U.S. factory workers are facing the steepest round of layoffs since the financial crisis, even as manufacturing output keeps growing. S&P Global’s latest survey shows that factory job cuts are running at their highest since 2009, excluding the 2020 Covid shock, as companies respond to rising costs and doubts about how long demand will hold up.
Production is still expanding. S&P’s flash manufacturing purchasing managers index, or PMI, rose to 55.7 in June, its highest level since 2022 and the fourth straight month of growth. A separate breakdown cited by Reuters shows the survey’s employment component dropping to 47.0, a six-year low and the weakest reading since May 2020, even as new factory orders hit a more than four-year high.
Economists and survey respondents tie that split to how manufacturers are managing costs and supply risks. Firms have been rebuilding inventories and front-loading orders to get ahead of potential shortages and price hikes linked to the U.S.-Israeli war with Iran, while cutting staff to offset higher overhead, especially for raw materials. Supplier delivery times have lengthened to their slowest pace since mid-2022, a sign of renewed congestion in supply chains.
For now, the broader economy looks mixed rather than recessionary. The same S&P data show services activity ticking up, with the flash services PMI at 51.3, and the combined manufacturing-services output index at 52.2, both in growth territory. Official Labor Department data also still show solid private-sector payroll gains over the last three months, even as private surveys point to softer hiring.
For businesses and investors, the key constraint is inflation. Input and output price indexes in the S&P survey remain elevated, and the Federal Reserve has held its benchmark rate at 3.50% to 3.75% while projecting further increases later this year. S&P’s economists say current output levels line up with real GDP growing at around a 1% annualized pace in the second quarter, leaving factory employment as one of the most fragile parts of an already slow expansion.
