The American employment boom is leaving factory workers behind

Dan Ariens had to make some tough decisions last summer when sales slumped at his company, well-known for its bright orange snow blowers and lawnmowers sold globally. He laid off workers, reduced shifts, and stopped hiring almost altogether. Employee count dropped by 20% to 1,600, with no expected improvement until 2025.

The situation at Ariens Company, a fourth-generation family-owned business in Brillion, Wisconsin, highlights the contrast between stagnating U.S. factory employment and the booming job market overall for the past four years.

President Joe Biden’s industrial policy, including legislation passed in 2022 encouraging factory construction, aims to boost sectors like semiconductors, electric vehicles, and green technologies. Biden is currently touring factories to showcase his accomplishments, especially in key battleground states during the upcoming election.

Despite ongoing construction and some areas of heavy industry thriving, like those involved in government-funded projects for infrastructure, the overall outlook for manufacturing jobs remains weak. Economists attribute this to various factors such as high interest rates, a slowing economy, and the reduction in COVID-19 demand for manufactured goods.

The Biden administration believes it will take some time to see the full impact of their efforts. Manufacturing investments generally take six to eight quarters to translate into new jobs, with more job creation expected once the Federal Reserve lowers interest rates later this year.

Elisabeth Reynolds, a researcher at the Massachusetts Institute of Technology with a background in economics and manufacturing, suggests that companies in states like North Carolina and Georgia are already hiring even before starting construction, indicating a positive future trend.

The most rapid jobs recovery ever

Large producers like Deere & Co, Whirlpool Corp, and 3M Co have announced layoffs, though mostly targeted reductions rather than widespread cutbacks as seen in the technology sector.

Many factories are opting to reduce or halt hiring. For instance, Kondex Corp., a blade manufacturer with around 280 employees, was previously paying premium wages to attract workers; however, they are now expecting natural attrition to reduce headcount by about 5% without resorting to layoffs.

Compounded impact

When freezes in hiring and targeted cuts occur across various locations in rural areas and small towns, the impact is compounded. Large employers like Deere and Tyson Foods have recently announced workforce reductions, further affecting communities that rely on these factory jobs.

Manufacturing employment in the U.S. once accounted for a large portion of jobs post-World War Two but has been in decline due to changing economic priorities, automation, and global competition. The drop in factory jobs had paused before the COVID-19 pandemic but resumed in late 2022 following reduced consumption of goods.

Since late 2022, factories have been responsible for a small fraction of new jobs added monthly, leading to a record low share of U.S. employment in the manufacturing sector. With various challenges impacting the industry, efforts are being made to adapt and grow with new technologies.

For some companies like Vermeer in Iowa, the current job market presents opportunities for selective hiring, providing a sense of relief. However, the overall job growth in the manufacturing sector is expected to continue beyond 2025, especially as new factories begin operation.

Jobs on the horizon

Scott Paul, president of the Alliance for American Manufacturing, believes that the current boom in factory construction will eventually lead to job creation, with many new positions expected in the coming years. He notes that despite challenges, employers have adopted a different approach from previous economic downturns, resulting in a more stable labor market.

While facing difficulties, Ariens Company implemented strategies like reduced work weeks to avoid further layoffs and maintain employee benefits during challenging times. The CEO acknowledged the impact on profits, attributing the sales slump partially to weather conditions affecting demand for their products.