According to the Cushman & Wakefield Industrial MarketNote, dated September 3, 2014, several workforce and demographic trends may threaten the industrial sector.
“The U.S. economy is slowly improving. The jobless rate in many metropolitan areas has fallen below the 5.2% to 5.6% level that the Federal Reserve regards as full employment nationally. Industrial sectors are leading the way in many of these markets, generating a large share of new jobs the past several quarters. While the job creation is good news, several workforce and demographic trends may threaten the health of the industrial labor pool long term.
Despite the improved unemployment rate, it still remains higher than pre-recession levels for all occupations except two: mining/oil/gas extraction and construction.
Mining, Oil and Gas Extraction. Labor rates in this sector have significantly outperformed the nation as a whole. The recent boom in shale oil extraction in places like Texas and North Dakota has benefited traditional oil markets. Houston and Dallas, for example, both have unemployment rates 1.1 percentage points below the 6.5% national average.
Construction. In addition to new home construction, significant demand for new logistics facilities has helped lower the unemployment rate in the construction sector from 9.4% to 7.5% since 2007. Markets like the Inland Empire, Philadelphia and Cincinnati all have seen unemployment rates fall by over two percentage points in the past year. The Bureau of Labor Statistics predicts the construction industry could join health care and business administration as one of the fastest growing employment markets by 2020.
While industrial-related industries have produced jobs at a higher rate than other sectors, several trends appear to threaten the future supply of workers. For example, the percentage of young people between ages of 25 and 29 with four-year degrees has more than tripled in the last 30 years, and educated, increasingly urban young professionals are much less inclined to do industrial work. The lack of young skilled workers entering the manufacturing field, in particular, threatens the future of the U.S. manufacturing recovery, which has lagged behind the broader economy. While automation increasingly performs the functions that low skilled labor once performed, the industry still needs highly skilled and trained workers to operate complex machinery.
The trucking industry is already experiencing labor shortage pains. The American Trucking Association (ATA) estimates that the U.S. is short 30,000 truck drivers. Many current drivers are nearing retirement and the industry has struggled to recruit younger drivers for a variety of reasons including quality of life, pay, and health concerns. The truck driver shortage is expected to surge to 239,000 by 2022 and the ATA estimates that the industry needs on average 100,000 new drivers each year over the next decade.”
The graph below shows how the current unemployment rate compared to the rate at the end of 2007 broken out by industry sector.
Source: US Bureau of Labor Statistics