Local Manufacturers are Hiring and Raising Wages, but are Significantly Less Optimistic About Recently Imposed Trade Tariffs
HORSHAM, PA, May 1, 2018 — Kreischer Miller, a leading independent accounting, tax, and business advisory firm serving the Greater Philadelphia and Lehigh Valley areas, today announced that its Manufacturing Industry Group has released the results from its sixth annual Greater Philadelphia Manufacturing Survey.
The survey found that a majority of Philadelphia-area manufacturing leaders hired new employees last year, and even more – nearly 65 percent – plan to do so this year. It also reflected positive growth in employees’ paychecks: More manufacturers reported that their employees received a raise in 2017 (92 percent) than in 2016 (87 percent).
“These results are a strong indication of the continued success and growth of manufacturing in Greater Philadelphia,” said Michael A. Coakley, Director of Audit & Accounting Director and Manufacturing Industry Group Leader.
Growth-related decisions have been fueled by manufacturers’ growing confidence in both the U.S. economy and their individual company’s performance. Of note:
- More than 86 percent of respondents said they were very or somewhat optimistic about the likely performance of the U.S. economy in the next 12 months – up about 20 percentage points from last year’s survey.
- Almost half of those surveyed predict their company’s revenues will grow by more than 5 percent in 2018, a marked increase from the 34 percent who anticipated that level of growth in the 2017 survey.
- 59 percent of those surveyed said federal tax reform would have either a somewhat or very positive impact on both the economy and their bottom line. In a brief, follow-up pulse survey administered after the tax reform package had been widely analyzed (please see “Methodology” at the end of this release), the percentage predicting a positive impact on the overall economy increased to nearly 70 percent.
Not all of the survey's findings reflect such optimism, however.
Most manufacturers expect to take a hit from new tariffs.
Local manufacturers are much less optimistic about the trade tariffs imposed this spring. The tariffs will have a negative or very negative impact on both their companies and the U.S. economy as a whole, said nearly 58 percent of local manufacturers who responded to the follow-up pulse survey, the administration of which came after the federal government announced new tariffs on steel and aluminum. Less than 8 percent expect their business will benefit. A higher number – nearly 27 percent – believe the tariffs will be good for the nation’s economy as a whole.
While manufacturers plan to hire, they say it won’t be easy.
Almost 59 percent of the manufacturers responding to the main survey said they hired new employees in 2017 (up from the 48 percent who increased company headcount in 2016). Even more – 65 percent – said they plan to hire in 2018. They do not expect hiring to be easy.
In fact, the lack of qualified workers/skilled labor was by far the most commonly cited barrier to company growth in the 2018 survey, and the concern has grown: More than half of the respondents identified a dearth of qualified job candidates as among the biggest barriers to company growth this year, up from 41 percent in the 2017 survey and 28 percent in 2016.
“The growth reflected in this year’s survey results reinforces the tremendous opportunities that careers in manufacturing offer current and future members of our regional workforce,” Coakley said. “The hiring challenges faced by our local manufacturers show that there is a disconnect between jobs available and the skill sets of applicants. It’s a nationwide problem, and one our region must continue to address.”
The gap between IT investment and IT security has narrowed, but risk persists.
The 2017 survey unearthed a gap between the use of cutting-edge, internet-connected machinery and utilizing equally cutting-edge security measures. The 2018 survey shows that gap is closing, yet more than half of the companies responding did not utilize vulnerability assessments, and more than a quarter used no IT security measures.
Among the findings:
- About 26 percent of respondents said they experienced a cyber or information security breach in the past year. The most common issues reported were malware, malicious email, or ransomware, followed by a system hack. This was a new question in 2018.
- The percentage of respondents who said they didn’t utilize any IT security measures dropped to 26 percent in 2018 – down from 33 percent of respondents last year.
- 44 percent of companies surveyed utilized vulnerability assessments, up from 33 percent last year.
- 31 percent did disaster recovery testing, up from 20 percent last year.
“While it is promising that more of our local manufacturers are addressing cyber security threats than before, the number that still haven’t is somewhat alarming,” said Sassan S. Hejazi, Ph.D., Director, Technology Solutions Group. “The risk for data breaches of all kinds continues to rise. And the costs of a data breach – in terms of time and reputation as well as actual dollars – can be substantial.”
The main 2018 Manufacturing Survey was administered from mid-December 2017 through mid-January 2018. There were 111 responses. In light of federal administrative action that instituted trade tariffs, those 111 respondents received a second, smaller “pulse” survey in March. Both portions were distributed electronically to middle market manufacturers in Greater Philadelphia, including southeastern Pennsylvania, southern New Jersey, and northern Delaware.
About Kreischer Miller
Kreischer Miller is a leading independent accounting, tax, and advisory firm serving the Greater Philadelphia and Lehigh Valley areas. The firm is built to respond to the unique needs of growth-oriented private companies, helping them smoothly transition through growth phases, business cycles, and ownership changes. Kreischer Miller offers a wide range of services, including Audit & Accounting, Tax Strategies, Business Advisory, Human Capital Resources, and Technology Solutions across an array of industries, including manufacturing, distribution, construction, real estate, not-for-profits, media, government contracting, professional services, family-owned businesses, and investment firms. The firm provides insight and creative services to organizations that need to be able to quickly adapt and respond to changing market opportunities and challenges. To learn more, call us at 215.441.4600 or contact us.