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“Manufacturing demand is not really the problem; employment is not the issue; it’s the ability to meet that demand.” That viewpoint courtesy of Chad Moutray, chief economist at the National Association of Manufacturing (NAM), speaking during MachineMetrics “2021 State of the Industry: A Year in Review” webinar. Moutray, who presented along with Jerry Foster, CTO and cofounder Plex Systems and Bill Bither, CEO and co founder MachineMetrics, said that manufacturers identified the biggest challenge they’re facing as rising raw material costs, followed by supply chain difficulties, attracting/retaining workforce, and transportation and logistics costs.

Related to workforce issues, Moutray said that manufacturing wages, which grew at a rate of 3.8% in 2021, are at an all-time high per NAM data, which goes back to 1997. Going by Bureau of Labor Statistics (BLS) data, wages are at a 40-year apex.

Some 349,000 workers were hired in manufacturing in 2021, making it the sector’s strongest year since 1994. Moutray said NAM expects manufacturing employment to grow by 140,000 to 180,000 jobs in 2022. That will not be enough hiring to fill all the roles that are needed, however, with job openings staying over 800,000 for 8 straight months, a level Moutray called “stratospheric.” As the broader economy experiences the “Great Resignation,” with 4.5 million people quitting last November, manufacturing has seen plenty of 2-week notices as well. Despite resignations in the sector slowing in the last few months, they remain near all-time highs. Moutray noted that in the broader U.S. economy for every 100 job openings only 65 people are actively looking for work.

Despite these difficulties, Moutray reported that manufacturing production is currently 2% above pre-pandemic levels, as the sector, if not society, puts COVID-19 in the rearview, albeit with some speedbumps on the road to full recovery remaining. According to preliminary January 2022 data from the Institute of Supply Management’s (ISM) purchasing managers index (PMI) there was a slowing in manufacturing activity to finish ’21 and start ‘22. In 2021 that index showed very robust demand, overall, remaining over 60 almost all year, when a reading of 50 or higher indicates an expansion. This was true internationally as well, with global PMI at 54.2. Only Mexico and Brazil’s PMI’s were below 50, while the U.S. (57.7), Germany (57.4) and China (50.9) showed varying levels of growth.

Per Federal Reserve Board data, manufacturing production was “a mixed bag”, Moutray said, contracting in August, September and December, with weaker automotive activity as the primary issue. December was the most disappointing result, turning faintly negative when a slight positive reading was forecast. That was also true for retail sales in December, according to Moutray.

Out of 20 manufacturing sectors, only eight grew in December. Among those that shrunk was plastics and rubber products, which contracted 1.8%. In the 20 months since the pandemic began, 10 sectors showed growth, while plastics and rubber was still contracting 1.1%. The top growth market? Aerospace.

Growing wages are part of larger inflationary pressures in the broader economy, with Moutray guessing three or four interest rate increases might be coming in 2022 to deal with an inflation rate at 4.4% when the Federal Reserve targets a long-term goal of 2% inflation. He expects inflation to drop to 2.8% or 3.0% by the end of the year.

Foster at Plex said that according to the numbers his company tracks, manufacturing activity was above pre-pandemic levels by last September, ending the year 11% higher than levels seen in 2019. Looking back to 2020, Foster estimated that the huge drop in activity during the March shutdown resulted in a 26% reduction to manufacturing for year. “How much of a hit did we take in expected production due to the pandemic?,” Foster asked. “About a quarter of production was wiped off the books.”

MachineMetric’s Bither said his company’s metric, which is tracked by the industrial IoT platform it sells, is simple machine utilization or uptime of machines. That data showed that 2020 was clearly down, and that the 2021 rebound reverted all the way back to 2018 levels. Over the last four years, the figure registered 27.8%, 25.09%; 24.94%, and 27.8% from 2018 to 2021.

The first half of 2021, the rate was averaging around 30%—the highest level since MachineMetrics began collecting data—but after July 4, the company saw it tick lower and stay down, likely in response to supply chain woes, Bither said. When MachineMetric’s asked its users the main reasons for downtime, operator unavailable was the No. 1, followed by lack of materials/jobs. So far he’s seen a strong start to 2022. “Right now, we see a steep increase,”Bither said. “It’s early to tell, but we’re matching 2021’s start at the moment.”

Manufacturing has returned to pre-pandemic levels but challenges remain.