Economy and Election Years, the Impact on the Industrial and Manufacturing Sector 

Post by:Cory Bartlett

The industrial and manufacturing sector has historically been and continues to be a cornerstone of the American economy. Economic conditions, especially during an election year, can have heavy influence on decisions made about your business. Understanding these impacts is crucial to navigate fluctuations and plan strategically.  

Economic Conditions 

During periods of economic growth, industrial and manufacturing sectors typically see increased demand for their products. Increased production volumes, capital expenditures, and workforce expansion can all be attributed to higher consumer spending and business investments in a growing economy. According to the Institute for Supply Management, economic expansion was evident when we look at the Manufacturing PMI data from June of 2020 to October of 2022. With an average PMI reading of 57.5 during this time, the manufacturing sector was booming. A PMI reading above 50 indicates expansion territory. This can be attributed to three main factors; “The Great Resignation” which saw wage competitiveness increases rapidly thus creating a talent war in the workforce, economic stimulus packages that helped ensure financial stability in American households, and PPP loans that many businesses took advantage of to help keep their workforce intact. All three of these factors helped to foster higher consumer spending, capital expenditures, and workforce expansion.  

Conversely, economic downturns can result in reduced consumer spending and business investments. Wage growth has stabilized, PPP loans have been exhausted, and the Great Resignation has now turned into the Great Stay (or Big Stay) where the quit rate has hit a low of 2.2% according to the Bureau of Labor Statistics. Again, we turn to the Institute for Supply Management data and observe this contraction through the Manufacturing PMI where the reading has averaged 47.8 from November 2022 to June 2024. A PMI reading below 50 indicates retraction territory. This leads to decreased demand for manufactured goods, production cutbacks, layoffs, and lower sales. Many companies have implemented cost-cutting measures to maintain profitability. Additionally, high interest rates have made many manufacturers wary about expansion. Many companies are watching fed rate decisions as an indicator of when and when not to strategically invest.  

Election Year Impact 

During election years many manufacturing investment initiatives are put on ice. This is due to unknown regulatory changes as well as tax policies, infrastructure project, and defense and public sector contacts which are heavily affected by election outcomes.  

Regulatory changes can have heavy impacts regarding labor, environmental standards, and trade policy. Uncertainty among manufacturers may delay investments and hiring until policy direction becomes clearer.  

Lower corporate tax rates increase the amount of investments manufacturing companies make to grow their business. This also allows for higher wages to be offered and more qualified talent to be placed in critical positions. While higher corporate tax rates may restrict a company’s ability to invest at a pace needed for growth.  

Infrastructure projects are usually a hot debated topic during election years. If these projects materialize, they will increase opportunities for construction, materials, machinery, and related services.  

Funding for defense and public sector contracts are heavily impacted by election outcomes. Changes in administration may lead to shifts in funding and contracting availability.  

Strategic Responses 

Industrial and manufacturing companies can shift strategic initiatives to help mitigate the impact of economic fluctuations and election year uncertainties: 

  • Planning – Creating an array of plans in anticipation of economic cycles or election results can put companies ahead of their competition by having pre-determined responses to outcomes.  
  • Diversification – Diversifying business mix or expanding product offerings can help your company be better prepared for policy change or economic conditions.  
  • Technology and Automation Investments – Investing in new technologies and automation can minimize mid to long term costs associated with economic factors and political initiatives.  

At The Reserves Network, we understand uncertain times especially during election years. We have helped manufacturers scale their workforce through multiple recessions and nine election cycles to date. Our service line offerings provide a wide range of options to help you navigate workforce management as well as the flexibility needed to surface stronger than ever!  

With over 40 office locations in the United States, The Reserves Network can provide solutions locally and nationally. Whether you have a need for daily fluctuating headcount, temporary, temp to hire, or direct hire, we can help. In addition to industrial and manufacturing needs, we also have specialties that can help recruit top talent in Accounting & Finance, Executive & Management, Engineering, Information Technology, Office & Professional, Healthcare, and Real Estate.