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Published in Manufacturing
Lack of available workers begins to hit manufacturing output Infographic by Rachel Harper

Lack of available workers begins to hit manufacturing output

BY Sunday, October 29, 2017 11:59am

While countless manufacturers throughout West Michigan have lamented the lack of available talent, evidence shows the workforce constraint has finally affected the industry’s ability to grow.

That’s according to Paul Isely, an economist and associate dean at Grand Valley State University’s Seidman College of Business, who notes the limited pool of talent in the region has shown up in the productivity data for manufacturing. While sales for West Michigan manufacturers are still growing, the rate of expansion has slowed compared to past years, particularly as companies struggle to find the necessary talent.

“We certainly see manufacturing slowing down because they’re sort of out of labor, so it’s hard to grow when you don’t have a lot of workers,” Isely said.

Growth among West Michigan’s manufacturing economy has waned in recent years.

In 2016, the gross domestic product (GDP) attributed to manufacturing in the Grand Rapids-Wyoming metropolitan statistical area reached $14.7 billion, a 2-percent increase compared to the previous year, according to the latest data available from the Bureau of Economic Analysis. By contrast, the manufacturing GDP expanded at a pace of 6.6 percent in 2015 in the Grand Rapids metro area, according to the data.

Other metropolitan areas in West Michigan mirror the same trend. In the Kalamazoo-Portage MSA, GDP growth for manufacturing slowed to a rate of 1.2 percent in 2016 compared to 8.2 percent in the prior year. Manufacturing generated $3.4 billion in economic activity in the Kalamazoo-Portage MSA last year, according to the data.

Expansion in the manufacturing GDP cooled to 5.1 percent in 2016 from 10.7 percent the prior year in Battle Creek. Meanwhile, Muskegon’s manufacturing GDP shrank in both 2015 and 2016, when it was down 1.2 percent.

On their own, manufacturing jobs account for roughly 21.3 percent of the job market in West Michigan, according to a recent report by Talent 2025 Inc., a Grand Rapids-based organization that studies and promotes talent development in the region.

“We’re just out of workers … When we look around Michigan right now, there’s less than 30,000 available workers — people who are looking for jobs and are available,” Isely said. “That’s not a lot.”

The unemployment rate in the Grand Rapids metropolitan area was pegged at 3.8 percent as of August — the lowest in the state, according to unadjusted data from the Michigan Bureau of Labor Market Information and Strategic Initiatives. Meanwhile, the Kalamazoo metropolitan area reported a 4.6 percent unemployment rate in August, according to preliminary data.

For Isely, the talent crunch manufacturers face has been compounded as new entrants to the job market eschew the sector in favor of jobs in other industries, particularly in leisure and hospitality.

“People are moving from jobs that paid more to jobs that pay less,” Isely said. “They’re moving professions from those production jobs and those business service jobs into hospitality and leisure type jobs. There’s a lot of them, but they pay a little less.

“As young people are looking for their first jobs, we’re seeing them go into those (service) types of jobs. That’s muting the overall wage growth in the economy.”


In addition to a tightly constrained workforce, Isely also points to the imminent slowdown in sales forecasted for the automotive industry, which remains a primary driver for the West Michigan manufacturing economy.

Automotive industry watchers expect the number of light vehicle sales in North America to peak at 17.3 million units annually in 2018 and decline from there to 16.7 million units annually in 2022, according to data from IHS Automotive.

The silver lining for companies in the automotive supply chain: Light vehicle production in North America is expected to reach 17.4 million units this year and continue to grow steadily before peaking at 18.3 million units in 2021.

“The primary industry that drives manufacturing in Michigan is automotive, and we don’t see growth in automotive in the next few years,” Isely said. “We certainly do not see a devastating drop or anything, but we’ve sort of topped out and we’ll be bobbing along at the same level for a little while, hopefully.”

Brian Long, director of supply chain management at GVSU, wrote this month in his report that automotive suppliers expressed concerns over declining vehicle sales, but noted that “so far, none of the firms in our local survey are talking about major sales declines.”

The industry’s fortunes reversed somewhat in September, when sales were up 6.1 percent year over year, according to reports.

“Most auto parts suppliers have been concerned throughout the summer about the slower auto sales, so the September bounce in sales seems to have forestalled any immediate fear of an automotive recession lurking around the corner,” Long wrote in his latest report.

At the same time, plastic-injection molders — many of whom supply the automotive industry — report their resin costs have gone up as a result of hurricanes affecting suppliers in Texas and Louisiana.

Among other local industries, office furniture manufacturers “appear to be topping out,” although smaller companies in the sector appear to be “having a little more success.” Meanwhile, business for equipment makers has slowed, while industrial distributors report “stable” activity.

In Long’s latest survey, 82 percent of respondents expected production to stay the same or increase, although the index (17) retreated two points from the previous month. However, the index for sales (22) edged up two points from August.


Outside of the automotive industry, Isely believes activity in the consumer products sector should remain strong for the next 18 months. However, he said he doesn’t “see a ton of growth” from that industry.

Overall, while talent continues to hamper the manufacturing industry, Isely believes one of the solutions to the talent crunch could be to encourage workers from more rural, northern communities to make the commute to larger metropolitan areas.

“The question is can we get people to drive a little bit further,” Isely said. “There’s still some excess capacity, meaning workers with the correct skill set north of Grand Rapids that can drive down. There’s pools of workers nearby that might have the right skillsets, but we have to find a way to convince them to drive an hour to work.”

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