US employment boom leaves factory workers behind
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[April 04, 2024] By
Timothy Aeppel
(Reuters) - Dan Ariens laid off workers, cut shifts, and halted nearly
all hiring last summer after sales slumped at his company, best known
for making bright orange snow blowers and lawnmowers sold around the
world. Headcount fell 20% to 1,600 people, and he doesn't see business
improving until 2025.
The experience of the Ariens Company, a fourth-generation family-owned
firm in Brillion, Wisconsin, shows the stark contrast between U.S.
factory employment - essentially flat-lining for more than a year - and
the four-year boom in the wider job market.
President Joe Biden's industrial policy, headlined by legislation passed
in 2022 that sparked a surge of factory construction, is aimed at
boosting semiconductors, electric vehicles and green technologies, as
well as other sectors.
As the presidential campaign shifts into higher gear ahead of November's
election, Biden is touring factories to tout his accomplishments,
especially to voters in battleground states.
Even as construction is booming and some segments of heavy industry
continue to hum, such as those that supply goods for government-funded
infrastructure projects, the larger outlook for jobs in manufacturing is
weak. Economists mostly attribute that to a combination of high interest
rates, a slowing economy, and the end of the COVID-19 demand surge for
many kinds of manufactured goods.
The Biden administration contends it's too soon to see the full fruits
of its efforts. It takes about six to eight quarters for manufacturing
investments to translate into factory jobs, a member of the White House
Council of Economic Advisors told Reuters in an interview. And as the
Federal Reserve moves to cut interest rates, which is expected later
this year, more jobs will follow.
"If you look in different pockets of the country - in North Carolina or
Georgia - companies are already hiring before they're breaking ground,"
said Elisabeth Reynolds, a Massachusetts Institute of Technology
manufacturing and economic development researcher, who previously served
on Biden's National Economic Council. "That's a sign of things to come."
For now, Deere & Co, Whirlpool Corp, 3M Co and other large producers
have announced layoffs, though for the most part the reductions have
been targeted rather than the recent mass cutbacks in technology.
Many factories have opted to curb or eliminate hiring. Kondex Corp., a
280-employee producer of blades used mostly on farm machinery, not long
ago was paying three times its normal pay rate to bring in workers from
as far away as Georgia, putting them up in hotels near its Lomira,
Wisconsin, plant.
That's long over. Kondex's President Keith Johnson said he expects
attrition to cut headcount by about 5% this year without layoffs.
COMPOUNDED IMPACT
The impact of hiring freezes and targeted cuts is compounded when they
occur at multiple locations in rural areas and small towns. Deere last
month said it would cut 150 workers at its sprawling campus in Ankeny,
Iowa - a relatively small hit in a factory that employs about 1,700
people. Just days later Tyson Foods Inc said it would close a nearby
pork-packing plant, leaving 1,200 workers jobless.
Manufacturing's share of U.S. employment accounted for roughly a third
of all jobs after World War Two. It has been in steady decline for
decades as the economy re-oriented around services and as efficiency
improvements and automation meant fewer bodies were needed on production
lines. More recently, U.S. manufacturers faced increased competition
from China and other cheaper sources of production.
[to top of second column] |
An Ariens Company employee works on the assembly line at the
company's plant in Brillion, Wisconsin, U.S., in this undated
handout photo obtained by Reuters on April 3, 2024. Ariens
Co./Handout via REUTERS
The erosion in factory jobs had leveled off in the run-up to the
COVID-19 pandemic but resumed in late 2022 after the binge in goods
consumption faded.
Since late 2022, factories have accounted on average for just over
2,000 of the nearly 250,000 jobs of all types added monthly. In
February, factory work fell to a record low 8.2% of U.S. employment,
a 13.8 point drop from the 1979 peak of 22%.
Data from the Institute for Supply Management this week showed
manufacturing employment contracted for a sixth straight month in
March, an unusually long run outside of a recession.
To be sure, manufacturing jobs and output can grow with the aid of
new technologies while also becoming a smaller share of the total
economy - because other parts of the economy have grown even faster.
For Jason Andringa, the chief executive of Vermeer, a Pella, Iowa,
machinery maker with 4,500 employees which is still hiring, the job
market comes as a relief. "We can be more selective now," he said.
JOBS ON THE HORIZON
Scott Paul, president of the Alliance for American Manufacturing, a
group that promotes domestic producers, said the boom in factory
construction is creating jobs for builders and those producing
materials they need, including cement and steel.
"The actual factory jobs that will come from all of this are still
down the road," he said, "A lot of it will be in 2025 and out."
Paul said the job picture could be worse. After the extreme labor
shortages during the pandemic, many employers have been hesitant to
shed workers. "There's a different philosophy in the sector compared
to what they did years ago," he said.
Ariens Company, the lawnmower maker, is an example. While shrinking
its headcount, for three months last year the company required
workers to take one week off for every week they worked.
The company's CEO said this helped avoid further layoffs. Workers
earned roughly the same as they would have gotten from unemployment
insurance during this time and kept their health insurance.
Office workers and those in distribution jobs continued working full
time.
As a privately owned business, Ariens Company doesn't face the same
pressures to cut costs to get through a slump. The CEO acknowledged
these efforts hurt profits.
Then there's the weather. Ariens said two winters of light snow in
the Eastern U.S. and summer droughts added to the sales slump.
"We're different in that weather affects as much, if not more than
the economy," he said.
(Reporting by Timothy Aeppel; Editing by Dan Burns and Suzanne
Goldenberg)
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