2024. Executives anticipate a 4.2-percent net increase in overall revenues for 2025, compared to a 0.8 percentage point increase reported for 2024.
Sixteen of the 18 manufacturing industries expect revenue improvement in 2025. The top five gainers include:
- Computer & Electronic Products
- Machinery
- Electrical Equipment
- Appliances & Components;
- Food, Beverage & Tobacco Products.
Construction Sector: Pent Up Demand But Lingering High Mortgage Rates
The construction sector outlook is one of guarded optimism. There is built-up demand for housing, yet ongoing affordability issues persist, even as mortgage rates gradually decrease.
According to a recent New York Times report, the market remains in a state of flux. While Redfin anticipates a 4% rise in home prices driven by continued demand outpacing supply, CoreLogic offers a more cautious outlook, forecasting a modest 1.9% growth due to high interest rates potentially deterring buyers. Sam Khater, chief economist at Freddie Mac, adds that although home prices are expected to climb faster than in 2024, sales will likely increase as buyers adjust their expectations and maximize their purchasing power.
However, insights from Fannie Mae’s Economic and Strategic Research Group suggest that affordability challenges and the "lock-in effect" will keep housing activity subdued, with existing-home sales inching only slightly upward from historic lows. Mark Palim, Fannie Mae’s Senior Vice President and Chief Economist, emphasizes regional disparities, noting stronger activity in the Sun Belt compared to supply-constrained areas like the Northeast. He also highlights that while mortgage rates are projected to remain above 6%, nominal wage growth may eventually outpace home price increases, offering gradual relief to prospective homebuyers.
Staffing and Labor: Retention and Upskilling a Priority
A recent survey from LinkedIn found that 43% of Americans say that they feel stuck in their jobs right now with few options for better employment. Competition for jobs has increased, with 2.5 applicants per open job on LinkedIn (compared to 1.5 in 2022). There are some sectoral bright spots. LinkedIn expects to see hiring pick up in several key industries, including defense, energy, and technology.
Overall, the manufacturing sector experienced a noticeable shift in its labor market dynamics in 2024. For the first time since May 2021, July saw the number of unemployed workers in manufacturing surpass the number of available job openings, signaling a loosening labor market. This change was further highlighted by a drop in the quits rate, which fell to 1.6% in September 2024, down by 0.2 percentage points since January. The decline in demand for manufactured goods has helped create a better balance between labor supply and demand, easing some of the immediate pressures within the industry.
Despite these improvements, significant talent challenges persist. The Employment Cost Index for manufacturing continued to rise, with total compensation increasing by 3.8% year-over-year as of September 2024. Long-term factors such as declining labor participation rates, driven by an aging population and barriers like access to child care and reliable transportation, continue to strain the workforce. A study by Deloitte and The Manufacturing Institute warns that up to 1.9 million manufacturing jobs could remain unfilled over the next decade unless these talent issues are addressed. Additionally, the need for higher-level skills that integrate technical, digital, and soft competencies is becoming increasingly critical.
January 2025