Industryweek 6921 Employment3

Is Manufacturing Finally Ready to Add Jobs?

June 25, 2014

From May 2013 to this past May, manufacturing added a paltry 105,000 jobs or less than 1% of total employment in the industry. But a new survey from tax and consulting firm McGladrey indicates manufacturing may finally have the help wanted sign out.

Two-thirds of small and mid-size manufacturers and distributors said they expect to hire more employees in the U.S. over the next year, according to McGladrey’s Manufacturing and Distribution Monitor, and on average they expect to increase their payrolls by 6%. Perhaps even more encouraging, only 5% said they expect to cut back on U.S. employment. That number had ranged between 9% and 11% for the past three years.

Employers are planning to hire because they expect sales and profits to increase in 2014. Some 88% of executives forecast an increase in domestic sales, with sales growth averaging 8%. And 67% of manufacturers also expect to see profits rise, with 24% anticipating an increase of more than 10%.

Looking at the new data, Karen Kurek, national industrial products practice leader for McGladrey, said it suggests “the influence of the economic downturn may truly be waning.”

Despite the upbeat assessment, manufacturers remain unhappy with government regulations. Two-thirds (66%) said they expect regulations to limit their company’s growth. The biggest culprit – the Affordable Care Act – was cited by 69% of executives, followed by 52% who cited state regulation and 50% who pointed to Environmental Protection Agency rules.

But while manufacturers are unhappy with Obamacare, 74% said they planned to offer ACA-compliant health coverage to their full-time employees. Less than 1% said they would forego offering coverage and instead pay penalties, while 11% said they were undecided.

McGladrey's Kurek said manufacturers are not dropping health coverage because there is a skills shortage in manufacturing and the labor market is very competitive. But she said executives remain uncertain what the long-term impact of the law will be and how it will impact their premiums.

Taxes were also much on the minds of manufacturers, with 60% saying it would limit their growth, McGladrey reported. Executives cited federal business taxes (61%), state business taxes (60%) and federal income taxes (50%) as problems. Many mid-size firms are organized as pass-through entities and thus have their earnings taxed as individual income.

Manufacturers and distributors predicted uncertainty around tax breaks that have expired – bonus depreciation (47%) and the research and development tax credit (39%) - would harm their businesses.

One thing that is not worrying mid-market executives is cybersecurity. Despite repeated high-profile data breaches, more than 80% of executives said they faced low levels of risk from data breaches and 11% reported no risk at all. The reason for their lack of concern: 43% believe their companies are not high-profile targets for data thieves.

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