What does 2018 hold for the manufacturing world?
While presenting at the February 12th Gears & Gadgets meeting, King Banaian, dean of St. Cloud State University, reflected on the state of manufacturing in 2017 and shared insights for 2018.
Looking back at 2017, Banaian recalled how he was cautious of the optimism in manufacturing following the November 2016 election. Now, however, he acknowledges that optimism was well-deserved — 2017 turned out to be a profitable year for Minnesota business owners.
Banaian also believes there is positive momentum going into 2018 for most of Minnesota, with favorable leading indicator data: Employment is up across the state and the number one thing people want to talk about is finding qualified workers.
He asked for a quick show of hands among the guests in the room, which confirmed that the majority of the manufacturing attendees are also concerned with finding qualified workers. Much of the meeting was spent discussing the labor shortage and the opportunities and challenges that business owners face. One interesting insight he shared was that for every five workers that travel from St. Cloud to the Twin Cities, there are four that reverse commute from the Twin Cities to St. Cloud. Both areas are trying to pull workers from other parts of the state.
Of course, Minnesota is used to being at the top of lists, and once again we rank second for the highest state workforce participation. Data also show that there are more people contributing to the labor force aged 65 and older than ever before. Banaian commented that, “people are getting healthier overall due to health technologies and are able to work longer.” He also shared that in Central Minnesota, more than half of workers are over the age of 55 and a little over a quarter are in the Twin Cities. For this reason, the retiring workforce is greatly concerning for more than one in five companies in Minnesota.
So with a labor shortage what are businesses to do?
Banaian shared what companies across the U.S. are doing. One example given was replacing workers with machines.
“We’re seeing this in the oil fields where workers are being replaced with machines named ‘Iron Roughnecks.’”
He also pointed out that companies are replacing workers with robotics that can do repetitive tasks, such as Deere’s Cotton Stripper or Lidar robots that act as site inspectors on construction sites, taking measurements and identifying problems immediately after something has been built, saving millions of dollars. Bossa Nova robots at Wal-Mart, he noted, perform inventory control, making employees’ jobs easier. But not all workers are happy about machines in replacing workers. In radiology, AI can see patterns in the 1,000 of images they are looking at which is a growing concern for radiologists who review images.
Will the reliance on machines to address the labor shortage mean that jobs will be lost in the U.S.? Banaian believes that machine automation will take time. There are still a lot of things a human needs to do as part of the overall process so machines are a supplement not a replacement.
Wrapping up the meeting, Banaian discussed data points to consider when thinking about 2018. He shared data showing that commercial lending has slowed down in the last two years but didn’t expand on why it has slowed down and indicated there could be a number of reasons. Interest rates have risen over the past five years and the dollar has depreciated over the past year while the price of gold rose. Based on the data, lending is not increasing too quickly and the dollar isn’t rising which would indicate to him that inflation isn’t coming anytime soon.
He also offered some advice when thinking about this data — or any data.
“We look for data that confirms our prior beliefs. When we see data that doesn’t mesh with us, we push back on it. We don’t want to believe it. We lose perspective. Be curious about your numbers and ask questions.” He went on to say, “If what you are doing is keeping you up at night, please stop what you are doing.”
Banaian concluded the presentation sharing that tax changes and deregulation could keep the good times rolling, and anticipated that the 2018 economy should be just as good as 2017.
“We’ll have to see what the stock market swing means, but right now there is not enough information. This year holds a different set of unknowns from last year”.
Gears & Gadgets was sponsored by Fidelity Bank, Resultants for Business, DS+B CPA’s & Business Advisors, Lockton, Success Computer Consulting, Hockenberg Search, Balius Marketing & Web Design, CorTalent and Minnesota Business magazine.
Mark your calendars for the next Gears & Gadgets event on May 7, 2018, which will showcase women in manufacturing.