As Economic system Rebounds, Producers Face New Hurdles

Matt Guse would hire a dozen machinists – if only he could find them.

Mr. Guse, the owner of MRS Machining, a precision metal parts maker in rural Augusta, Wisconsin, notes that business is recovering so quickly that the effects of the pandemic are wearing off and his business is understaffed by 47 workers.

“I’ve turned down a million dollar job in the past two weeks,” he said. “If you do, it is difficult to go to bed at night with your head on the pillow. I have open capacities, but I need more people. “

Factories were buzzing again after a sharp downturn when the pandemic hit last year. But the pace of recovery has gotten employers in trouble. Despite huge layoffs – manufacturing employment initially fell by 1.4 million – some companies are desperate for workers.

In other cases, bottlenecks in parts like semiconductors and interruptions in the supply chain have made orders difficult to execute and created new uncertainties.

“Turning the lights off was a lot easier than turning it on,” said Diane Swonk, chief economist at the accounting firm Grant Thornton in Chicago. “Manufacturers weren’t prepared for an increase in demand for goods. You got caught a little flat-footed. “

The recovery in manufacturing signals a turning point. The Biden government is again focused on increasing the number of jobs in the factory, particularly in areas such as semiconductors and electric vehicles. This growth will be critical if the overall economy is to expand rapidly in the months ahead.

The Commerce Department reported Monday that orders for durable goods – like automobiles and home appliances – rose half a percentage point in March, leading Barclays to lower its tracked estimate of economic growth for the first quarter to 1.4 percent, or 5.6 Percent on an annual basis.

On Thursday, the government will publish its first reading on economic growth for the first three months of the year, and manufacturing is expected to be among the bright spots. Analysts polled by Bloomberg agree that the report will show GDP growth of 1.7 percent.

At one point, factory production was down significantly due to the pandemic, but it should return to pre-Covid-19 levels by the third quarter of this year, according to Chad Moutray, chief economist at the National Association of Manufacturers.

“We’re seeing gangbuster orders,” he said. “However, the sector faces many challenges, such as increases in raw material costs, supply chain disruptions, logistical bottlenecks and labor shortages.”

At MRS Machining, according to Guse, the shortage of items such as steel and metal plates is a constant problem. “Quotations for material goods from suppliers are typically valid for three to six months,” he said. “Now it’s a matter of hours.”

Like many factories, the work pays off well, starting at $ 18-20 an hour and going all the way up to $ 30. But the most skilled workers, like machinists, are still hard to find, according to Guse.

“We get applicants because people from Minneapolis and Chicago are moving out and want to live in the countryside,” he said.

Despite the good news at MRS, rebuilding all factory jobs is challenging, said Scott Paul, president of the Alliance for American Manufacturing, a political group that represents manufacturers and the United Steelworkers.

President Biden is fighting a long-term trend. Almost 12.3 million Americans work in factories. Two decades ago it was just over 17 million.

After the recent economic downturns – the decline in growth after the Asian financial crisis in the late 1990s; the break-in after the September 11, 2001 attacks; and the great recession – manufacturing failed to restore the jobs that were lost.

While the sector may have made up some ground after losing nearly 1.4 million jobs in the first few months of the pandemic, employment remains 515,000 jobs lower than in February 2020.

Some experts wonder why policymakers are so focused on manufacturing when most Americans work in service industries that have created jobs over the years and have better prospects for growth. Production, however, is one of the few avenues to a civil life for two-thirds of American adults lacking a college degree.

The average hourly wage for workers in manufacturing is $ 29.15 while those in recreation and hospitality, another area that attracts people with lower levels of education, make $ 17.67 an hour.

Mr. Paul hopes that Mr. Biden’s plan to revitalize American manufacturing as part of his larger infrastructure effort will bear fruit.

“He’s pretty serious about some form of industrial policy,” Paul said, citing the government’s call for measures to manufacture products like semiconductors and electric vehicles. “Perhaps Biden can do what no president has done since the downsizing began in Manufacturing and reverse the losses.”

The government’s plan includes $ 50 billion to invest in chip manufacturing and research and $ 174 billion to further develop electric vehicles.

The $ 2 trillion plan, which focuses on rebuilding roads and bridges, as well as the power grid, could help companies like Auburn Manufacturing of Maine, managing director Kathie Leonard said.

“We supply the companies whose products make their way into the infrastructure,” said Ms. Leonard, describing the heat and fireproof fabrics that Auburn makes in two factories in central Maine, about half an hour from Portland. “The infrastructure plan is very promising for companies like us.”

“You have to work on being an optimist,” she said. “We’re not going to hire 25 people, but maybe five. We need to hire a technical director and processor, and we need people to help with e-commerce. “

The semiconductor flaws are a headache for Christie Wong Barrett, executive director of MacArthur Corporation, a label and decal maker outside of Flint, Michigan. She said orders had been delayed by automakers – their main customers – who couldn’t find enough of the chips they needed to keep cars off the assembly line.

“Customers are struggling to meet start times and production targets,” she said. “Orders are either reduced in volume or delayed. It boils down to different suppliers and we only get one haircut across the board. “

MacArthur’s business had already been damaged when the car factories closed a year ago due to the pandemic, reducing the demand for labels and decals such as those showing tire pressures or vehicle identification numbers.

Ms. Barrett was able to pivot and deliver products for medical customers, avoiding but a handful of layoffs for her 50-strong workforce. Despite the current logistical support, she remains optimistic.

“It’s a terrible disruption right now but I expect a strong rebound,” she said. “We have never made any major cutbacks, and with auto production recovering, I expect to hire more people in the coming months.”

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