Talent Talk: The Beginning of a Plastics Upturn

My company just completed its fifth NPE show, so I want to use this week’s Talent Talk to share our observations. KLA is a recruiting firm working only within plastics manufacturing. That means most of the exhibitors and attendees at NPE would fall within our client or candidate space.

Since what I am going to relate here is based on hundreds of conversations over the course of the week, it is closer to observational evidence than anecdotal, but to be clear it is not a scientific survey. With that said, I am seeing clear signs pointing to where we are in the business cycle.

Overall economy vs. manufacturing.

In oversimplified terms, economies have four phases: Expansion, peak, contraction, and trough. Most of the data you will see in the newspapers, the nightly news, or online is for the overall US economy, which includes education, hospitality, government, agriculture, information technology, and so much more. Our focus is on the manufacturing sector, which comprises around 12% of US GDP.

We have demonstrated in previous Talent Talk columns that the manufacturing sector has been in the contraction/trough phases for around two years. One measure we follow closely has indicated that 17 of the past 18 months were in contraction (that measure has just two categories — expansion and contraction).

Related:Talent Talk: Lots of Layoffs, but Relatively Few in Plastics

Conversations point to an expansion phase.

Going back to the many conversations we had during NPE, I believe the plastics industry is ready to enter an expansion phase because of all the companies who approached us with sales needs. That makes a lot of sense in an early recovery phase.

Companies have excess capacity, so the first step is to sell that. According to the Federal Reserve Bank of St. Louis, plastics material and resin industrial capacity has increased about 12% over the past four years, but capacity utilization for that same category has remained soft. The latest reading was around 81% of available capacity.

Headwinds remain.

Sticky inflation and stubbornly high interest rates will remain as headwinds, but with available capacity in the industry, there is potential for healthy gains without big capital investments, which would come later in the cycle.