An overwhelming majority (98.6%) of American manufacturing companies are small businesses, and 75.3% of those businesses have fewer than 20 employees, according to new data released on May 23 by SCORE, mentors to America’s small businesses. Last year, small manufacturing businesses generated 11.6% of the U.S. economic output and employed 8.5% of the U.S. workforce, but 89% of manufacturers report that they cannot fill all job openings The reasons given for not filling the positions were:
• Shifting skill sets due to advancing technologies;
• Misperceptions of manufacturing jobs;
• Retirement of baby boomers.
“Manufacturing businesses drive the U.S. economy,” said SCORE CEO Ken Yancey. “They might be factories or bakeries, and they might utilize machine power or hand-make their products, but what they have in common is that the vast majority of manufacturers are small business owners.”
US Factory Gauge Falls
A measure of U.S. manufacturing activity unexpectedly fell in May to the lowest level since October 2016, in a sign President Donald Trump’s trade war with China is weighing on the economy as he considers further tariffs. The Institute for Supply Management’s purchasing managers index declined to 52.1 from 52.8, missing the median forecast of 53 in Bloomberg’s survey but holding above the 50 mark that indicates expansion. Three of five components declined, including production, inventories and supplier deliveries, according to a report Monday.
Material availability and a lack of skilled workers were cited as concerns, amid growth, by three hundred custom manufacturers and sourcing professionals in North America, according to a 2019 Manufacturing Report recently released by online manufacturing marketplace MFGWatch.“Based on our data analysis, it’s our belief that 2019 will be a promising year for manufacturing and that business will continue to be strong along with the rest of the U.S. economy. There were some surprises in the survey findings, however, as well as some rising challenges that may slow progress,” said Ronald L. Hollis, president and CEO of MFG. More than 44% of survey respondents said they plan to hire more workers and buy new technology this year to keep pace with demand. While 34% of buyers will focus more on technology infrastructure and not their workforce, the survey showed that 33% plan to increase both this year. Survey results show 44% of suppliers are concerned about tariffs and 42% of buyers say tariffs and shipping costs are impacting their supply chains, according to an MFG news release.
Bloomberg National Federation of Independent Business
Optimism among small U.S. businesses rose to a seven-month high in May as companies increased capital spending plans, suggesting firms remain confident economic growth will continue. The National Federation of Independent Business optimism index increased 1.5 points to 105 on more upbeat views of the economy, employment, capital outlays and sales, a report showed Tuesday. Analysts had forecast a 1.5-point decline in the gauge.
“Uncertainty levels remain high but owners are focused on a very busy Main Street,” report authors William Dunkelberg and Holly Wade wrote. “The surge in optimism was supported by solid gains in reported capital spending, hiring, inventory investment and profit trends.” The fourth straight improvement in optimism, the longest streak in two years, is the latest sign of brighter assessments by small business owners despite trade-policy uncertainty. NFIB’s gauge, based on responses from 650 member firms surveyed in May, remains at one of its highest levels of the expansion and not far from the record 108.8 level in August.
There were 12,839,000 employees in manufacturing in May 2019, the most since December 2008 (the Great Recession). In addition, firms continue to cite a difficulty in obtaining talent as a top concern, with elevated job openings data.” Chad Moutray, NAM, Full employment and shortage of candidates for manufacturing employment is a sign of good times, compared to the opposite.
United States factory production expanded in May for the first time since December on gains across sectors that signal the manufacturing sector is holding up amid trade uncertainty. Manufacturing output rose 0.2% after falling 0.5% in the prior month, according to Federal Reserve data Friday that matched the estimate in Bloomberg’s survey of economists. Total industrial production, which also includes mines and utilities, increased 0.4% after an upwardly revised 0.4% decrease. The report follows data from China Friday showing industrial output growth in the world’s second largest economy slowed to the weakest pace since 2002, reflecting headwinds from the U.S. trade war.