Manufacturing’s Talent Crunch

The sector can’t hire and keep enough talent, and it’s hurting growth.

The U.S. manufacturing industry’s ongoing talent crunch continues.

U.S. manufacturing growth has slowed to its lowest point since May 2017, according to the recent Purchasing Managers Index survey. One of the main reasons: a pervasive talent gap. Manufacturers report that they are having problems in attracting and retaining talent. “The manufacturing sector has been facing a general ‘branding’ crisis, as manufacturing jobs were perceived by an entire generation as less attractive than alternatives in healthcare, technology, consumer, and service sectors,” says Alex Martin, Korn Ferry’s global sector leader for chemicals, materials, and industrial manufacturing. “We have fewer people interested in careers in manufacturing and as a result, fewer people with the training and education needed to fill the jobs.”

That’s not all that’s driving the dearth in talent. Manufacturing is experiencing a sort-of renaissance in the United States, which means demand for skilled labor has increased, Martin says. But that growing need for talent is only exacerbated by the low supply of suitable staff. Hence, a shortage.

The industry is working to address this gap. Some firms are recruiting from other sectors and looking at workers with transferrable skills. Others are investing in local high schools, trade schools, and colleges where manufacturing plants are located or planned to increase interest in manufacturing as a career choice.

“More creative employers are looking at military veterans, previously part-time workers, and retirees as potential full-time employees,” Martin says. “Most are looking at where formal training, development, and education programs can close skill gaps among current employees.”

To some degree, those efforts seem to be working. The U.S. manufacturing industry did experience some healthy job growth over the last year, with the biggest net gains in durable goods—think cars, furniture, and machinery. In total, manufacturers added 284,000 jobs in 2018, a 37% uptick from the year before, according to the U.S. Bureau of Labor Statistics. It’s the largest employment increase manufacturing has seen in more than two decades.

However, just as companies work on the skills gap, they may have to start worrying more about the overall economic picture. A drop in client demand, decline in vendor performance, and downtrend in new orders could also explain the Purchase Manager Index’s 15-month low. The group that conducts the survey, IHS Markit, says tariffs may curtail future growth, with over two-thirds of manufacturers reporting higher costs say led to price increases. “There are a lot of storm clouds on the horizon and people think there will be a slowdown,” says Justin Ripley, senior client partner and member of Korn Ferry’s Global Industrial Practice.

Overall, the impact of tariffs and trade uncertainty have also dealt a blow to optimism about future business growth. Consumer demand may not support running a plant at full capacity, so manufacturers have become more cautious about overstaffing, Ripley says. There is uncertainty around how manufacturers will treat their workforce—in other words, do they keep their labor, outsource their labor, or staff up?

“When policy seems uncertain, you have to exercise a high degree of caution,” Ripley says. “People are reluctant to invest in new plants, new products, and new staff until those questions are answered.”