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Help Wanted: Evaluating Labor Shortages in Manufacturing Accessible Data
Figure 1: Labor Shortages in Manufacturing
Figure 1 displays the evolution of the share of respondents reporting labor shortages as a factor restraining production from the Quarterly Survey of Plant Capacity; the data are shown for the fourth quarter of each year. Reports of labor shortages tend to decline during recessions and recover during expansions. In the fourth quarter of 2016, the share of respondents indicating insufficient labor/skill reached 12 percent, up considerably from the lows of the Great Recession, but still below pre-recession peaks.
Source: U.S. Census Bureau, Manufacturing and Construction Division.
Note: Share of respondents reporting insufficient labor/skill as a factor restraining production; shaded areas represent NBER recessions.
Figure 2: Comparing Measures of Labor Shortages
Figure 2 compares the QSPC-based indicator of labor shortage with data on v/u, the vacancy-to-unemployment ratio, which is based on data from the Bureau of Labor Statistics. With a correlation above 0.8, the two series tend to co-move considerably. The vacancy-to-unemployment ratio increased sharply in recent years and reached around 0.48 vacancy-per-unemployed in 2016q4, a little above the pre-recession peak in the fourth quarter of 2006.
Source: U.S. Bureau of Labor Statistics and U.S. Census Bureau, Manufacturing and Construction Division
Note: Share of respondents reporting insufficient labor/skill as a factor restraining production; shaded areas represent NBER recessions.
Figure 3: Labor Shortages within Manufacturing: Durables vs. Nondurables
Figure 3 inspects yearly patterns of two groups of industries, durable (red line) vs. nondurable (green line) sectors. The figure shows that the level and the volatility of labor supply constraints tend to be higher in durables industries—with a higher volatility likely associated with the high cyclicality of durable goods consumption and employment. The share of respondents reporting labor shortages rose in both sectors after the Great Recession, but with significant differences: Relative to history, labor supply constraints in 2016q4 appear to matter more for nondurables.
Source: U.S. Census Bureau. Manufacturing and Construction Division.
Note: Share of respondents reporting insufficient labor/skill as a factor restraining production; shaded areas represent NBER recessions.
Figure 4: Labor Shortages within Manufacturing: Small vs. Large Firms
Figure 4 highlights differences in labor supply constraints between the firms in the top 10th percentile and those in the bottom 10th percentile of the firm size distribution. We rank firms based on their average number of production workers (left panel) and average value of production (right panel) between 1997 and 2016. Different patterns are associated to the two size proxy. While there is not a significant difference across firms if looking at the top and bottom of the distribution of production workers, discrepancies are more evident over the revenue distribution: On average, less than 1 percent of firms in the top 10 in terms of revenues report labor shortages vs. 2 percent of the smallest firms. The divergence in labor reports over the revenue distribution, however, tends to shrink during recessions and increase during expansions.
Source: U.S. Census Bureau. Manufacturing and Construction Division.
Note 4a: Share of respondents reporting insufficient labor/skill as a factor restraining production; percentiles are obtained from the distribution of production workers. Shaded areas represent NBER recessions.
Note 4b: Share of respondents reporting insufficient labor/skill as a factor restraining production; percentiles are obtained from the revenue distribution. Shaded areas represent NBER recessions.