Labor Pains Persist

Labor Pains Persist

As rising interest rates, poor economic conditions, and a talent shortage continue, optimism among manufacturing industry leaders remains low, according to a Sikich Industry Pulse: Manufacturing and Distribution report.

More than half of manufacturers (57%) rate their optimism about business prospects over the next six months at a seven or lower on a scale of one to 10. This is similar to the same time last year—in March 2022, 53% of manufacturing leaders rated their optimism a seven or lower on a scale of one to 10.

When asked about factors contributing to decreased optimism, manufacturers cite three main challenges:

  • Interest rates (36%)
  • Economic conditions (27%)
  • Labor shortages (26%)

Compounding these challenges, manufacturers have had to increase wages to meet labor needs and support employees through an economic slump. More than half (53%) of manufacturers have increased wages by 5% to 8% in the past 12 months, and nearly one-quarter (22%) have increased wages by 9% or more. Thirty six percent of manufacturers report that wage increases over the past 12 months are significantly higher than increases over the past five years.

On a positive note, nearly half of survey respondents (43%) report consistent or increased customer demand and 34% note improvements to the supply chain. In comparison, in October 2022, 43% of manufacturers reported supply chain issues.