How the pandemic has impacted the manufacturing sector

vNational Association of Manufacturers CEO Jay Timmons joins Yahoo Finance Live to discuss supply chain disruptions and labor shortages in the manufacturing industry as the pandemic nears its third year.

Video Transcript

EMILY MCCORMICK: Welcome back. The US manufacturing sector has been one area of the economy hit hard over the course of the pandemic by ongoing supply chain disruptions, labor shortages, and rising prices. For the latest on the outlook for the goods-producing industries, we're welcoming in Jay Timmons, National Association of Manufacturers President and CEO. Jay, it's always great having you on. Thank you so much for your time this afternoon.

And looking at the most recent data on manufacturing, we have been seeing a little bit of a deceleration in the rate of expansion during this recovery. The ISM manufacturing and market PMIs have both come down slightly. And labor shortages are still widespread and near record levels. From your perspective, tell us where we are right now in terms of conditions on the ground for manufacturers across the country.

JAY TIMMONS: Yeah. Well, I think, Emily, what we're seeing is we're seeing the impact of labor shortages. And your previous guests have talked about the fact that it's widespread across the entire economy. It is not something that is unique for manufacturers. We had 500,000 open jobs pre-pandemic in the sector. And right now, we've had several months-- three months, I think-- where we've had over 800,000 open jobs in the sector. We almost had a million jobs a couple of months ago.

So that is really impacting our ability to produce the goods that folks want, which is causing a constraint in the supply chain, which you already have talked about. That leads to inflation because more demand, less supply. All of those econ 101 rules that we learned in high school and college are coming into play right now.

ADAM SHAPIRO: Hey, Jay, I just want to jump real quick to that headline that broke about 15 minutes before we came into this stream at 3 o'clock, Supreme Court's decision that the administration's vaccine mandate or mask mandate for companies with 100 or more employees. I mean, manufacturers, a lot of them have more than 100 employees. How is this going to be received, do you think, among your membership?

Well, you know, Adam, it's a mixed bag to be quite blunt. There are some manufacturers that very much supported the mandate. And they were already doing a-- many of them were already doing a mandate on their own facilities or in their own facilities.

Others were simply opposed to it for various reasons. They worried about exacerbating the workforce shortage that was in existence, and others were just kind of waiting to see. Now the fact of the matter is the Supreme Court has spoken. And when the Supreme Court speaks and they rule on something, even controversial issues, we follow the ruling of the court.

That does not change, however, our obligation as individuals, as businesses to do everything we can to get the vac-- to get the virus under control and get this pandemic under control. That's the only way we're going to keep our schools open. It's the only way we're going to keep our facilities open. It's the only way we will have any semblance of normalcy in our society.

So what does that mean? That means we've got to get people vaccinated. And so we're going to continue to encourage and follow the great lead of several of our companies who have already done that, like Cleveland-Cliffs or Tyson Food and others who have shown the way to getting their workforces vaccinated. Nephron Pharmaceuticals in South Carolina, they put a mandate in place several months ago, and they have 100% compliance now. So it can be done, and we can do this together.

EMILY MCCORMICK: Jay, shifting gears here. We got the producer price index coming in at 9.7% year-on-year for December this morning, the highest on record in data, going back to 2010. Do you think this is the peak for price increases? Or do you expect these inflationary pressures to keep rising into the first couple of months of this year, at least?

JAY TIMMONS: Well, I'm not an economist. But if I could answer that question correctly, I would be a very highly-paid commentator. So I can't answer it. But what I would like to say is that-- I mean, I hate to say it.

But if all roads really do lead back to the pandemic-- again, we have worker shortages that are leading to our supply chain crisis that we have, which are leading to more and more price pressures and demands. More demand, fewer goods that we can produce. People are calling in sick. Folks are deciding that they're going to take part of the Great Resignation because they're afraid that they're going to be infected in their workplaces if businesses are not doing what they need to do to get their employees vaccinated and boosted.

So I'm hopeful that we'll start to see price pressures ease. But the way to do that and the way to get our economy back to normalcy is to get the pandemic under control. I sound like a broken record. But the way to do that, get vaccinated, get boosted. And by the way, we're--

ADAM SHAPIRO: When we get on the other side-- Jay, when we get on the other side of the pandemic, I remember doing a live hit with you about a year ago about the efforts that your organization and manufacturers are doing to recruit people into the industry. I mean, it's 12% of GDP. It is a huge part. And the salaries are now pretty terrific. And you don't have to take on four years of debt to get a college degree to go into manufacturing in some cases, although it helps. How do you recruit younger people when you have high salaries, you have a future, and yet they still aren't showing up because we need more people?

JAY TIMMONS: Well, younger people are a key. But you know what? We'll take anybody of any age because there's a lot of folks out there that are taking a wait-and-see attitude about what they want to do next. The term "Great Resignation" has been applied to those who are taking a pause, who are waiting to see what they want to do next in life. They may change careers. They may do things completely differently. So we're competing with every other sector for talent.

Now here's the good news for the manufacturing-- the manufacturing sector is we do pay-- as you said, we pay more than any other sector. Our wage growth has been up over 5% for production and non-supervisory workers over the last 12 months. That's the strongest year-over-year growth since September of 1982. So even before those solid gains, manufacturing workers were already well paid, and they were averaging about $93,000 in pay and benefits in 2020.

So we've launched-- and I think this is what you're referring to, Adam-- we've launched a campaign called Creators Wanted. We're on the road. And we're showing young people, kind of giving them a hands-on experience and showing them what manufacturing, modern manufacturing, is all about. It's clean. It's sleek, technology-driven. It's cool. It's something that, if you want to make a career out of it, you're literally going to come to work every single day and be excited. You're never going to get bored in manufacturing.

So telling that story to the next generation is critical. Telling the story to those who are trying to figure out what to do next in the remainder of their career is also critical. So we're telling the story everywhere we can and making sure everybody knows what opportunities are available.

EMILY MCCORMICK: Jay Timmons is National Association of Manufacturers President and CEO. And we always appreciate your insight and hope you'll join us again soon.