Without a doubt, the pandemic has brought about many unexpected changes. Early booms in technology sectors during lockdowns and quarantines have been followed by subsequent declines. The rise in hybrid and remote work opportunities reflects another such development. But when it comes to trends in manufacturing employment, the biggest impact of the pandemic has been on domestic production. From supply chain problems to evolving foreign policies, there has been a significant return in factory jobs as of late. But it remains unclear if these gains will be maintained or simply reflect a fleeting rise in domestic demand. For now, however, the immediate future for U.S. domestic manufacturing looks quite bright.
“We have 67,000 more workers today than we had in February 2020. I didn’t think we would get there, to be honest with you.” – Chad Moutray, Chief Economist for the National Association of Manufacturers
Trends in Manufacturing Employment Through the Pandemic
When the COVID-19 pandemic struck, it was not kind to the manufacturing industry in the U.S. Within the first three months, roughly 1.36 million factory jobs were lost amidst COVID restrictions. But what happened over the course of the next couple of years is what’s most unusual. By August of 2022, there had been a return of factory jobs exceeding 1.43 million. That meant there had been a net gain of 67,000 manufacturing jobs even as a recession loomed. In past recessions, this has never been the case. In fact, the domestic manufacturing sector has still yet to recover the return of factory jobs to pre-2008 levels.
Certainly, these trends in manufacturing employment came as a surprise to even those in the industry. The manufacturing sector was seeing a better degree of resilience than the services sector, which had not happened in recent times. In addition, there continues to be increasing demand for domestic production as supply chain issues persists in post-pandemic times. And increases in shipping costs from overseas are encouraging some manufacturers to consider increasing domestic investments. While these trends may not last, the current snapshot shows many firms are still looking to add more skilled workers. In this regard, the return of factor jobs has yet to reach its peak in the aftermath of the pandemic.
“We had a huge shift away from services and into goods that spurred production and manufacturing and very rapid recovery in the U.S. economy.” – Janet L. Yellen, U.S. Treasury Secretary
Drivers of Current Manufacturing Job Trends
In trying to explain recent trends in manufacturing employment, perhaps the most notable one involves supply chain issues. The disruptions in global supply chains highlighted the security of domestic production of a variety of goods. Thus, as consumers demanded more durable products like cars, furniture, and electronics, U.S. companies had to respond. Likewise, other products such as foods and textile products also increased in demand. Combined with rising shipping fees concurrently, it’s easy to understand increased domestic production and the return of factory jobs. And as these supply chain woes persist, manufacturing companies have continued to add workers.
Of course, supply chain issues have not been the only driver of these trends in manufacturing employment. Another major driver has been various U.S. policies that have further supported these trends. For example, many manufacturing goods were deemed essential during the pandemic, allowing them to minimize the impact of restrictions. This combined with consumer stimulus packages resulted in a shift away from services to manufactured products. At the same time, U.S. policies related to China and China’s highly restrictive pandemic response further encouraged more domestic production. And the most recent Inflation Reduction Act also subsidizes some manufacturing sectors and provides tax incentives as well. All of these events are further contributing to the return of factor jobs in the U.S.
“The pandemic response by China has definitely prompted more than a rethink on where to put new money. I think we are actually beginning to see action.” – Mary Lovely, Professor of Economics, Syracuse University
Will the Return of Factory Jobs Persist?
The big question currently is whether these trends in manufacturing employment will persist. In this regard, there appear to be mixed signals. On the one hand, the job market remains robust despite recessionary pressures. The number of skilled factory workers remain small while manufacturers are increasingly looking to hire. In fact, many firms are becoming more flexible in their benefits and wage offerings to attract workers. Some are looking beyond traditional backgrounds to find workers who might be trained and developed to meet needs. As long as consumer demand persists for domestic production, it seems opportunities for factory jobs will only expand.
At the same time, however, it remains to be seen whether manufacturing firms are committed to domestic shifts. While many question the long-term benefits of operations in China, nearly 80% of firms have not made any moves. The profits enjoyed from manufacturing in China and other countries like Vietnam have served as obstacles to domestic investments. It may be that current U.S. policies supporting domestic manufacturing will continue to fuel change. If so, then trends in manufacturing jobs may well continue. But it remains too early to tell the impact of these new policies. As such, the return of factory jobs may not be a lasting phenomenon should the winds of change shift yet again. But it’s quite clear that in the short-term, the return of factory jobs in the U.S. is real. And for the time being, domestic manufacturing appears to be quite in vogue.