US Manufacturing Activity Expands but Employment Slows Amid Hiring Challenges

Staffing Industry Analysts (03/01/22)

Activity in the US manufacturing sector expanded in February at a faster rate than January, according to the Institute for Supply Management’s “Manufacturing ISM Report on Business,” released today. However, growth in employment slowed as hiring remains a challenge.

“The US manufacturing sector remains in a demand-driven, supply chain-constrained environment,” said Timothy Fiore, chair of the ISM’s manufacturing business survey committee. “The Covid-19 omicron variant remained an impact in February; however, there were signs of relief, with recovery expected in March. A higher-than-normal quits rate and early retirements continued.”

Overall, the ISM’s Manufacturing PMI measure of activity in the US manufacturing sector rose to a reading of 58.6% in February from 57.6% in January, which was the lowest since November 2020. A reading above 50% indicates the manufacturing economy is generally expanding. A Manufacturing PMI above 43.1% over time generally indicates an expansion of the overall economy.

US manufacturing activity picked up more than expected in February as Covid-19 infections subsided, though hiring at factories slowed, contributing to keeping supply chains snarled and prices for inputs high, Reuters reported. Its poll of economists had forecast the index rising to 58.0%.

The employment subindex of the Manufacturing PMI fell to a level of 52.9% in February from 54.5% in January, indicating expansion in employment but at a slower rate.

“Survey panelists’ companies are still struggling to meet labor management plans, as there were signs of slowing progress compared to prior months,” Fiore said.

Data for the ISM’s Manufacturing PMI come from purchasing and supply executives across the US. A smaller share of comments — 4% in February, down from 11% in January — noted greater hiring ease. An overwhelming majority of panelists again indicate their companies are increasing headcounts, or attempting to, as 90% of employment Index comments were hiring focused. Among those respondents, 34% expressed difficulty in filling positions, up from 31% in January. Turnover rates also remained elevated.

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