Labor and Employment

Manufacturing job openings inched down in June, U.S. Bureau of Labor Statistics data showed, and manufacturers continued to see business challenges in July, according to the ISM® Manufacturing Purchasing Managers’ Index®.

What’s going on: Open positions in the manufacturing sector declined approximately 4.28%, to 582,000 in June from 608,000 in May. Meanwhile, economic activity in the manufacturing industry declined for the ninth month in a row in July.

• While the Manufacturing Purchasing Managers’ Index was 46.4 in July, up from 46.0 in June, any number under 50 indicates contraction.
• In employment, durable goods job openings decreased to 356,000 in June from 379,000 in May. In nondurable goods, openings fell to 226,000 from 229,000 in the same period.

The details: New orders (up to 47.3 from 45.6) and production (up to 48.3 from 46.7) declined more slowly in July, according to the ISM®.

• However, employment fell to 44.4 from 48.1, and exports declined to 46.2 from 47.3.

Hiring: Manufacturing’s net hiring—hires minus separations—in June was 6,000, the same as the pace in May.

• Job openings in the sector remained above pre-pandemic levels.

United Parcel Service Inc. and the International Brotherhood of Teamsters came to a tentative agreement on a five-year labor contract yesterday, according to NBC News.

What’s going on: “Union leaders announced the deal midday Tuesday, hours after resuming negotiations following a breakdown in talks on July 5. The handshake agreement must still be approved by rank-and-file union members at UPS to take effect.”

• The current contract between the parties was set to expire on July 31. Earlier this year, the Teamsters overwhelmingly voted to strike beginning as soon as 12:01 a.m. Aug. 1 if no agreement had been reached.
• The tentative agreement—said to be worth about $30 billion in total—averts the possibility of a strike, which could have further snarled manufacturing supply chains and significantly affected domestic shipping services.
• The contract covers 340,000 UPS workers.

What they’re saying: “The deal, [UPS CEO Carol Tome] said, ‘continues to reward UPS’s full- and part-time employees with industry-leading pay and benefits while retaining the flexibility we need to stay competitive, serve our customers and keep our business strong.’” She called it a “win-win-win.”

• Teamsters President Sean O’Brien said in a statement that the deal “sets a new standard in the labor movement and raises the bar for all workers.”

Why it’s important: “A work stoppage by UPS drivers would have been the largest single-employer strike in U.S. history. A recent forecast by the Anderson Economic Group estimated that a 10-day walkout would cost the U.S. economy some $7 billion, with workers racking up $1.1 billion in lost wages and UPS seeing $816 million in losses.”

Our take: “Manufacturers applaud today’s agreement between @UPS and @Teamsters and thank both parties for working quickly to reach a resolution that provides our industry with the supply chain certainty we need to keep the U.S. economy strong,” the NAM tweeted yesterday following news of the deal.

Manufacturing activity in July has contracted for the eighth time in nine months, though the pace of decline has slowed markedly. The S&P Global Flash U.S. Manufacturing PMI rose to 49.0 in July from June’s 46.3.

The details: Output increased to 50.2 in July, from 46.9 in June. New orders rose to 48.5 from 42.9.

• Export demand saw significant progress (up to 48.7 from 44.9).
• Hiring increased to 52.8 from 52.3
• Future output picked up speed, increasing to 69.8 from 63.6.

However … The S&P Global Flash U.S. Services Business Activity Index dipped to a five-month low of 52.4, down from June’s 54.4, indicating a decline in business activity among service providers.

Across the pond: Manufacturing activity continues to decline in Europe, particularly in Germany, according to the S&P’s HCOB Flash Eurozone Manufacturing PMI.

• The headline Eurozone index fell to 42.7 in July from June’s 43.4, signaling a post-COVID-19 low.

Speaking of the importance of flexibility, a Harvard Business Review survey of 5,700 onsite US workers in industries like manufacturing, transportation and health care found a mismatch between the flexibility options that companies provide and what employees actually want.

What companies are offering: The most common flexibility options that onsite workers reported were relaxed dress code (55%), flexible start and end times (33%) and choice over hours they worked (31%).

What onsite workers want: When asked what flexibility options they would change jobs to get, onsite workers reported increased paid time off or vacation time (57%) and four-day work weeks (44%).

Employee engagement matters: People with engaging work and one week of vacation report 25% higher well-being than actively disengaged workers who have six or more weeks of vacation, according to Gallup research.

• Among those with fully onsite work responsibilities, Gallup finds that those with a four-day work week report lower active disengagement and higher overall well-being.

Which manufacturing sectors experienced the most growth in job openings over the past year? We used Lightcast™ to dive into the 789,969 unique job postings for the past 12 months (May 2022 to May 2023) and organized by North American Industrial Classification (NAICS) codes. In this case, we are better able to understand what sectors are experiencing the most growth. As a reminder, the data get more granular with increased digits.

The top manufacturing sectors over the past 12 months at the 3-digit NAICS level, ordered by the number of unique postings, were:

1. Computer and Electronic Products (NAICS 334) – 103,507 unique postings
2. Transportation Equipment (NAICS 336) – 93,075
3. Food Manufacturing (NAICS 311) – 78,397
4. Machinery (NAICS 333)– 74,193
5. Chemicals (NAICS 325) – 72,254

The top manufacturing sectors over the past 12 months at the 4-digit NAICS level, ordered by the number of unique postings:

1. Navigational, Measuring, Electromedical, and Control Instruments Manufacturing (NAICS 3345) – 66,411 unique postings
2. Beverage Manufacturing (NAICS 3121) – 54,837
3. Aerospace Products and Parts (NAICS 3364) – 40,541
4. Pharmaceuticals and Medicines (NAICS 3254) – 27,442
5. Motor Vehicle Manufacturing (NAICS 3361) – 25,006

➔   The takeaway: Though growth in manufacturing has been broad-based, many of the sectors leading job creation over the past year require advanced skills and yield high salaries. Looking at only the top five 4-digit NAICS manufacturing sectors list above, the median advertised salaries for those five sectors over the past 12 months was $36.12 per hour.  

* Lightcast™ data accessed on June 16, 2023.

The big number: 74.4% of respondents in the Q2 NAM Manufacturers’ Outlook Survey cited the inability to attract and retain workers as their primary business concern, even amid signs of a cooling labor market. This is the third consecutive quarter in which this concern appeared at the top of respondents’ list.

• In the previous survey, more than 59% of manufacturers said that not having enough employees would impact their ability to make investments or expand.

Manufacturing: Manufacturing employment rose by 7,000 in June, continuing to seesaw from month to month over the year to date.

• The sector added just 15,000 workers during the first six months of 2023, slowing materially after adding a robust 385,000 and 390,000 employees in 2021 and 2022, respectively.
• More positively, there were 12,989,000 manufacturing employees in June, just shy of February’s total of 12,988,000, which was the most since November 2008.

Nonfarm payrolls: Nonfarm payroll employment rose by 209,000 in June, slowing from 306,000 in April but still a good figure. The U.S. economy has added 1,669,000 workers through the first half of 2023, a robust pace.

• The unemployment rate edged down from 3.7% in May to 3.6% in June, as the economy remains at or near “full employment.”
• The number of employed workers increased from 160,721,000 in May to 160,994,000 in June, which was not far from April’s record level (161,031,000). Those who were unemployed declined from 6,097,000 to 5,957,000.
• The labor force participation rate remained at 62.6% for the fourth straight month, the best rate since March 2020.

Job openings: There were 604,000 manufacturing job openings in May, down from 668,000 in April and the lowest level since February 2021. Even with the overall labor market remaining solid, the number of job postings in the sector continues to cool notably, as expected.

• Total quits in the manufacturing sector rose to 293,000 in May, an 11-month high. In addition, total quits in the overall economy increased to 4.015,000, the most since December.
• With that said, layoffs in the manufacturing sector have also risen, up to 139,000 in May, the highest level since July 2020.
• Meanwhile, nonfarm business job openings declined from 10,320,000 in April to 9,824,000 in May, a solid reading. In May, there were 62.1 unemployed workers for every 100 job openings in the U.S. economy.

Wages: The average hourly earnings of production and nonsupervisory workers in manufacturing jumped 1.0% to $26.41 in June, with 5.6% growth over the past 12 months, up from 4.7% in May.  

➔  Key takeaway: Manufacturers continue to cite an inability to attract and retain workers as their top challenge. While there are signs that the labor market is cooling, both for manufacturers and the macroeconomy, employment remains not far from a 15-year high while wage growth continues to increase very solidly.

Attracting and retaining a quality workforce has long been a top business challenge for manufacturers. The Parts Life Inc. family of companies is no different—but its variety of workforce strategies have led to considerable hiring success.

The Moorestown, New Jersey–based manufacturing group—which consists of engineering firm Parts Life, armament support manufacturer DeVal Lifecycle Support and electrical manufacturer LC Engineers—offers a number of inducements for new and existing workers, President and CEO Sam Thevanayagam explained. Together, they are helping the companies, and their workers, thrive.

The plan: “We create an environment where [people] can achieve their God-given potential,” Thevanayagam told us.

• After being inspired by several books—David Docusen’s “Neighborliness” and Hernando De Soto’s “The Mystery of Capital” among them—Thevanayagam sought to provide workers with a range of benefits, some of them unusual for an employer to offer.
• “In ‘Neighborliness,’ [Docusen] realized people need education, a job, health care and housing to be successful and build community,” Thevanayagam said. “So we are making sure we are offering these things to our people.”
• For example, Parts Life recently devised a financial program called Help U Buy, which helps workers buy their first homes. 

Helping the whole employee: Parts Life offers its employees a variety of educational opportunities to help them advance at the company and better their lives.

• Approximately 40% of the workforce at DeVal Lifecycle Support is made of immigrants to the U.S., according to Thevanayagam.
• To help employees learn the language, the Parts Life companies offer no-cost formal English courses with a trained Teaching English as a Second Language instructor. “It’s helped them not just at work, but in being better neighbors, parents and citizens, too,” Thevanayagam
• The businesses also offer free basic financial management classes for workers.

Upskilling: Several years ago, when a nationwide shortage of trained machinists began to impede the companies’ operations, Thevanayagam devised a fix. Parts Life would “create” its own machinists.

• “As difficult as it is to find a trained machinist, it’s even harder to find teachers” for machining, Thevanayagam said. Once Parts Life found and hired a machinist instructor, the company had him begin training other employees.
• “Now he’s working with about 10 of our machinists—upskilling them, teaching them everything” they need to know, Thevanayagam said. “He’s sort of like a pitching coach, working with them on their technique and speed. That’s the model we’re using. … It really increases employee engagement and retention.”

Talent in the community: The Parts Life family of companies is also building relationships with local schools in an effort to find potential hires.

• These include partnerships with technical high schools that offer welding and machining training and partnerships with local colleges and universities to source engineering and business talent.
• “I look at [the partnerships] as building an entire ecosystem,” Thevanayagam said. “These are ways to be able to recruit and retain good people.”

Veterans: Lastly, Parts Life has had success in hiring from another pool: veterans. One of the reasons? It is willing to provide needed accommodations.

One recent veteran hire, a former U.S. Marine, had post-traumatic stress disorder and a substance-abuse problem when he was brought on board and “we were able to … get him counseling and get him a support system through veterans organizations,” Thevanayagam said.

• “We try to be veteran-ready,” said Thevanayagam, adding that veterans now account for about 3% to 5% of Parts Life companies’ workforces. “These are people who have sacrificed for our country—and I want to make sure we are an environment where they can achieve.”

The last word: “The fact that we’re able to create meaningful work for people so they have the ability to … become part of the American dream—it’s a big part of who we are,” said Thevanayagam. 

Read more: As the 501(c)3 nonprofit workforce development and education affiliate of the National Association of Manufacturers, the Manufacturing Institute is a trusted adviser to manufacturers, equipping them with solutions to address the toughest workforce issues. Visit the MI’s site for workforce solutions insights and resources.

Industrial production declined 0.5% in June for the second month in a row, the Federal Reserve reported today, according to Bloomberg (subscription).

What’s going on: “The June index of production at factories, mines and utilities decreased 0.5% for a second [consecutive] month, Federal Reserve data showed Tuesday. Manufacturing output declined 0.3% in June, the most in three months.”

• The central bank’s index of manufacturing output has dipped 0.3% from June 2022, with production hamstrung “by lackluster export markets, efforts to work down inventories and more limited consumer spending on merchandise.”

The details: Consumer goods output declined 1.3% in June, the biggest drop in more than two years and a reflection of decreased production across a wide swath of categories, including automotive vehicles, apparel and appliances.

• Materials output also declined, while production of business equipment was flat.

Some good news: “[M]anufacturing may benefit some in coming months as retailers get inventories more in line with sales and the pace of goods inflation slows. Separate data on Tuesday showed retail sales rose by less than forecast, while an underlying measure of household spending pointed to a more resilient consumer at the end of the second quarter.”

U.S. wages are now growing faster than inflation for the first time in two years, helping workers but muddling Federal Reserve attempts to lower price increases, according to The Wall Street Journal (subscription).

What’s going on: “Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the Labor Department. That marked the second straight month of seasonally adjusted gains after two years when workers’ historically elevated raises were erased by price increases.”

• In manufacturing, wages are up 5.6% over a year ago, according to NAM Chief Economist Chad Moutray.

More to enjoy: “In addition to enjoying solid wage growth, Americans are taking comfort in slower price increases for everyday items—such as gasoline and groceries—that have the biggest influence on their perception of inflation.”

• However … Adjusted for inflation, pay growth “remains below the trend in the five years before the pandemic,” one source told the Journal.

Why it’s important: If wages continue to surpass cost increases, they could encourage more spending, which could help the economy avoid a recession.

• In recent months, Journal-polled economists have been less confident that there will be a recession in the next 12 months. However, Americans in general continue to expect a recession, according to the article.

The Fed’s role: The Federal Reserve has increased the benchmark interest rate 10 times in the past 16 months and has indicated it will raise it again later this month.

• “‘It’s great to see wage increases, particularly for people at the lower end of the income spectrum,’ [Federal Reserve Chairman Jerome] Powell said [in June]. ‘But we want that as part of the process of getting inflation back down to 2%, which benefits everyone.’”

The last word: “With manufacturers continuing to cite workforce challenges, even in a cooling labor market, wage growth remains significant,” Moutray said. “The average manufacturer pays $26.41 [an hour] nationally for production and nonsupervisory workers, up 5.6% from one year ago, a very solid rate. Relief on growth in consumer inflation will allow those employees to realize the purchasing power of those dollars more fully.”

Further resources: For more workforce solutions and insights, check out the resources of the Manufacturing Institute, the NAM’s 501(c)3 nonprofit workforce development and education affiliate.
 

California’s port system will get a $1.5 billion upgrade, according to Sourcing Journal (subscription).

What’s going on: “The Port of Los Angeles has been awarded $233 million in grants, while the Port of Long Beach received $383 million. The Port of Oakland got $119 million in funding, and the Port of Hueneme received $80 million.”

• “$1.2 billion will go to 15 projects designed to increase the capacity to move goods throughout the state’s global trade gateways while lessening environmental impacts on neighboring communities.”
• At Los Angeles, grant-funded improvements are set to include “a project that augments an existing partial roadway that directly serves 10 percent of all waterborne containers entering and exiting the entire United States.”

The background: The investment announcement by California Gov. Gavin Newsom late last week came less than a month after the Pacific Maritime Association and the International Longshore and Warehouse Union—dockworkers and their employer, respectively—reached a tentative six-year labor agreement at all 29 West Coast ports.

Why it’s important: The grants will decrease port congestion, boost business, add jobs and help operations use more zero-emissions energy, sources told the publication.

What we’re saying: “These types of congestion- and capacity-focused upgrades will ensure that ports across California remain operationally sound for years to come,” said NAM Director of Infrastructure, Innovation and Human Resources Policy Ben Siegrist.

• “As with the historic investment funded by the bipartisan infrastructure law, these improvements will keep products flowing and manufacturing lines open.”