September 18, 2019 Potential Economic Downturn Threatens Manufacturing Industry

Manufacturers in the U.S. struggle to stay afloat and keep bills paid.

September 17, 2019

By Louann Moss

With many of the Trump administration’s economic policies now in effect, the United States is beginning to witness firsthand the impacts they will continue to have on the economy. For most people in their day to day lives, prices of common household products have been on the rise. However, those more likely to feel the strain of these policies are those working within the manufacturing industry. Manufacturers within the United States are struggling to stay afloat and keep bills paid, and as it stands it seems possible that the changing economy could significantly harm the industry.

Changing Tariffs And Economic Shifts

Recently, increased tariffs on foreign goods have particularly hurt certain aspects of the American economy. In particular, the tariffs have impacted goods being imported from countries like China, where components and materials for many manufacturing processes originate. In fact, almost 95% of shipping containers used to ship those components are manufactured in China. This has been arguably more of a reality within the manufacturing sector than in many other industries, due to the skyrocketing costs of components and materials frequently required by these businesses. If tariffs remain at their current rate, the impact will likely grow and continue to affect manufacturing businesses both large and small.

The changing global economic climate has also had implications for businesses regardless of industry. Bankruptcies in the U.S. increased to 25,227 companies in the second quarter of 2016, from 24,797 companies in the first quarter of 2016. These trends have continued since then, both domestically and on a larger international scale; businesses are increasingly unable to afford the costs of operation, pushing many smaller companies out of business. With economies across the globe struggling, manufacturing businesses are having to work harder than usual to stay afloat.

Businesses Feeling The Pressure

Because of the increased cost of operations, many manufacturers are seeing a slowdown in both output and demand. Smaller manufacturers, in particular, find themselves struggling to keep up with regulations while still staying profitable. The EPA maintains a list of 140 chemicals, many used in manufacturing, that require their owners to submit a “risk management plan” to federal regulators. With money tight, many business owners are simply unable to keep up with the regulations sufficiently enough to remain in business.

However, the economy isn’t the only factor directly harming their ability to continue production – the job market is also taking its toll on the manufacturing sector. An estimated 89% of manufacturers are leaving jobs unfilled. They can’t find qualified applicants, according to a 2018 Deloitte Institute report. The skills gap could leave 2.4 million vacant between 2018 and 2028, costing the industry $454 billion by 2028. Fewer people are being properly trained in trades, instead looking for office jobs and other types of employment that offer better pay and a different lifestyle. Without a shift in focus while training individuals for the workforce, there could be hiring issues well into the future.

Technology Offering Some Solutions

Where employee loss and high operational costs are hurting businesses, there are a few potential paths forward that can theoretically enable business owners to weather the storm. The right manufacturing methods and technology use could allow businesses to shed operational costs. Some of this could involve switching to alternative materials or processes for products, such as reaction injection molding. In the process, two liquid components are mixed and injected into the mold where they chemically react and cure. Additionally, with data access and AI capability growing by the day, more manufacturers are able to use technology to fill the gaps in employment. This does, unfortunately, contribute to an issue of shrinking job creation and availability. Fewer employees overall are needed to manage an automated workplace, meaning a cut to jobs for the same output. While this might be a decent way for companies to save money, it leaves former workers in the manufacturing industry without a career path.

Potential Futures In The Current Economy

As it stands, the manufacturing industry seems positioned to struggle in the coming months and years, despite the small advantages that may be available to some. With tariffs remaining high and the global economy gradually slowing down, it is difficult to say for sure what the future of the manufacturing sector will look like. If the current economic state of the world continues, business owners within the manufacturing sector will have many difficult choices ahead of them to make.

Louann Moss

Louann hold a Bachelor’s degree in English and Creative Writing. She currently writes for a variety of industries and can’t resist a good story when she comes across one. Contact: mosslouann@gmail.com.

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