1. Increased manufacturing output not translating into job growth: Manufacturing output has risen, moving closer to the all-time high of 2007, primarily because of productivity. Manufacturing employment has been trending lower since the late 70s, owing to the advent of the computerization of manufacturing processes. “What took a thousand workers to produce in 1950 as of last year takes fewer than 200,” said William Strauss of Federal Reserve Bank of Chicago. Even though manufacturing output has been rising over time, the share of the economy represented by manufacturing has been falling. Blue Chip Economic Indicators is expecting industrial production to improve in 2017 and 2018, but at a pace below historical trends. Regarding new job creation, Ryan Sullivan of Xenith said, “Investment in R&D and new product creation will ultimately result in having more stuff to make and therefore help to continue creating opportunities for the manufacturing sector.”
2. ‘Education’ as the number one concern: Over the last 25 years, the major growth in jobs has been for people educated beyond high school while the need for less educated workers is diminishing. Talent availability and acquisition is the major problem going forward across industries. To achieve above-average industry growth, highly skilled workers are required, which are hard to find and expensive. “What we have not come to grips with is the policy and strategy to address education and the skills gap in this country,” said Joseph Anderson of TAG Holdings. As technology and automation take over jobs, skilled labor is required to control them, thereby increasing the need for a highly skilled and educated workforce. According to Ryan Sullivan, automation/ technology adaptation over time is going to be a net positive for society, as freeing up manual labor to be applied toward higher-value parts of the economy will be a net benefit in the long run.
3. Local government authorities attract talent through creative solutions: People are making choices regarding where to work and live; marketing the whole region will not yield results in attracting a workforce. According to John Sampson of Northeast Indiana Regional Partnership, people’s perception of different regions is rooted in history and not in the current state; as a result, the challenge is to get them to know the current
situation. Building the region around what the existing employees need is the right way. “The incentives game might get you some big wins, but it is not going to win in the long run,” said Don Cunningham of Lehigh Valley Economic Development Corporation. Availability of land, labor, capital, access to market and a competitive cost structure along with incentives and cooperation by federal, state, county and city councils make a difference. Appropriate incentive levels help settle roots faster; however, it is the core factors that attract companies in the long run.
4. Supply chain transition—offshore and onshore: Diversification of offshore and onshore supply chain has changed from being offshore-centric to more local in the past
decade. “We are still buying a lot of products from China, but total control of everything seems to have evolved to a lot more into NAFTA’s arena, with Mexico being the primary beneficiary,” said Joseph Anderson. According to Eric Fish, the capability required for quality products does not move easily. Ryan Sullivan said, “I think it’s a mix for us to try and find the right partners here in the US to drive our business forward.” Consumers are not willing to pay more for something produced in the US. Protectionism can be politically correct, but it’s the quality of the product and its value and use proposition that matter in the competitive world.
5. Uncertainty around investments: Investments in companies having global operations established in North America is prominent. There is a level of general optimism and positivity regarding the manufacturing industry. Cheap feedstocks, cheap energy, and the legal protection that the companies enjoy in the US along with the level of growth are some factors keeping investments active in the US. Global companies are concerned about the new policies that can be undertaken which can act as a headwind for exports
of goods. Regulatory uncertainties around FTA and NAFTA pose a challenge without stopping M&A activity. Apart from recession-resilient industries, speculation around the next recession period is keeping some companies from investing.
Prepared By TresVista
As of 7/31/17 Source: PitchBook
ACG New York Blog: Driving Middle-Market Growth 