Last week we discussed US manufacturing being in a phase called Industry 4.0, continuing an evolutionary process that is now around 260 years in the making. From the spinning jenny and steam engine, we now have artificial intelligence (AI) and the industrial internet of things (IIoT).
By the way, last week we also predicted that there will be another rate hike or two, which Fed Chairman Powell confirmed in his press conference. After an initial groan, Wall Street rallied as it realized this means, while we are still in the tunnel, there is a light at the end of it. A big part of that light is manufacturing and the plastics industry.
A perfect storm for US manufacturing growth
Several factors are coming together that may create a perfect storm for manufacturing growth in the United States. The first is the ongoing reshoring movement that has been going on for several years, as we discussed in July 2022. To update that discussion, 2022 saw 360,000 new jobs created from reshoring and foreign direct investment. That is a 53% increase over 2021, which was a record, according to the Reshoring Initiative.
Much of this job growth is in the EV battery and semiconductor areas, driven in part by the second tailwind for manufacturing — government investment. Three major pieces of legislation have been passed in the last year and a half — the Infrastructure Investment and Jobs Act (IIJA), the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act, and the Inflation Reduction Act (IRA).
To be sure, these bills were not without controversy, if I may acknowledge that without “going there,” and there was significant investment in the works before these bills. However, together these new laws provide more than $2 trillion in authorized federal funding and incentives over the next decade.
Believe it or not, spending billions of dollars is not quick or easy in the manufacturing world. There is a lot of anecdotal evidence from companies that provide construction and engineering services, equipment, and critical raw materials, such as steel, that very little of that money has made its way to the economy . . . yet. But it is coming, and soon. Jacobs Solutions recently predicted that funding from the three acts could hit full strength by the end of 2023, with maximum funding overlap for four to five consecutive quarters.
About the author
Paul Sturgeon is CEO of KLA Industries, a national search firm specializing in plastics, packaging, and polymer technology. If you have a topic you would like to see discussed, a company that is growing, or other ideas for this blog, e-mail Sturgeon at [email protected].