"We used to have 100 applicants for an opening; we are now seeing about 10...”
The U.S. manufacturing sector heated up further in last month, reaching its sixteenth straight month of expansion, according to the Institute of Supply Management’s survey of supply executives released October 1st.
The ISM reports its index of manufacturing activity advanced 1.2% to a reading of 61.1% -- far into expansion territory.
In September, new orders and production continued to grow rapidly, while the closely-watched supplier deliveries index slowed at a faster rate, according to the ISM. Demand remained high, with the New Orders Index reading at 66%, as backlogs grew and prices rose.
Prices edged back up in September over the 80% mark after cooling slightly in July and August. Meanwhile, employment, which had fallen into contraction in August, rebounded back into expansion last month.
Timothy Fiore, Chair of the ISM committee said that survey panelists reported their companies and suppliers are facing “unprecedented number of hurtles to meet increasing demand.” Fiore referred to a myriad of challenges, stating that “All segments of the manufacturing economy are impacted by record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties transporting products.”
Fiore also referred to ongoing coronavirus-related challenges such as worker absenteeism and shutdowns related to parts shortages, and of course, the labor shortage. Meanwhile Fiore stated ports congestion in China and U.S., the world’s largest trading partners “continue to be a headwind, as transportation networks remain stressed.”
Optimism among manufacturing executives was strong, though optimism has waned significantly over the past several months. The ISM registered 3 positive comments for every one negative. By contrast, there were 36 positive comments for every one negative comment recorded in May of this year.
One executive in the transportation equipment sector reported, “In the U.S., labor availability is the most significant supply challenge for our company, with raw materials just behind. Plastic resin, polyurethanes, small-volume steel purchases and electronics are the biggest material challenges.”
For months now, the ISM’s employment index has reflected hiring struggles amongst manufacturers, expanding one month and contracting the next. In September, the employment index advanced 1.2% to a reading of 50.2%--barely over the level of expansion.
Said one executive in the paper products industry, “We are still amazed by the labor market. We used to have 100 applicants for an opening; we are now seeing about 10 — and often, the applicant does not show for the interview.”
Seventeen of eighteen industries included in the ISM’s survey reported growth in September, with growth strongest in furniture & related products; petroleum and coal products, machinery, and electrical equipment.
Supply shortages continue to shake up supply chains. The ISM listed several commodities in short supply, including adhesives and paint; nylon, rubber-based products, semiconductors, steel, lumber, metal components, electronic components, PCBs and more.
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