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Will the party continue?

This economic expansion appears to have some life left in it

The length of the economic expansion since the Great Recession is turning into one of the longest on record. The good news is that there doesn't appear to be any potholes ahead in the coming months.

Have you ever been at a party that you think is coming to a close, but somehow it keeps going? Did you get the time wrong? Did someone tip the DJ for some overtime work? Is everyone having such a good time that no one wants to go home?

I’m kind of like this with the current state of the U.S. economy. Sure, the economic rebound following the Great Recession was more of a skip than a big leap, hardly the GDP growth in the 4 to 5 percent range that occurred in the 1980s and 1990s, but it has been in an expansion phase for 102 months now. That’s kind of a big deal now as we are getting close to attaining one of the longest economic expansions on record. In fact, it’s already the third-longest expansion in U.S. history, dating back to 1854, according to Goldman Sachs economists. (For the record, the longest economic expansion lasted 120 months, from March 1991 to March 2001, and the second-longest one was 106 months, from February 1961 to December 1969.)

The Great Recession is still fresh in my mind, so excuse me if I’m a bit nervous. The funny thing is that I’m not so sure I should be, even as we march even closer to uncharted territory when it comes to modern economic history. Just think about recent news:

  • Released in mid-October, the third-quarter “Forming and Fabricating Job Shop Consumption Report” (FFJSCR) from the Fabricators & Manufacturers Association (FMA) revealed that 58 percent of the fabricators surveyed have a generally positive business outlook and 31 percent see business as stable. That leaves only 10 percent with a negative outlook.
  • This same survey revealed that 37 percent see new order activity as improving, and 47 percent report that it is stable. That’s always a good sign for the future.
  • In September, the Institute for Supply Management’s manufacturing index, known as the PMI®, reached 60.8 percent, the best reading since May 2004. The October PMI came in at 58.7 percent, close to the 58.8 percent seen in August, but the manufacturing sector remains upbeat. Sixteen of the 18 industry segments, which include fabricated metal products, the association tracks still appear to be in expansion mode, while the other two reported showed similar levels of activity to September. The last contraction, a reading under 50 percent, was registered in August 2016.
  • FABTECH® 2017, held Nov. 6-9 in Chicago, wound up being one of the largest in the event’s history, with more than 1,700 exhibiting companies and almost 45,000 attendees. “…[E]very person who participated in the show had a palpable level of enthusiasm that radiated across the show floor,” said Mark Hoper, FMA senior vice president of expositions and media. Well, that’s a fancy way of saying that people were happy, and it was evident from conversations held on the show floor. The most recent FFJSCR provided a glimpse of what was to come at the tradeshow as 60 percent of the respondents indicated that their planned capital investment was on track and perhaps growing as they headed into the fourth quarter.

If you look at the U.S. economy from a macro point of view, job creation seems pretty strong. Spurred on by the need to repair hurricane-damaged areas, employers added 261,000 jobs in October, the most in one month in more than a year. The New York Times reported that, following an initial report of negative job creation in September and a later revision to those numbers that actually suggested job growth, the U.S. economy has now added jobs for 85 straight months following the October jobs announcement.

The one metric that keeps economists scratching their heads, however, is wage growth, which typically follows drops in the unemployment rate, currently at 4.1 percent. People keep waiting for better growth in wages, but instead they have to settle for a never-ending supply of excuses, such as productivity hasn’t climbed or retirements of baby boomers are bringing down the overall reported numbers.

I have a feeling that pressure is increasing, at least in manufacturing, to boost those wage numbers. In a survey of The FABRICATOR readership conducted in the first quarter of 2017, 26 percent of fabricators indicated that their companies are paying entry-level welders more than $17 per hour. A similar survey in 2015 revealed that only 13 percent were offering a similar wage.

So as we look to 2018, you have to be pretty optimistic, right? That’s normally not the side of the street I walk on, but it looks like that’s where I am. For now, let the party go on.

If you ever wonder what some of your peers in the metal fabricating industry are thinking about the economy or anything else that affects the shop, consider attending the 13th annual The FABRICATOR’s Leadership Summit at Talking Stick Resort in Scottsdale, Ariz., March 7-9. The technology and business discussions are rich, but the frank talk between shop owners and managers is even better. Visit annualmeeting.fmanet.org, or call 888-394-4362 if you want more details.

About the Author
The Fabricator

Dan Davis

Editor-in-Chief

2135 Point Blvd.

Elgin, IL 60123

815-227-8281

Dan Davis is editor-in-chief of The Fabricator, the industry's most widely circulated metal fabricating magazine, and its sister publications, The Tube & Pipe Journal and The Welder. He has been with the publications since April 2002.