separates expansion from contraction.”
• Similar gauges for nonmanufacturing sectors and construction also expanded at a faster pace.
• With that said, the country’s manufacturing and overall economic growth are well below what was expected earlier in the year—particularly in the aftermath of last year’s “zero-COVID” policies. That has implications for both China and the global economy, according to NAM Chief Economist Chad Moutray.

What’s next: Many economists believe that to continue this growth, China needs more government stimulus. This could come in the form of household tax breaks, or cash or vouchers that consumers can spend directly. 
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Washington, D.C. – Following the U.S. Supreme Court’s denial of cert to reconsider the D.C. Circuit’s decision affirming the validity of Optional Practical Training extension for STEM graduates, a program that expands access to hundreds of thousands of skilled workers for manufacturers and other American businesses, National Association of Manufacturers Chief Legal Officer Linda Kelly released the following statement:

“Today’s decision ends a years-long legal battle, and the NAM Legal Center is proud to have fought to preserve the STEM OPT program, which will aid manufacturers in filling critical, skilled positions. Thanks to the NAM Legal Center’s efforts, the STEM OPT program will remain a vital talent pipeline, providing opportunities for those graduates in science, technology, engineering and math to enhance their education through hands-on work.

Background: In 2018, after an anti-immigration activist group brought a lawsuit against the Department of Homeland Security seeking to invalidate the entire STEM OPT program, the NAM and two other business groups moved to intervene as defendants in the case. The U.S. District Court for the District of Columbia ruled in the NAM’s favor in 2020, holding that DHS acted within its statutory authority and in accordance with the Administrative Procedure Act by continuing the STEM OPT program, a decision the D.C. Circuit affirmed in 2022. Today’s decision by the Supreme Court not to hear the case maintains the Circuit Court’s ruling and preserves the STEM OPT program.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 55% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.