By Perc Pineda, Ph.D.

Chief Economist

 

The State of Play

In April 2020, plastics manufacturing employment decreased to 531,200 from 592,100 in March based on estimates from the U.S. Bureau of Labor Statistics. In May this year, the total number of employees in plastic products manufacturing increased to 589,200. While the gap is closing, manufacturing employment is still 2,900 short of March last year.

Companies tend to hire when their revenue is increasing to meet rising demand for their goods and services. Judging from the industrial production index of plastic product manufacturing, production has been increasing, but has slowed in recent months. The resin shortage explains the monthly slowdown in production since January. Plastics production was virtually unchanged in April and May.

Higher product demand requires an increase in capacity utilization. Two years before the coronavirus pandemic, plastics and rubber products capacity utilization averaged 84.5%, ranging from a low of 81.9% to a high of 86.7%. Since January this year, capacity utilization has averaged 81.8%. While that is an improvement from the 64.0% in April last year, the capacity utilization rate has stayed stubbornly at 81.0%. This could mean that efforts to increase output through higher labor utilization have been met with a low labor supply.

Uneven Prospects

The current tight labor supply is an outcome of shifts in the labor market dynamics due to the pandemic. Labor preferences shifted due to health concerns and economic reasons. The movement of labor occurred between geographic location and between industries. Those in the manufacturing sector with transferable skills are exploring opportunities for higher wages in other industries.

It is difficult to gauge if there will be an increase in skilled labor supply after the extended unemployment benefit expires in September this year. Over 9.4 million were unemployed in June, according to the Bureau of Labor Statistics. However, considering that a high percentage of labor displaced by the pandemic was from the services sector, the percentage of skilled labor for manufacturing is most likely low. The economy had a low supply of skilled workers—particularly for manufacturing—even before the pandemic. Although employment in plastics manufacturing will eventually return to pre-pandemic level as labor market conditions further improve, monthly jobs gains in the near-term could continue to be spotty.

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