A speedy recovery in the manufacturing sector has industrial executives grappling with parts and labor shortages as well as supply chain snags.

Boyden's perspectives on the news and trends that are transforming industries

New types of uncertainty are keeping manufacturing executives up at night. Many were caught unawares when last year’s steep downturn rapidly reversed course. Now companies are struggling to recruit enough staff to keep up with demand. “It was a lot easier to turn the lights out than to ramp up,” said Chief Economist Diane Swonk of accounting firm Grant Thornton. “Manufacturers weren’t prepared for a surge of demand in goods.”

The turnaround in the manufacturing sector reflects the U.S. economy’s overall return to good health. On April 29, the Commerce Department reported that the economy grew by 6.4% in the first quarter, following a 4.3% increase in the fourth quarter of 2020. In March alone, orders for durable goods were up by .5%.

Demand is likely to continue growing. Chad Moutray, Chief Economist for the National Association of Manufacturers, notes that factory production is expected to return to pre-COVID-19 levels by the third quarter. “We’re seeing gangbuster levels of orders,” he said. “But the sector has a lot of challenges, like a rise in raw material costs, supply chain disruptions, logistics bottlenecks and worker shortages.”

The semiconductor shortage in particular has been problematic for executives like Christie Wong Barrett, CEO of Michigan-based MacArthur Corporation, which makes labels and decals. Her biggest customers, car companies, started delaying and cutting orders when they found themselves unable to obtain chips for their vehicles. “Customers are struggling to meet launch timelines and production targets,” she said, adding that this “trickles down to different suppliers.”

Scott Paul, President of the Alliance for American Manufacturing, said it will be a challenge to rebuild factory employment. The root of the problem lies in a long-term downward trend: Over 12 million Americans work in factories, but this has declined from more than 17 million 20 years ago. While the sector is bouncing back from the pandemic, it never fully recovered from the series of economic blows it sustained over the past few decades – such as the 9/11 attacks and the Great Recession.

Paul hopes that President Biden’s plan to revitalize American manufacturing, as part of his broader infrastructure plan, will help. “He’s pretty serious about some form of industrial policy,” Paul told the New York Times. Biden's proposed $2 trillion infrastructure plan allocates $300 billion to boosting manufacturing. This includes $50 billion for investments in semiconductor manufacturing and research and $174 billion toward electric vehicles.

Manufacturing executives along the supply chain share similar hopes. “We feed the companies whose products go into infrastructure,” said Kathie Leonard, CEO of Auburn Manufacturing, referring to the heat- and fire-resistant fabrics her company makes at its factories in Maine. “The infrastructure plan holds promise for companies like us.”

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