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Lost! 6,000,000 manufacturing jobs in 9 years. Challenges in the face of our emerging recovery.

by Lee Schwartz

The reports vary wildly.  Some studies suggest that manufacturing job losses in the United States over the last 10 years approximate 2.5 million.   That would be sobering enough.  But according to the Bureau of Labor Statistics, the U.S. lost an astounding 6,000,000 manufacturing jobs between 2000 and 2009.  Staggering numbers by any gauge!

Let’s consider the biggest causes for the dramatic drop in jobs:

  • Offshoring.  Before the economy tanked, jobs were leaving the U.S. in droves.  Data from the U.S. Department of Commerce showed that “U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers … cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”  It was believed at the time that producing offshore . . . China, Asia . . . was less expensive than manufacturing in the States.
  • Technology.  With the advance in technology, companies could produce more products with fewer staff.   I recently toured the L.A. Times production plant and watched as robots moved giant rolls of paper from one location to another.  There wasn’t a human in sight.  And software has become so much more sophisticated and comprehensive in recent years that it takes fewer people than before to complete the necessary tasks.
  • Recession.  Hard times.  Few people escaped the effects of the Great Recession.  Consumption declined dramatically.  To stay afloat, manufacturers cut costs.  Many of the surviving companies (57,000 did not survive in that period from 2000 to 2009) reduced their work force as a way to reduce expenses.

By any measure manufacturing has suffered.  Greatly.  But like many areas in our lives, there’s an ongoing cycle to it all.  Manufacturing has been on the rebound.  The Manufacturing Alliance for Productivity & Innovation (MAPI) believes manufacturing production has recovered 15% of the 20% decline caused by the recession.  Prime Advantage, an industrial buying group, surveyed its members and found that a record number (47%) of small to midsize manufacturers expect to hire in the next six months.  And ThomasNet.com’s latest Industry Market Barometer reports that nearly two-thirds (63%) of their surveyed manufacturers expect to grow this year.

This is encouraging news.  Yet, how many of the lost jobs will ultimately be recouped?  Jeff Immelt, CEO of U.S.-based conglomerate General Electric, predicts that we “aren’t likely to see all manufacturing jobs we had return, but we could see slow steady growth of the employment sector.”  I agree.  I believe that we will never rise to pre-recession levels again.  Why not?  Fear.  Improved Productivity.  Shifting generations.

Fear:  Maybe we are seeing cautiousness rather than fear.  Yes, there are signs that manufacturing fortunes are rebounding, but no one has the crystal ball to know whether the growth is sustainable.  Perhaps these signs are just a blip on the screen.  World events, over which we have little control, could derail the recovery.  Articles abound with commentary from economists cautioning us that we’re still a long way off from a substantive and sustainable recovery.  If I’m sitting in the seat of a manufacturing executive, I’m going to think long and hard about hiring and, if I do elect that path, it will be done deliberately, defaulting to the notion that fewer commitments to new hires is less risky.

Improved productivity:  During the recession, manufacturers were forced to downsize.  I’m sure there were times when the cuts were strategic and thoughtful.  My sense is that many times decisions were more reactionary than calculated.  Regardless of how companies got there, those that survived learned how to do more with less.  Not to say that the scales were balanced.  I know of many clients who asked their employees to do the work of 1-1/2 to two people under the guise that at least they still had a job.

The bottom line is that companies learned how to operate more efficiently.  Continuous process improvement, whether by choice or happenstance, became the way of life in many manufacturing companies, as I have seen from my work with my own clients.  So now, as revenues begin to climb, workers throughout the organization, whether on the shop floor or in the office, know how to produce more efficiently.  In good . . . or at least better . . . times companies won’t need to hire at the pre-recession levels.

As Perry Saiinati, Founder and President of Beldon, Inc., a Midwest-based industrial manufacturer, described, “U.S. manufacturing is in the midst of a remarkable recovery not because of job growth but because of process improvement.  It’s been about productivity.  It’s been about quality.  We’ve streamlined our factories to the point that they’re now among the most efficient in the world.”  Again, I can agree from my own client experience.

Shifting generations:  The Baby Boomers (born ~1946-1964) took the biggest hit during the downsizing and will be the last allowed back in, as fortunes improve. Gen Xers (born from early 1960s to early 1980s) are now managers.  Companies are now hiring from the cohort known as Gen Y, or Millennials (born early 1980s to 2000).  The concern being expressed by some is that manufacturing jobs may not be “cool enough” for this generation.  According to a 2012 Deloitte study, “there were approximately 600,000 unskilled manufacturing jobs in the U.S. simply because employers cannot find people with the skills they need.”  Or, it seems, the willingness to become skilled.

Manufacturers will be challenged moving forward trying to find trained, skilled employees who are passionate about working in the industries that this country was built upon.

Manufacturing is in a state of recovery.  No one knows the recovery’s duration or rate.  It is apparent that we are facing a new norm with regard to manufacturing employment – in terms of balancing our workforce with our technology and new efficiencies, in recruiting and retaining new young workers, and in anticipating the impact of our changing economy on our companies.

I welcome your comments at moc.orpztrawhcsnull@eel.

 

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