IU Survey: Manufacturers Expect Continued Growth in 2020

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IU Survey: Manufacturers Expect Continued Growth in 2020

But Kelley School warns worker shortage is a drag on profits

(INDIANAPOLIS) - Indiana manufacturers say they're doing well, but they'd be doing better if they could fill their open jobs.

IU Kelley School of Business Professor Mark Frohlich says a rough rule of thumb  is that every job you have to leave unfilled slices $250,000 to $500,000 off your bottom line -- you can't sell what you don't have enough people to produce. Companies have papered over the shortages with stopgaps like automation, overtime, or asking longtime workers to delay their retirement plans. Now, though, Frohlich says an increasing number of companies have automated where they can, overtime isn't enough to meet demand, and retirees don't want to wait any longer. 

IU's annual manufacturing survey, commissioned by Katz, Sapper and Miller, still finds employers expecting an 8% jump in profits next year, down slightly from this year's 9%. Four out of five manufacturers increased profits this year.

Frohlich says there'll be a recession sooner or later, but IU doesn't see any sign of one around the corner. 

Economists sounded an alarm this summer when the purchasing management index, a measure of what companies are buying for their own use, declined to the lowest level in 10 years. But Kelley School Professor Steve Jones says the PMI measures only month-to-month changes, making a 10-year comparison useless. And he says the sharp drop reflects companies frontloading purchases earlier this year to complete them before tariffs kick in and drive up prices.

(Photo: Eric Berman/WIBC)

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