As the largest vertical in staffing, manufacturing is an attractive market. In this article, we focus on hiring trends and the hiring outlook for the US manufacturing sector as a whole — including some insights by geographic region — by looking at survey data from the Federal Reserve.

Understanding the health of the US manufacturing sector is useful for several reasons. First, US manufacturing spends roughly $20 billion each year on agency temporary staffing, a disproportionately large sum. Second, trends in manufacturing are considered a leading indicator of the direction of the overall US economy.

So to what data can we turn? One timely source of insight on trends in manufacturing hiring are the monthly business outlook surveys conducted by the Federal Reserve. Five of the 12 Federal Reserve districts publish monthly findings from surveys of manufacturing firms in their local region. For each region, the number of firms surveyed typically ranges from 100 to 200. The surveys are conducted with rigor (for example, the Philadelphia district survey has been conducted each month for the last 48 years) and relied upon by the Federal Reserve Governors to aid them in making decisions regarding interest rates.

More manufacturers have reduced headcount so far this year.

The Fed surveys indicate that, on average, slightly more manufacturers on net have decreased their number of employees each month from January to May in the five districts, as shown in Table 1. (Surveyed companies were asked whether their number of employees increased, decreased, or stayed the same compared to the prior month. The numbers shown in the table represent the percentage of firms reporting an increase minus the percentage of firms noting a decrease).

Table1

1. Includes New York state, 2. Includes Pennsylvania, New Jersey, Delaware, 3. Includes Virginia, West Virginia, Maryland, North Carolina, South Carolina, 4. Includes Kansas, Oklahoma, Colorado, Wyoming, Nebraska, 5. Includes Texas and New Mexico

This bearish finding is in line with manufacturing employment data from the US Bureau of Labor Statistics. Through May of this year, the monthly change in manufacturing employment has averaged a decline of 7,000 jobs.

Possible explanations for the job losses include weak GDP growth of 1.1% in the first quarter, a drop in orders due to high levels of inventory, a stronger dollar that has made US exports more expensive, as well as a resumption of the long-term trends of globalization and automation that have eroded manufacturing job levels over the past two decades.

While the Fed surveys overall paint a picture of modest job declines, survey results in two districts indicate modest job growth. The Richmond, Va., Fed District — which includes Virginia, West Virginia, Maryland, North Carolina and South Carolina — has shown the most positive data among the five districts, with an average of a net 8% of firms increasing employment so far this year. The New York Fed District reported a net 2% of firms increasing employment in April and May.

Job Gains Ahead?

The Fed surveys also track manufacturer’s plans for increasing or decreasing their workforce six months ahead (see Table 2). Survey results suggest that across most districts, a net percent of firms expect to increase employment in six months. The New York and Pennsylvania Fed districts appear the most optimistic about growth with a double digit net percent of firms expecting to add workers. However, the May survey results indicate a softening of growth expectations across all five districts, with the Kansas City District falling into negative territory; firms in this district cited weakness in the oil and gas and agricultural verticals.

1. Includes New York state, 2. Includes Pennsylvania, New Jersey, Delaware, 3. Includes Virginia, West Virginia, Maryland, North Carolina, South Carolina, 4. Includes Kansas, Oklahoma, Colorado, Wyoming, Nebraska, 5. Includes Texas and New Mexico

1. Includes New York state, 2. Includes Pennsylvania, New Jersey, Delaware, 3. Includes
Virginia, West Virginia, Maryland, North Carolina, South Carolina, 4. Includes Kansas,
Oklahoma, Colorado, Wyoming, Nebraska, 5. Includes Texas and New Mexico

In conclusion, manufacturing hiring as a whole remains under pressure, with weak 2015 job gains followed by declines this year. Survey results show that manufacturers continue to hold out some hope for job expansion ahead, with possible growth drivers including an uptick in US GDP growth along with passing the anniversary of the spike in the US dollar that occurred in IQ15. And while the current weak hiring trends likely present a headwind for staffing demand, the substantial amount of uncertainty among manufacturers could provide an opportunity for staffing companies to sell their value proposition of providing a more flexible workforce.