The Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey rebounded in March to show an improvement in manufacturing conditions in the Mid-Atlantic region.
Many of the key indicators – including general activity, new orders and shipments – saw big jumps for the month in the region, which includes eastern Pennsylvania, southern New Jersey and Delaware.
Specifically, the index for current manufacturing activity in the region jumped to 13.7 in March from -4.1 in February. A figure above zero is consistent with a manufacturing expansion, while a reading below indicates contraction. Additionally, the new orders index improved to 1.9 in March from -2.4 in February, while the shipments index increased 25 points to 20.0.
“Manufacturer sentiment bounced back in the Philadelphia Federal Reserve District in March,” said Adam Ozimek, a senior economist at Moody’s Analytics who covers the Pennsylvania economy and U.S. labor markets.“Demand conditions improved, with both new orders and shipments returning to positive territory. Conditions are modestly positive, but the downward trend over time is worrying,” he added.
Manufacturing firms surveyed are less optimistic about the sector in the future. While the numbers are still positive, the diffusion index for future general activity, which forecasts the change in general business activity over the next six months,dropped nearly 10 points to 21.8 this month. This is the lowest reading since February 2016.
In addition, the future capital spending index fell 12 points to 19.5, its lowest reading since November 2016.
“The survey’s future indexes indicate that respondents continue to expect growth over the next six months, but most readings have been trending lower,” the Philadelphia Fed report said.
Firms also reported they are experiencing increasing difficulties finding skilled workers.
About 74 percent of the firms said they see labor shortages. Specifically, 51 percent of the surveyed firms said they had positions that have remained vacant for more than 90 days. And 47 percent said positions are getting harder to fill – up from 35 percent last year. Further, 66 percent reported there are skills mismatches between requirements and available labor, while 30 percent of firms said they have hired less qualified workers to meet their labor requirements.
Area firms have sought to address these workforce issues in several ways. Along with increasing wages, companies have stepped up their training of existing employees and new hires. They have also boosted recruiting efforts, including looking outside the region for qualified candidates.