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Is a recession on the horizon, as many professionals predict?
Table of Contents
Recently, we launched our American Manufacturing Pressure and Productivity Index, a report that compiles survey data from manufacturing leaders across industries. It reveals many challenges and opportunities for manufacturing companies of all sizes to navigate, from international competition to the prevalence of data gaps. However, one question was especially revealing, and troubling: is a recession coming in the next two years?
When asked about economic outlooks and recessions, our queried industry leaders were pessimistic. Only 11% of senior manufacturing leaders have a positive short- or medium-term outlook on the economy, and 84% expect a recession in the next two years. Some are even more concerned, with 49% predicting a recession in 2025.
This demands attention. The manufacturing sector is a reliable bellwether of economic trends, as it is impacted by a wide breadth of externalities. However, in every crisis are opportunities to claim a competitive advantage. Let’s discuss why this is a credible concern, what factors might be driving a downturn, and what strategic moves are worth considering to weather the storm.
The economic prophets of manufacturing
Across American history, one of the most reliable indicators of economic trends has been the status of manufacturing. For example, take the industrial production index, which measures the real output of the manufacturing, mining, oil, and electrical industries. Tracking this index relative to the general economy, you can see consistent dips before every recession. It’s not surprising – these industries are the foundation upon which all other industries in America are built. If the raw material and fuels aren’t being produced and processed, every subsequent transaction grinds to a halt.
What’s even more telling is that this index is still a trailing indicator, reflecting output of the previous month. That means for manufacturing professionals, like the ones we’ve surveyed for our report, the writing on the wall is apparent even earlier. Aware of all the pressures impacting their production, they can anticipate a downturn in their output months in advance.
All of this is to say: when manufacturing experts agree that a recession is imminent, there’s plenty of reason to believe them.
What will cause the coming recession?
Understanding the causes of recession is far from a trivial task. In fact, leading economists spend their whole career puzzling out what factors influence what metrics to which extent. However, there’s some events definitely worth tracking to understand the situation as it unfolds.
The election – as 2024 is an election year, many pressing policies remain open questions. Both candidates have made promises to revitalize middle class jobs, which could lead to stimulus plans for manufacturing. But regardless of who wins, what they’ve promised, and how successful their plans end up being, this uncertainty leads to caution around investments and purchasing in the short term, which leads to slumping across the board.
The talent crisis – manufacturing is facing a looming crisis of talent. Estimates show over 2.1 million jobs going unfilled by 2030. In our surveying of major pressing concerns for manufacturing leadership, we found that 56% of respondents identified acquiring talent, and 50% identified equipping current employees to take leadership roles, as among their primary challenges. This is all going to be exacerbated by upcoming waves of retirement, where many of the most experienced and knowledgeable employees are going to disappear. With major shortcomings in talent expected, major shortcomings in productivity, and therefore economic activity, are sure to follow.
International competition – for manufacturing especially, the global marketplace has been both an obstacle and opportunity for decades. However, in recent years, destabilizing factors have transformed other manufacturing nations, such as China and Mexico, from helpful resources to growing competition. No longer just places to leverage cheaper labor, other nations have emerged as full-fledged markets, operating without American heads but selling to American consumers. Aggressive tariffs on foreign goods and subsidies to reshore manufacturing jobs back home are intended to reclaim chunks of the global market, but these policies can have second-order chilling effects on investment and growth.
If a recession is indeed coming, these three issues will certainly be factors. However, there are many others: dozens, if not hundreds, of tiny dominoes that could drop. If we could figure them all out, we probably wouldn’t be staring down a recession in the first place. Being knowledgeable is important, but in the face of such a complex challenge, being pragmatic is even better.
Weathering the coming recession as a manufacturer
A recession is hard, some shortcomings and stressors are inevitable. But they aren’t a death sentence. In fact, these times of hardship often coincide with opportunities to claim a competitive advantage and move ahead of peers. You just need to move strategically, seize options that open up to you, and stop leaving savings on the table.
As we mentioned, the causal forces of a recession are uncountably many and dizzyingly complex. They’re often wholly out of your control – your company isn’t personally renegotiating trade relationships with China. It’s better not to think about addressing the actual causes of the recession directly. Instead, think about what areas of your business are likely to be impacted, and optimize what things you can control that also affect those areas. It’s sort of like the old adage about accepting what you can’t change, needing courage to change what you can, and knowing how to tell the difference.
For example, you’ll likely face a talent gap as retirement frequency increases and new hires are unavailable or ill-equipped to step into advanced roles. That’s likely inevitable at this point, and you can’t hope to magically tap into an army of workers undiscovered by competitors. However, what isn’t inevitable is that you’ll suffer from reduced productivity because of that. Investments in new technology can help uplevel new employees to have the strategic insights of former old employees. No matter what crisis is coming, there are steps you can take to stop the ramifications before they hit the bottom line.
Speaking of the bottom line, these tighter times are also perfect for claiming opportunities for savings. Maybe you won’t have the capital to tackle ambitious new projects due to the recession, but you can build back a leaner and faster foundation for when economic tides shift back. This doesn’t mean headcount reductions – there’s no faster way to cripple productivity than layoffs and overburdening of whoever remains. Instead, look for inefficiencies and unnecessary costs to do more with what you still have.
Consider CADDi
Whether a recession is around the corner or not, saving time, money, and stress is always a good thing. CADDi can make revolutionary improvements in your productivity by unlocking the power of your past data. Move past reinventing the wheel and into an era of iteration and evolution with our patented drawing searches, while saving money on procurement and responding faster and more accurately to RFQs.
See it all in action by booking a demo or checking out our interactive product tour.
Recently, we launched our American Manufacturing Pressure and Productivity Index, a report that compiles survey data from manufacturing leaders across industries. It reveals many challenges and opportunities for manufacturing companies of all sizes to navigate, from international competition to the prevalence of data gaps. However, one question was especially revealing, and troubling: is a recession coming in the next two years?
When asked about economic outlooks and recessions, our queried industry leaders were pessimistic. Only 11% of senior manufacturing leaders have a positive short- or medium-term outlook on the economy, and 84% expect a recession in the next two years. Some are even more concerned, with 49% predicting a recession in 2025.
This demands attention. The manufacturing sector is a reliable bellwether of economic trends, as it is impacted by a wide breadth of externalities. However, in every crisis are opportunities to claim a competitive advantage. Let’s discuss why this is a credible concern, what factors might be driving a downturn, and what strategic moves are worth considering to weather the storm.
The economic prophets of manufacturing
Across American history, one of the most reliable indicators of economic trends has been the status of manufacturing. For example, take the industrial production index, which measures the real output of the manufacturing, mining, oil, and electrical industries. Tracking this index relative to the general economy, you can see consistent dips before every recession. It’s not surprising – these industries are the foundation upon which all other industries in America are built. If the raw material and fuels aren’t being produced and processed, every subsequent transaction grinds to a halt.
What’s even more telling is that this index is still a trailing indicator, reflecting output of the previous month. That means for manufacturing professionals, like the ones we’ve surveyed for our report, the writing on the wall is apparent even earlier. Aware of all the pressures impacting their production, they can anticipate a downturn in their output months in advance.
All of this is to say: when manufacturing experts agree that a recession is imminent, there’s plenty of reason to believe them.
What will cause the coming recession?
Understanding the causes of recession is far from a trivial task. In fact, leading economists spend their whole career puzzling out what factors influence what metrics to which extent. However, there’s some events definitely worth tracking to understand the situation as it unfolds.
The election – as 2024 is an election year, many pressing policies remain open questions. Both candidates have made promises to revitalize middle class jobs, which could lead to stimulus plans for manufacturing. But regardless of who wins, what they’ve promised, and how successful their plans end up being, this uncertainty leads to caution around investments and purchasing in the short term, which leads to slumping across the board.
The talent crisis – manufacturing is facing a looming crisis of talent. Estimates show over 2.1 million jobs going unfilled by 2030. In our surveying of major pressing concerns for manufacturing leadership, we found that 56% of respondents identified acquiring talent, and 50% identified equipping current employees to take leadership roles, as among their primary challenges. This is all going to be exacerbated by upcoming waves of retirement, where many of the most experienced and knowledgeable employees are going to disappear. With major shortcomings in talent expected, major shortcomings in productivity, and therefore economic activity, are sure to follow.
International competition – for manufacturing especially, the global marketplace has been both an obstacle and opportunity for decades. However, in recent years, destabilizing factors have transformed other manufacturing nations, such as China and Mexico, from helpful resources to growing competition. No longer just places to leverage cheaper labor, other nations have emerged as full-fledged markets, operating without American heads but selling to American consumers. Aggressive tariffs on foreign goods and subsidies to reshore manufacturing jobs back home are intended to reclaim chunks of the global market, but these policies can have second-order chilling effects on investment and growth.
If a recession is indeed coming, these three issues will certainly be factors. However, there are many others: dozens, if not hundreds, of tiny dominoes that could drop. If we could figure them all out, we probably wouldn’t be staring down a recession in the first place. Being knowledgeable is important, but in the face of such a complex challenge, being pragmatic is even better.
Weathering the coming recession as a manufacturer
A recession is hard, some shortcomings and stressors are inevitable. But they aren’t a death sentence. In fact, these times of hardship often coincide with opportunities to claim a competitive advantage and move ahead of peers. You just need to move strategically, seize options that open up to you, and stop leaving savings on the table.
As we mentioned, the causal forces of a recession are uncountably many and dizzyingly complex. They’re often wholly out of your control – your company isn’t personally renegotiating trade relationships with China. It’s better not to think about addressing the actual causes of the recession directly. Instead, think about what areas of your business are likely to be impacted, and optimize what things you can control that also affect those areas. It’s sort of like the old adage about accepting what you can’t change, needing courage to change what you can, and knowing how to tell the difference.
For example, you’ll likely face a talent gap as retirement frequency increases and new hires are unavailable or ill-equipped to step into advanced roles. That’s likely inevitable at this point, and you can’t hope to magically tap into an army of workers undiscovered by competitors. However, what isn’t inevitable is that you’ll suffer from reduced productivity because of that. Investments in new technology can help uplevel new employees to have the strategic insights of former old employees. No matter what crisis is coming, there are steps you can take to stop the ramifications before they hit the bottom line.
Speaking of the bottom line, these tighter times are also perfect for claiming opportunities for savings. Maybe you won’t have the capital to tackle ambitious new projects due to the recession, but you can build back a leaner and faster foundation for when economic tides shift back. This doesn’t mean headcount reductions – there’s no faster way to cripple productivity than layoffs and overburdening of whoever remains. Instead, look for inefficiencies and unnecessary costs to do more with what you still have.
Consider CADDi
Whether a recession is around the corner or not, saving time, money, and stress is always a good thing. CADDi can make revolutionary improvements in your productivity by unlocking the power of your past data. Move past reinventing the wheel and into an era of iteration and evolution with our patented drawing searches, while saving money on procurement and responding faster and more accurately to RFQs.
See it all in action by booking a demo or checking out our interactive product tour.
Ready to see CADDi Drawer in action? Get a personalized demo.
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