Talent Talk: Reflections on a Horrible, No-good, Very Bad Year

2024 was a tough year for the US manufacturing sector, and just as a rising tide lifts all boats, the opposite is also true as the plastics sector struggled. There are many reasons, but I believe the two biggest were persistently high interest rates and the continued labor shortage.

In March 2022, the Federal Reserve made its first small interest rate hike. It would be 17 months and 5.25 percentage points before the Fed was finished. The rate remained at its maximum level for most of 2024. Only in the past few months has the Fed eased a bit.

Inflation is transitory . . . not

The reason for the high rates is the Fed’s mandate to keep inflation in check, which is generally regarded as around 2%. While the rate of inflation has slowed, core inflation has yet to reach below 3.2%. Throughout 2022 and 2023, Talent Talk opined that inflation was not transitory — a fashionable term at the time — and that the Fed would need to raise rates much higher than experts were predicting. Sometimes being right is not fun.

Wage growth in 2024 expected to be just under 4%

One of the reasons we did not think inflation would go away soon was the extreme labor shortages we witnessed in 2022 and 2023: At times, there were two job openings for every potential worker. That squeezed the labor market and drove down unemployment as low as 3.4%, a level not seen in 50 years. In turn, that drove wages higher, and every manufactured good has a labor-cost component.

Related:Talent Talk: The Labor Shortage Is About to Get a Whole Lot Worse

The official government figures for wage growth in manufacturing for 2024 will probably be just under 4%, in line with that of workers in general, but we saw top professionals asking for and receiving increases of 10 to 20%.

Trade tensions and supply-chain disruptions

Other problems confronting the manufacturing space in 2024 included trade tensions caused by global conflicts, supply-chain disruptions, weakness in key end markets such as residential construction and automotive, and raw material price volatility.

Bullish for 2025

With all this, it’s a wonder the industry has hung on. But it has, and our reward is just around the corner. There are many reasons to be bullish on the plastics manufacturing sector in 2025, which we will begin to explore next week.