April 2011- According to numbers released in early April, the U.S. unemployment rate fell to a two-year low of 8.8 percent in March as companies added workers. Reuters reported the economy added 216,000 jobs with private employees driving the increase. "They added 230,000 jobs last month on top of 240,000 in February. It was the first time private hiring topped 200,000 in back-to-back months since 2006-more than a year before the recession started."
Better data is contributing to optimism among executives. Prime Advantage, Chicago, a buying consortium for midsized industrial manufacturers, recently released the findings of its third annual Group CFO Survey, revealing the top financial concerns of its member companies' CFOs in 2011. The company pointed out in the results, "CFOs are seeing solid signs of the economic recovery in U.S. manufacturing and planning more hiring and capital expenditures this year. Hiring plans may be limited, however, by a shortage of skilled machine operators and welders and an increase in health insurance costs."
Topping the list of CFOs' concerns were customer demand, commodity prices and medical insurance. According to Prime Advantage's results, "uncertainty about customer demand remains the top external concern among 48 percent of respondents and in the top three concerns for 82 percent of respondents. However, these levels are down from 61 percent and 80 percent in 2010."
In addition, 73 percent of respondents cited concern over the cost of non-fuel commodities, and price pressure ranked among the top three concerns. Medical insurance premiums jumped to the top internal concern for 33 percent of respondents. The ability to maintain margins also was among the top three internal concerns, while attracting and retaining qualified employees and maintaining morale/productivity were cited in 42 percent of responses.
As the manufacturing economy continues to grow, companies will begin to invest. Ninety-two percent of survey respondents expect to invest in capital expenditures, with 74 percent saying they would leverage available temporary tax credits to make improvements in manufacturing equipment and 27 percent planning to accelerate purchases of computer hardware and software in 2011.
Fifty-eight percent of CFOs invested the same amount in R&D in 2010 as they did pre-recession. Specifically pertaining to new product development, 39 percent of respondents plan to increase investments in 2011.
All CFOs plan to grow or maintain the size of their workforces, with 72 percent expecting to hire in 2011. This result is a spike from 2010, when only 24 percent of CFOs planned to hire more employees. A new challenge is a shortage of skilled labor, with 23 percent having difficulties filling open positions.
"The optimism expressed by our small and midsized members for a more robust 2011 may be a sign of strong growth years ahead for the manufacturing community, despite the challenges posed by health care costs and margin pressures," said Louise O'Sullivan, founder, president and CEO of Prime Advantage, in a press release. "Prime Advantage remains focused on being the best strategic resource for reducing and/or controlling material and component costs to keep our members competitive." MM