Perc Pineda, PhD, Chief Economist, PLASTICS
The unemployment rate in the United States edged up to 3.9% in October. Despite this increase, the economy managed to add 150,000 nonfarm payrolls, though the number of unemployed individuals rose from 6.3 million to an estimated 6.5 million compared to the previous month. The labor force participation rate saw a marginal decline of 0.1%.
Within the goods-producing sector, there was an overall decrease of 11,000 jobs, but construction employment increased by 23,000. The services sector, on the other hand, saw a gain of 110,000 jobs, primarily driven by an increase of 89,000 jobs in the private education and health services sector.
The manufacturing sector, in particular, experienced a decrease of 35,000 jobs. This decline was notably influenced by a decrease of 33,200 jobs in motor vehicles and parts manufacturing, potentially linked to the UAW strike. In contrast, nondurable goods manufacturing added 1,000 jobs in October. However, all told, the manufacturing sector added only 6,000 jobs in the last twelve months.
Interestingly, the plastics and rubber products manufacturing industry managed to maintain its second consecutive month of declines in unemployment, despite a contraction in monthly payroll by 3,100. The unemployment rate in this sector was 0.9% in October, following a 1.5% rate in September and a 5.6% rate in August.
October job effects on the plastics industry
While the October job estimates may not be optimal, it’s essential to assess their impact on the plastic industry within the context of evolving macroeconomic fundamentals. The addition of 6,200 jobs in food manufacturing reflects stable demand in the food and beverage consumption sector, suggesting stability in the plastics packaging segment. The decline in employment in motor vehicle and parts manufacturing is indicative of slower plastics manufacturing within this space last month. The increase in employment in construction, both in the residential and nonresidential building sectors, indicates an improvement in plastics demand for construction and building supplies in October.
It is noteworthy that the increases in employment in some sectors still suggest positive demand, which could have a corresponding increase in utilization of existing inventory. Lower inventory levels will eventually need replenishing – a positive for the plastics industry. This is consistent with the rise in employment in wholesale trade by 9,400 jobs in October.
Can near-shoring be an answer to labor shortage in U.S. manufacturing?
The 12-month average gap of 273,000 monthly between job openings and hiring in U.S. manufacturing serves as compelling evidence of the persistent labor shortage challenge facing the industry. During a press briefing at PLASTIMAGEN in Mexico City on November 8th, I fielded a question about the near-shoring of U.S. manufacturing. Unlike the past decades when the focus was on seeking lower wages for competitiveness, today’s landscape sees U.S. manufacturing strategically near-shoring or reshoring to optimize supply chain efficiency—an invaluable lesson learned in the wake of the COVID-19 pandemic. This approach, viewed as a crucial strategy, merits consideration as a means to address the prevailing labor shortage in U.S. manufacturing. Notably, the dynamics of the U.S. labor market have shifted, with a marked decline in the inclination of new labor entrants to pursue opportunities within the aging U.S. manufacturing workforce.
U.S. manufacturing, including the plastics industry, needs to adapt and innovate in the face of changing labor dynamics and supply chain demands.
