Optimism among U.S. manufacturers is soaring as the Republican-led tax cuts help fuel a white-hot economy with the lowest unemployment numbers in over a decade, but a significant labor shortage is undermining the gains, a new report shows.
Nearly 93 percent of manufacturers are projecting further expansion for their businesses, and positive sentiment among smaller companies is up to 91.3 percent, according to a quarterly survey from the National Association of Manufacturers. It's one of the best outlooks the group has seen in the 20 years it has conducted the survey among its 14,000 members.
"We used to be happy when that number would get up to the mid- and high 50s," Chief Executive Officer Jay Timmons told the Washington Examiner.
Many of the Trump administration's largest achievements have been overshadowed by simultaneous controversies, but the strength of the U.S. economy has earned accolades even outside of the conservative base. While only 38 percent of voters approve of President Trump, 70 percent say the U.S. economy is "excellent," according to a Quinnipiac University poll released in September.
Republicans are hoping the comprehensive tax overhaul signed into law in January that permanently lowered the top corporate rate and temporarily cut individual obligations – along with the deregulation efforts by the White House – will drive momentum in the 2018 midterms and help the GOP retain control of the House and Senate.
But lower expenses are only part of the picture, and other pieces are unsettling. Nearly 74 percent of manufacturers say they are concerned about attracting or keeping a quality workforce, and one in four companies have had to turn down business because of labor problems.
"The workforce issue is where we are focused like laser beams making sure we can attract young people," Timmons said.
The shortfall may slow the development of advanced technology, such as autonomous vehicles or fifth-generation wireless transmission that require a skilled workforce. Many young adults don't think manufacturing jobs exist, Timmons said, or envision the positions as the blue-collar jobs of their grandparents' generation that have largely shifted overseas, where labor is cheaper.
"We have to have a fundamental restructuring, re-calibration of our education system from start to finish in this country," Timmons said.
Any major education overhaul would be a heavy lift, and it's unclear how Democratic takeovers of the House, Senate or both might affect the odds of such an initiative.
There may be more subtle ways Congress can help, though. The federal government spends billions of dollars each year on training and apprenticeship programs, and allowing states to manage them could would be a "more efficient use of those tax dollars and more efficient use of these programs," Timmons said.
If Republicans lose control in Washington, however, the trade group may have a higher priority than education reform. Democrats have vowed to roll back the tax law should they get the chance, dealing a stinging blow to an industry that Timmons said has proved it is "keeping its promises" on hiring more workers and raising wages.
"For those who would like to roll back the progress we made, our question is really simple: Which investments do you not want to see happen in America?" he said.
Apart from advocating for the tax overhaul, much of the association's focus recently has been on Trump's trade skirmishes with countries like China, Mexico, and Canada. A recent update of the North American Free Trade Agreement earned praise from the group, but it is opposed to the administration's tariffs on $250 billion in Chinese goods. And while many U.S. business have expressed concerns over the separate tariffs on steel and aluminum imports – which hit trading allies like Canada, Mexico and the European Union – the group has not taken a position on it.
Timmons is hoping that, once the NAFTA overhaul is approved by the U.S., Canada and Mexico, there will be "some effort by the administration to move away from the tariffs."
Publicly, many U.S. companies are critical of the duties and warn they plan to raise prices to protect their bottom lines. But privately they agree that Chinese practices like theft of intellectual property must be addressed.
"We've had problems with China for 20 years," said Timmons, who hopes the world's two largest economies can reach a trade deal. "We’ve been very concerned about the fact that they cheat."