In the US, 2016 was a challenging year for industrial staffing firms in large part due to sluggish demand from the manufacturing sector, the largest client industry vertical for the segment. The 2016 malaise in the manufacturing sector can be blamed on a variety of culprits, ranging from high levels of inventory, a strong dollar, uncertainty due to the presidential election, the secular shift of manufacturing to lower cost countries, and sluggish overall growth in both the US and global economies.
Nevertheless, with a new year, we find that March is bringing unmistakable signs of job growth in the manufacturing sector. In this article, we examine the latest employment figures released by the Bureau of Labor Statistics on March 10 regarding February payrolls to get the latest read on jobs levels for manufacturing as a whole, and the various specific manufacturing industries that comprise the sector.
The Bureau of Labor Statistics estimates that the manufacturing sector added 28,000 jobs in February in addition to 11,000 jobs gained in January, to reach almost 12.4 million total jobs. On a year-over-year basis, manufacturing jobs were up 7,000 (or 0.1%), marking the first year-over-year increase since July, as shown in the accompanying table. We highlight some of the manufacturing industries experiencing the greatest job growth in the following paragraphs.
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Food manufacturing is the largest subcategory of manufacturing tracked by the Bureau of Labor Statistics, with almost 1.6 million jobs. It is also adding jobs at the fastest-rate (2.8% year over year) of any of the large manufacturing industries, as shown in the table. As the only large manufacturing category to have gained jobs over the past decade, food manufacturing is benefiting from a secular trend of households demanding more prepared fresh and processed foods. Separately, but related, we note that the beverage manufacturing industry niche of breweries, wineries and distilleries (not shown in the table) reached 141,000 jobs in January (up 10.2% year over year), maintaining its double-digit growth pace seen over the past few years.
Motor vehicles and parts is the fifth-largest subcategory of manufacturing that the Bureau of Labor Statistics tracks, and has shown significant growth in recent years. However, industry observers note that the record 17.6 million cars and trucks sold during 2016 may represent a cyclical peak, likely causing a headwind for continued job growth in the sector. Job growth was 0.7% in February and 1.2% in January, a deceleration from an average of 2.9% year over year during 2016 and 4.8% year over year during 2015.
Nonmetallic mineral manufacturing, which includes cement, Sheetrock and glass products, showed 2.4% year-over-year job growth in February, while wood product manufacturing grew jobs at a 2.0% year-over-year pace. Both of these industries are likely benefiting from the expansion of construction activity in the residential, commercial and public sectors. The related furniture manufacturing industry grew employment 1.0% year over year in February.
In addition to the job growth indicated by Bureau of Labor Statistics figures, we highlight two other metrics that suggest general optimism for the manufacturing sector. First, the ISM Manufacturing Purchasing Manager Index reached 57.7 in February and 56.0 in January, up from an average of 51.5 during 2016 (any reading above 50 indicates expansion). Second, the average net percent of manufacturing firms increasing employment from five Federal Reserve districts — New York, Philadelphia, Richmond, Kansas City and Texas — reached 10% in February and 6% in January, up from an average -3% during 2016. See the accompanied graph, which plots a three-month rolling average of both current month and six-months-ahead indices. All five Federal Reserve districts reporting this information noted net employment growth among manufacturing survey respondents in February, evidence of the geographic breadth of expansion.
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These signs of job growth in manufacturing provide a generally positive sign for industrial staffing demand. Industrial staffing firms may find that now is an attractive time to reach out to manufacturing clients to get ahead of any plans for future hiring and investment for the remainder of 2017 and beyond.
