Manufacturing is still expanding. That’s the headline, and it’s a good one. But if you’re planning headcount for the next quarters, the more useful story is in what’s cooling underneath it.
U.S. manufacturing continued its steady growth streak in August, backed by steady demand and continued production across key industrial sectors. But a cautious labor market, stubborn supply chain delays, and escalating tariff costs are forcing factories to take a more cautious approach to hiring.
Manufacturing Is Growing, But Momentum Is Slowing.
The ISM manufacturing PMI reached 54.6% in August, marking the eighth consecutive month of expansion. However, the index fell 1 percentage point from July, while several key indicators weakened.
Five of the six largest manufacturing industries continued to expand: transportation equipment, petroleum and coal products, machinery, computer and electronic products, and food, beverage and tobacco products.
Growth is holding. But ISM Chair Susan Spence has pointed to “warning signs” starting to appear, and for employers, those signs matter more than the headline number.
The “Warning Signs”
Several ISM indicators weakened in August, suggesting manufacturers are becoming more careful about future demand and production.
- New Orders Index fell from 56.7% to 53.7% (- 3% points).
- Production Index fell from 58.5% to 58.3% (- 0.2% points).
- Backlog of Orders fell from 55% to 51.8% (- 3.2% points).
- The Employment Index fell from 52.8% to 51.2% (- 1.6% points).
- Inventories Index fell from 51.2% to 50.6% (-0.6% points).
The biggest declines came from new orders and backlogs, two indicators that can influence how confidently manufacturers plan production, staffing, and spending.
A “Low-Hire, Low-Fire” Labor Market Adds to the Uncertainty
The broader labor market is showing a similar pattern: employers are not hiring aggressively, but they are not making widespread cuts either.
The U.S. job openings increased slightly to 7.27 million in July, while manufacturing employment increased by 5,000 jobs. However, gross hiring declined from 5.3 million to 5.1 million. Layoffs also fell and unemployment rate remains at a low 4.1%.
Employers aren’t cutting staff, which means competitors aren’t handing anyone their best engineers. The talent worth hiring is largely still employed, still off the job boards, and still hard to reach. A cautious market doesn’t make hiring easier, it makes the roles that matter more competitive to fill.
Supply Chain Delays Continue to Pressure Manufacturers
Hiring caution is not happening in isolation. Manufacturers are still contending with supply chain challenges that make production harder to plan and predict.
The Supplier Deliveries Index rose to 59.3%, indicating a continuing slowdown of the supply chain. Manufacturers also reported supply chain disruptions and longer lead times (46%) as one of their major concerns. In addition, the electronics market supply chain remains particularly challenged by strong AI infrastructure demand and continued global uncertainty.
When materials are delayed, costs rise, schedules shift, and production problems become harder to resolve. Supply chain issues can increase the need for engineers who can improve processes, troubleshoot, evaluate alternatives, and maintain production.
Tariffs and Rising Costs Are Making Hiring Decisions More Difficult
Cost pressure hasn’t let up either. The Prices Index remained elevated at 71.1% in August. Manufacturers also frequently cited pricing volatility (57%), the Iran war (30%), and tariffs (29%) as one of their major concerns.
As operating costs rise and budgets become tighter, employers have less room for hiring mistakes. Employers need to prioritize roles that directly contribute to productivity, efficiency, and cost control.
What Should Engineering Employers Do?
Don’t treat a cautious market as a reason to put all hiring on hold. The problems piling up like supply chain volatility, cost pressure, and shifting schedules are engineering problems. An empty req doesn’t solve any of them.
Instead, prioritize the roles doing the most work right now:
- Production and operational efficiency: Manufacturing, Industrial, and Process Engineers.
- Supply chain problem-solving: Supply Chain, Manufacturing, and Quality Engineers
- Product development: Mechanical, Electrical, and Design Engineers
- Equipment and process improvements: Manufacturing, Equipment, Automation, and Controls Engineers
From there, prioritize candidates who can contribute quickly and adapt as business needs change. It’s also worth considering flexible engineering hiring options: contract or contract-to-hire arrangements can close critical talent gaps while keeping workforce costs under tighter control.
The current market calls for caution—but not inaction. With manufacturing still expanding and operational challenges continuing to evolve, engineering and manufacturing employers need the right talent to keep production moving.
When the market is uncertain, having the right people in place can make all the difference. Let SoloPoint Solutions help you find the talent you need to move forward with confidence.