Key Points:
- More than 67% of manufacturers report that their biggest challenge is attracting and retaining employees.
- Manufacturing sentiment inched up in Q2 at 71.2% but remained below the historical average (74.8%).
- Manufacturers are enhancing their recruitment and retention strategies mainly through internships (74.7%) and apprenticeships (57.3%).
The National Association of Manufacturers released their Manufacturer’s Q2 2024 Outlook Survey. The survey not only highlights the performance in Q2 but also identifies the challenges and expected growth rates for the next 12 months. Here are some highlights of their findings:
- Q2 Manufacturing Sentiment increased but remained below the historical average.
According to NAM’s survey for Q2 2024, 71.9% of manufacturers are either somewhat or very positive about their own company’s outlook, slightly up from Q1’s 68.7%, but remain below the 74.8% moving average.
- Workforce challenges persist.
More than 67% of manufacturers report that their biggest challenge is attracting and retaining employees, followed by rising healthcare costs (66.7%), an unfavorable business climate (59.6%), and a weaker economy (56.8%).
- The Push for Congress to Prevent Tax Increases.
Around 94% of manufacturers believe Congress must act immediately to prevent scheduled tax increases by the end of 2025. There is growing concern about the upcoming expiring tax policies specifically the 20% pass-through deduction.
Without action, manufacturers believe that the tax increase could result in limited capital investment opportunities (73%), fewer job creation (65.4%), increased challenges competing globally (52.6%), and limited R&D spending (51.7%)
Small businesses could be especially affected, especially those that depend on current tax deductions. Around 93% of pass-through manufacturers state that losing the pass-through deduction would hinder business growth and job creation.
- Focus on Strategies to Improve Recruitment and Retention.
Manufacturers are enhancing their recruitment and retention strategies through internships (74.7%), apprenticeships (57.3%), and partnerships with high schools (55.1%) and colleges (48.9%). However, the outlook for full-time employment remains mixed, with small and medium-sized firms expecting growth while larger firms anticipate a slight decline.
- Growth in Full-Time Employment.
Manufacturers expect full-time employment to grow by 0.9% over the next year, down from 1% in Q1. Over 34% anticipate an increase in full-time hiring, 16.9% on reduced employment, and 48.4% expect no change. In addition, small and medium-sized firms expect employment growth of 1.4%, while large firms predict a slight 0.2% decline.
- Employee Wages
Respondents anticipate employee wages (excluding nonwage compensation, such as benefits) to rise 2.8% over the next 12 months, remaining in line with last quarter’s expectations. Around 53% of manufacturers predict wage growth of 3% or more over the next 12 months, with 7.0% suggesting 5% or more. The majority of respondents (92.1%) expect wages to increase generally. There was little difference by firm size.
- Sales
Respondents expect sales to rise 2.2% over the next 12 months, on par with the previous quarter, maintaining the strongest reading in one year (four quarters). Nearly 59% of manufacturers predict sales will increase over the next four quarters, with 32.7% feeling orders will rise 5% or more. In contrast, 19.8% anticipate declining sales, with 21.7% predicting no change. Large firms predicted the strongest growth (3.1%) over the next 12 months, while small and medium-sized firms expect only 1.8% growth.
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