Industry embraces strong outlook, laments tight labor market – by Victoria Kickham

Demand for labor heats up as 2018 comes to a close and the economy continues its solid pace

Electronics industry companies will continue to reap the rewards of a strong U.S economy in 2019, but they will face accompanying challenges as well–most notably a tight labor market that is helping to ramp up supply chain pressures. As U.S unemployment hit a near-50-year low of 3.7 percent this fall, employers across all industries were feeling the crunch.

“The U.S economy is growing rapidly now, and we expect this trend to continue in the coming quarters, meaning that the demand for workers should not slow down,” Gad Levanon, chief economist, North America, for The Conference Board, said in a statement commenting on U.S unemployment data released earlier this fall. “We expect employers to more rapidly do what they have been doing in recent quarters: automate, increase working hours and pull people back to the labor force, especially young men, whose labor force participation rate [has] barely recovered yet. At the same time, the labor market will continue to get tighter, with the unemployment rate reaching 3.5 percent or even lower in 2019, accompanied by rising inflation pressures.”

Homing in on the manufacturing supply channel offers a clearer picture of what the electronics industry is up against. Earlier this fall, the National Association of Manufacturers released its Manufacturers Outlook Survey for the third quarter of 2018, and employment related concerns took center stage there as well. Despite exceedingly high levels of economic optimism in the manufacturing community (92.5 percent), most companies said the lack of skilled workers will challenge their ability to grow in the months ahead. The inability to attract a quality workforce has forced more than one in four manufacturers surveyed to turn down new business opportunities, the survey showed, while one-third said they held off on plans to hire more workers due to workforce constraints.Nearly half of manufacturers surveyed by NAM cited the workforce crisis as the number-one threat facing their business.

All of this comes in the face of a strong electronic components market, driven by strength in everything from consumer electronics to automotive and industrial sectors. Recent reports on semiconductor growth underscore the trend: Worldwide sales of semiconductors reached more than $40 billion in August, up nearly 15 percent year-over-year, according to data released this fall from the Semiconductor Industry Association. Also this fall, industry researcher IC Insights reported that seven product categories will exceed the 16 percent growth rate expected from the total integrated circuit (IC) market this year, led by dynamic random-access memory (DRAM) at 39 percent growth. The automotive special purpose logic market comes in second, with an expected 29 percent growth rate, followed by wireless communication application-specific analog, which is forecast to grow 23 percent this year.

“The U.S economy is very strong now,” Levanon said in a separate statement on employment trends. “Demand for workers is likely to continue growing rapidly but with the unemployment rate now at 3.7 percent, recruiters have their  work cut out for them. They will have to bring more people off the sidelines faster. In the meantime, businesses will have to squeeze more out of their current workers, either by increasing working hours or raising labor productivity.”