Manufacturers still on the upswing

The pandemic created a lot of problems for just about every kind of industry, but in the U.S. in particular, few were more heavily affected than the manufacturing sector. The good news is that, as COVID risk has declined in many states throughout the second period of the year, factories have come back online. While there's still quite a way to go in terms of getting back to pre-downturn levels of production, the recovery appears to be going well.

At the end of May, for instance, the Institute for Supply Management found that its manufacturing index rose to a reading of 61.2 — up slightly from the 60.7 seen in April. Any reading north of 50 indicates growth, and at this point, the month-over-month improvements are picking up speed. Overall, though, this marked 12 straight months of the industry trending upward.

Manufacturing is getting back to pre-pandemic norms, but issues persist.

It wasn't all positive news in the sector, though, the ISM report said. While new orders were up and growing quickly, production and employment slipped on a month-over-month basis, and customers' inventories were considered "too low," shrinking more quickly than they were in April. At the same time,  the backlog of orders manufacturers were sitting on increased more quickly as well. Despite that, however, prices declined somewhat, but remained at an extremely high reading of 88.

Similar findings
Meanwhile, the Purchasing Managers' Index from IHS Markit showed almost identical findings, but further reflected that business growth was starting to even off a bit despite being quite high for the third straight month. Likewise, the costs manufacturers faced to make their products in June were also rather high, especially when it came to acquiring raw materials and paying for fuel. Furthermore, they faced pressures related to labor — specifically to hire new employees amid tight competition for blue-collar workers.

"Although price gauges have also slipped from May's all-time highs, it's clear that the economy continues to run very hot," said Chris Williamson, the chief business economist at IHS Markit. "Prices charged for goods and services are still rising very sharply, record supply shortages are getting worse rather than better, firms are fighting to fill vacancies and manufacturers' warehouse stocks are being depleted at a worrying rate as firms struggle to meet demand."

A ways to go
When it comes to labor, hiring has rebounded sharply in just over a year. According to data the Federal Reserve Bank of St. Louis, between March and April of last year, employment in the sector cratered to about 11.4 million, representing a low not seen since early 1941. In the 14 months since that trough, however, things have trended upward, hitting almost 12.3 million as of the start of June (the most recent month for which data is available).

Unfortunately, the new higher number is well below where it was just before the pandemic took hold in the U.S., in February 2020, the data showed. At that point, the manufacturing industry stood at almost 12.8 million — meaning the sector still needs to add about half a million jobs to get back to square one.