America 2020 - How to manufacture more business with fewer workers

There was an economic report from earlier this week on the state of US manufacturing, and I think it says a lot about where we are at this point in the “recovery”.

U.S. manufacturing activity accelerated to a nearly two-year high in August amid a surge in new orders, but employment continued to lag, supporting views that the labor market recovery was losing momentum…

The ISM’s forward-looking new orders sub-index increased to a reading of 67.6 in August, the strongest since December 2017, from 61.5 in July. The survey’s measure of order backlogs at factories accelerated as did orders for exports.

Though factory employment continued to improve last month, it remained in contraction territory. The ISM’s manufacturing employment measure rose to a reading of 46.4 from 44.3 in July.

Factory employment was already in decline before the coronavirus crisis because of the Trump administration’s trade war with China. Its struggle to rebound even as orders received by factories are rising fits in with economists’ views that the labor market was losing steam after being boosted by the reopening of businesses in May.

Same story held for the Census Bureau’s monthly report for new orders, shipments and inventories, which hit today.

New orders for manufactured goods in July, up three consecutive months, increased $27.8 billion or 6.4 percent to $466.1 billion, the U.S. Census Bureau reported today. This followed a 6.4 percent June increase. Shipments, also up three consecutive months, increased $21.3 billion or 4.6 percent to $479.5 billion. This followed a 10.0 percent June increase. Unfilled orders, down four of the last five months, decreased $8.3 billion or 0.8 percent to $1,084.3 billion. This followed a 1.4 percent June decrease. The unfilled orders-to-shipments ratio was 6.70, down from 7.01 in June. Inventories, down following two consecutive monthly increases, decreased $3.1 billion or 0.5 percent to $687.2 billion. This followed a 0.5 percent June increase. The inventories-to-shipments ratio was 1.43, down from 1.51 in June.

All of this sounds like quite a bounce-back, but at the same time, the jobs in manufacturing aren’t rebounding in the same way. The monthly jobs reports indicate that manufacturing employment flatlined in the 2nd half of last year, fell off a cliff as COVID-19 broke out, and hadn’t made back half of those losses as of July.

And today’s release of the full “gold standard” Quarterly Census of Employment and Wages (QCEW) said that 2019 and early 2020 was even worse than what the monthly reports were indicating. The QCEW shows that manufacturing jobs were already being lost by the end of 2019, and more than 100,000 manufacturing jobs had been lost by March 2020.

The same holds for Wisconsin, where the QCEW report says that there were more than 6,000 jobs lost in manufacturing year-over-year in both January and February, BEFORE COVID-19 broke out. And even as manufacturing allegedly recovers nationwide, Wisconsin manufacturers have been announcing layoffs in high numbers. Check out the list of Wisconsin’s mass layoff announcements from August and how many of them are manufacturers.

In addition to those WARN announcements, here is the list of other mass manufacturing layoffs that were slated to happen between the end of July and the end of September.

Manufacturing layoffs, Wisconsin July 31-Sept 30, 2020
Verso Paper Mill, Wisconsin Rapids (902 jobs, 7/31)
Renaissance Manufacturing, Waukesha (120 jobs lost, starting 7/31)
Humane Manufacturing, Janesville (21 jobs, 7/31)
Astec Industries, Mequon (135 jobs, 8/14)
Novares Engine Components, Richland Center (74 jobs, 8/17)’
Adecco USA, Wauwatosa (120 jobs, 8/28)
Nova Wildcat Shur-Line, St. Francis (78 jobs, 9/4)
MRQUIS yACHTS (57 jobs, 9/11)
Briggs & Stratton, Wauwatosa (184 jobs, 9/25)


So there are allegedly more orders and business for manufacturers in Wisconsin in America, but fewer workers. Wall Street may like that combination, but it sure doesn’t give much to the average American.

It also is yet another area of the economy where August’s and September’s numbers feel like major indicators as to whether we stay at a reduced “new normal”, or if we continue to head back toward where we were at the end of 2019.