U.S. factories emerge as a strong point in a weakening economy

It’s been a very good year for US manufacturing.

The factories have added 467,000 jobs over the past 12 months. And factory production in September was the highest in 14 years, according to the Federal Reserve.

Even as other industries struggle under the weight of rising interest rates, factories are churning out products to satisfy insatiable consumer demands for cars, computers and candy bars. Now, manufacturers are working to expand capacity as they grapple with supply and labor constraints and look to the near future where some economists and many on Wall Street are talking of a looming recession.

Auto production has faltered in recent months as automakers continue to struggle with semiconductor shortages. But September was a good month for auto manufacturing, with production up 1%.

Ten months ago, Drew Greenblatt bought the Madsen Steel Wire Products factory in Orland, Indiana, which supplies automakers, among other things.

“Since we bought them, we’ve grown the company from 33 employees to 53 employees,” says Greenblatt. “We have invested in new technology, robotic press brakes and new bathrooms for employees. It is an aggressive attempt to reinvest in the factory because we are so enthusiastic and optimistic about the future.”

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The semiconductor shortage epitomizes the challenges factories have faced during the pandemic to obtain the parts and consumables they need. While those challenges have eased somewhat, managers say supply chains are still not back to normal.

“I try to keep enough parts on the shelf,” says Betty Jane Parrott, whose family business, Milwaukee Metal Products, has been in existence for more than a century. “But if I have two on the shelf and sell two, I can’t sell another one until I get a new one back. And with a lead time of four or five months, I can’t predict that far in advance what I want, I’m going to need it.”

Finding skilled workers is also a challenge, Parrott said.

“A lot of the baby boomers retired during COVID, and they had years of experience,” she says. “We’ve been looking for qualified welders for about a year. The qualified people, the trained people, are very, very difficult to find.”

Manufacturing is still a long way from its peak of more than 40 years ago

Factory employment rebounded to pre-pandemic levels in June — two months earlier than overall employment in the United States. Factories added 22,000 jobs in September, up from 27,000 the previous month.

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“Manufacturing is rebounding,” President Biden declared last month, touting what he called “the strongest recovery in manufacturing jobs since the 1950s.”

But US factories still employ about two-thirds as many people as they did at their heyday in 1979, when factories accounted for almost 22% of all jobs in the country. Today, less than 9% of US jobs are in manufacturing.

“Every president wants to increase production. But the future of jobs is in the service sector,” says University of Michigan economist Betsey Stevenson.

While some manufacturing jobs have been offshored, US factories have also become more efficient, allowing them to produce more things with fewer workers.

“We’ve become so much more productive at making things that we only have to devote a small fraction of our resources—our people, our time, our factories, our equipment—to making things,” says Stevenson.

Factory jobs are also more skilled these days as workers need the expertise to handle more advanced equipment.

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While new Federal Reserve data shows that factory production is still growing, there are anecdotal signs that demand for manufactured goods may be slowing.

A recent survey by the Institute for Supply Management found that new factory orders have declined over the past month. And manufacturing managers have become more cautious about replacing workers when they quit or retire.

As mortgage rates have risen, home sales have declined. That should dampen demand for some industrial goods such as furniture and appliances.

Factory exports could also be impacted by the strong dollar, which makes US goods more expensive for customers in other countries.

However, factory owners like Greenblatt remain optimistic. In addition to purchasing the Indiana facility, Greenblatt has expanded its original Baltimore facility by more than 50%. And he plans to install two more robotic wire benders next month.

“We’re seeing demand right now,” Greenblatt says. “We want to provide our employees with the best technology to weather potentially stormy times.”

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