A national slowdown in the manufacturing sector is hitting home for local businesses, with some companies already seeing sales declines and others acknowledging heightened uncertainty.
Recent Federal Reserve System data reveal that U.S. factory output has fallen in each of the past two quarters, indicating the onset of a recession in the industry.
Meanwhile, the Institute for Supply Management this month reported that its “manufacturing index” had fallen to 49.1% in August, its lowest level in more than three years. Anything below 50% indicates contraction.
On top of that, a jobs report issued this month showed that the manufacturing sector added just 3,000 jobs in August. By comparison, the sector added an average of 22,000 per month in 2018.
Randy Decker, president and co-owner of Decker Precision Machining in Peosta, Iowa, said his company has definitely felt the impacts of the changing economy.
“Things are not nearly as good as they were this time last year,” said Decker. “We are still fairly busy, but the market has definitely softened.”
At Decker Precision Machining, other manufacturing companies serve as the main clients. Not surprisingly then, the fortunes of the company are closely tied to the well-being of the industry as a whole.
Decker said many manufacturers have been spooked by talk of a national recession, noting that these customers don’t want to place large orders and “get caught” like they did when the Great Recession struck one decade ago.
The looming 2020 election also has stirred uncertainty, compelling many manufacturers to adopt a wait-and-see approach.
“The bigger manufacturers, where we get most of our work from, they are very hesitant these days,” Decker said.
Employees at Decker’s business are logging fewer overtime hours. Decker also is using down time to train his workers.
Gary Tressel, owner of Die Makers Manufacturing in southwest Grant County, Wis., said it has been an up-and-down year for his company.
“Six months ago, we were kind of slow. Now we are busy,” he said. “We are pretty much booked up for the rest of the year. But talk to me six months from now and it could be different.”
Tressel acknowledged that trade disputes and tariffs have hurt some parts of the U.S. economy, most notably farmers. However, he believes tariffs on imported Chinese products have helped his business.
“People who used to have their dies made in China aren’t going over there anymore,” he said. “They want to keep it in the United States now.”
Jamie Lund, president of Lund Manufacturing in Farley, Iowa, said the business is “as busy as it’s ever been.” Looking forward, however, he believes workforce issues could usher in difficult times for the industry.
“The limitations of labor and the labor pool are really the thing that is going to push this industry toward recession,” he said. “If you don’t have the people to get your product out, then you are limited in how much you can grow.”