With manufacturers reporting the sector's growth is steadily on the move in 2015, the long term future of the industry depends on the health of the job market and the economy. While the state of manufacturing was shaky during winter 2014, manufacturers across the board are now optimistic about business expansion, both in revenue and hiring.
Here are widespread changes to expect in manufacturing:
Manufacturers urge favorable government policies to support sector
In a response to President Barack Obama's State of the Union address, Jay Timmons, president and CEO of the National Association of Manufacturers, called for federal government policies designed to help boost manufacturing.
"Other solutions the president proposed, such as addressing our workforce issues and skills gap and ensuring we have a long-term solution to our infrastructure needs, are critical to sustain the manufacturing comeback and allow manufacturers in the United States to innovate, create jobs and thrive," Timmons said a statement.
Manufacturers favor policies related to increasing energy access, which could help lower costs of feedstocks used in manufacturing, such as plastic, as well as reduce production costs when running machinery.
What job growth means for manufacturing
The economic impact of manufacturing on the U.S. economy totals $2 trillion per year, NAM said, citing data from the Bureau of Economic Analysis. NAM highlighted the progress the manufacturing sector made since the recession as the sector represents 12 percent of the gross domestic product of the U.S.
The U.S. Department of Labor said the job market added 257,000 positions in January. RBS Global Banking & Markets Economist Guy Berger said the latest Labor Department release is the best employment report in recent years and job growth could continue to pick up into 2015, The New York Times reported.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a client note that the gains in the employment rate and payrolls are strong, according to the Times. He also said that wage growth could see increases.
Productivity boost in the manufacturing sector
The latest U.S. Bureau of Labor Statistics report found labor productivity in the private sector declined at an annual rate of 1.8 percent in the fourth quarter of 2014. Although productivity decreased, output grew 3.2 percent and hours rose 5.1 percent – the biggest percentage gain since the fourth quarter of 1998.
Although productivity decreased for the entire nonfarm business sector, manufacturing had a high-performing year with productivity increasing year over year in 2014. In 2014, productivity rose 2.5 percent from the previous year. Even with the productivity increase, manufacturers still kept costs down as unit labor costs were unchanged. Although unit labor costs did not move, manufacturers are paying their workers more, which could increase productivity because workers are more motivated. Real hourly compensation in the manufacturing sector inched up 0.8 percent, according to BLS.
As companies aim to recruit younger workers into the field, increasing compensation could be key to fill employment vacancies. In addition, employers will have to make a greater effort to retain their talent in the face of increasing competition for skilled workers, Manufacturing.net reported.
While NAM urged the president to implement policies that could increase U.S. manufacturing competitiveness on the global stage, companies are increasingly developing solutions to their hiring problems. One of these is providing engagement programs as well as offering flexible work hours.
"As the demand for skilled workers is increasing and the supply is decreasing, employers are learning that they have to attract talent with benefits beyond health care, including competitive wages, employee engagement programs and a strong safety culture," Traci Fiatte, president of Randstad Staffing, told Manufacturing.net. "For some manufacturing positions, employees are looking for flexible working environments and even some work-from-home options."