US Employment Boom Leaves Factory Workers Behind
The U.S. employment market has experienced a significant boom in recent years, with President Joe Biden’s industrial policy aimed at boosting various sectors such as semiconductors, electric vehicles, and green technologies. However, this boom in jobs has not translated to the manufacturing industry, leaving factory workers behind.
Ariens Company, a family-owned firm known for its orange snow blowers and lawnmowers, experienced a slump in sales last summer, leading to layoffs, reduced shifts, and a halt in hiring. The company’s headcount fell by 20% to 1,600 people, and the CEO does not anticipate business improving until 2025.
This contrast between the stagnant factory employment and the overall job market boom highlights the challenges faced by the manufacturing sector. While construction and certain segments of heavy industry continue to thrive, the outlook for manufacturing jobs remains weak. Economists attribute this to factors such as high interest rates, a slowing economy, and the end of the COVID-19 demand surge for manufactured goods.
The Biden administration argues that it is too early to see the full impact of its efforts. Manufacturing investments typically take six to eight quarters to translate into factory jobs, and as the Federal Reserve plans to cut interest rates later this year, more jobs are expected to follow. Some companies in states like North Carolina and Georgia are already hiring before breaking ground, signaling a positive trend for the future.
In the meantime, large producers like Deere & Co, Whirlpool Corp, and 3M Co have announced layoffs, although these reductions have been targeted rather than mass cutbacks. Many factories have chosen to curb or eliminate hiring altogether. Kondex Corp., a producer of blades used on farm machinery, was previously paying three times its normal rate to attract workers from other states but now expects attrition to reduce headcount by around 5% without resorting to layoffs.
The compounded impact of hiring freezes and targeted cuts is particularly felt in rural areas and small towns. For example, Deere recently announced the reduction of 150 workers at its Ankeny, Iowa campus, while Tyson Foods Inc is closing a nearby pork-packing plant, leaving 1,200 workers unemployed.
The decline in factory jobs has been a long-term trend in the United States as the economy shifted towards services and automation reduced the need for manual labor. Increased competition from countries like China and other cheaper sources of production further impacted the manufacturing industry. While the erosion in factory jobs leveled off before the pandemic, it resumed in late 2022 after the surge in goods consumption faded.
Manufacturing employment currently accounts for only around 8.2% of total U.S. employment, a significant drop from its peak of 22% in 1979. Data from the Institute for Supply Management shows that manufacturing employment contracted for the sixth consecutive month in March, an unusually long run outside of a recession.
However, it is important to note that manufacturing jobs can still grow with the aid of new technologies, even as they become a smaller share of the total economy. Other sectors have grown at a faster rate, allowing the overall job market to boom. Some companies, like Vermeer, a machinery maker in Iowa, continue to hire and are relieved by the current job market conditions.
The boom in factory construction is creating jobs for builders and those producing materials such as cement and steel. However, these actual factory jobs are still down the road, with 2025 being a significant year for potential growth in the sector. Despite this, the current job picture could be worse, as many employers have been hesitant to lay off workers following the labor shortages during the pandemic.
Ariens Company implemented measures to avoid further layoffs during their sales slump. Workers were required to take one week off for every week they worked, but their earnings remained similar to unemployment insurance benefits, and they retained their health insurance. Office workers and those in distribution jobs continued working full-time. As a privately owned business, Ariens Company did not face the same cost-cutting pressures as publicly traded companies, although these efforts did impact profits.
Factors such as weather also played a role in the sales slump experienced by Ariens Company, with two winters of light snow in the Eastern U.S. and summer droughts affecting demand for their products. Despite the challenges faced by the manufacturing industry, there is hope that the Biden administration’s policies and future investments will lead to a resurgence in factory jobs in the coming years.
Overall, while the U.S. employment market has seen a significant boom, factory workers have been left behind. The manufacturing sector continues to face challenges due to various economic factors, but there is optimism for future job growth as investments start to translate into tangible results.