Lower employment rates in manufacturing could have ripple effects on the demand for plastics

There were 818,000 fewer total nonfarm jobs than previously estimated for the twelve months ending in March 2024, according to revised Bureau of Labor Statistics. The magnitude of this downward revision has raised concerns with the Plastics Industry Association about the future demand for plastics in a declining manufacturing economic climate.

Upward and downward employment trends in the plastics sector

Professional and business services employment saw the largest downward jobs revision of 358,000. Manufacturing employment was also revised down by 115,000 over the same period. 

Conversely, there were upward revisions: private education and health services employment increased by 87,000, and transportation and other services were revised upward by 56,400 and 21,000, respectively. While the manufacturing revisions were not broken down by specific industries, these trends will eventually be reflected in the monthly industry workforce statistics.

How could the labour numbers affect the plastics industry?  

Employment is a key economic indicator of economic growth. The labour market continues to reflect changes in the economy's aggregate demand and supply dynamics. According to the Plastics Association, revisions to employment data are neither surprising nor trivial, as they can be valuable in assessing the business landscape. Perc Pineda, chief economist of the association, gives three reasons why these numbers are important for the industry to watch.

First, the manufacturing sector, a primary customer of the plastics industry, is particularly important. The lower employment rate in manufacturing suggests reduced manufacturing activity, which can have ripple effects both upstream and downstream. For plastics and rubber product manufacturing, the preliminary employment estimate for July was 724,000, nearly matching the monthly average of 725,300 in 2021.

Secondly, each year, PLASTICS releases its Annual Size and Impact Report, which quantifies the plastics industry across the supply chain and its contribution to the broader economy. A decrease in manufacturing employment might be offset by an increase in services employment. Based on 2022 data, total jobs related to the plastics industry numbered 209,000 in manufacturing and 483,000 in services.  

Third, changes in government data have far-reaching policy implications. Institutions, including the Federal Reserve, have publicly acknowledged that their policy actions have been and will continue to be data-dependent. Still, data quality and reliability are crucial. According to Pineda, the U.S. policy shift to support a global goal of reducing plastic production, as part of a global plastics treaty, is shortsighted. 

U.S. plastics reduction policies will be harmful to industry and employment numbers

The effect of such a policy on the U.S. labour market is net negative, according to Pineda, considering the interlinkages of plastics production throughout the economy's value chain. Whether in manufacturing or services, it is unfortunate that with lower employment numbers than previously estimated, policies are being deliberately considered to further reduce the ability of industries to generate employment throughout the broader economy. Based on the Economic Policy Institute's estimates, 100 direct jobs in durable goods manufacturing create a total of 744 jobs, while 100 direct jobs in nondurable goods manufacturing create 514 jobs.

The revisions in manufacturing employment by industry are yet to be released. According to the BLS, the CES will be updated when the final benchmark revision is issued along with the monthly employment estimates in January 2025.