California Manufacturers Expected to Expand Employment, Hampered by Supply Issues

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More than 61 percent of purchasing managers surveyed at California manufacturing companies expect deliveries from their suppliers to be slower in the October-December quarter than during the July-September quarter.

Analysts say this bottleneck means California’s manufacturing sector is expected to grow at a slower pace in the fourth quarter than it did during the third quarter.

Chapman University’s Anderson Center for Economic Research has taken a survey of purchasing managers at California-based manufacturers at the beginning of every calendar quarter since 2002. Purchasing managers have a unique outlook on the immediate future of production and employment, since they’re responsible for buying the materials needed in the manufacturing process.

According to its most recent findings, supplier deliveries “are expected to slow at the highest rate ever recorded.”

The survey director, Professor Raymond Sfeir, said, “The California manufacturing economy is expected to continue to grow in the last quarter of this year but at a rate below the record high of the third quarter.”

He said the slower pace of the growth can be attributed to a “lack of raw materials and components, and dramatically slower deliveries.”

These results come on the heels of recent news that one of California’s highest profile manufacturers, Tesla, is moving its headquarters to Texas. In addition, one of the ships anchoring near the San Pedro-Long Beach port complex may have dragged its anchor through an oil pipeline, fouling the waters in Orange County. According to the Port of Los Angeles, there are 60 container ships “at anchor” off the twin ports of Los Angeles and Long Beach as of Oct. 8.

Supply shortages are widespread throughout the economy, with a lack of computer chips causing manufacturing snarls at global car manufacturers. Some U.S. retailers have also chartered their own container ships so they can stock their shelves in time for the American gift-buying season.

Three months ago, at the beginning of the third quarter, some 55 percent of purchasing managers expected their own firm’s production to expand during the quarter, and only 9 percent thought production would decrease. However, now, only 46.4 percent of purchasing managers think production at their firms will increase, and 17.4 percent think it will actually shrink.

Commodity prices are expected to keep going up. Indeed, 83.7 percent of all surveyed purchasing managers say commodity prices will be higher during the fourth quarter. Only 4.1 percent of purchasing managers expect commodity prices to go down.

Regarding employment: 34.4 percent of the purchasing managers surveyed say their firms will expand employment during the fourth quarter. Only 10 percent of purchasing managers think their firms will reduce employment during the quarter.

Despite the relatively positive outlook, it’s not what was expected at the beginning of the third quarter when 43.2 percent expected employment to increase and only 9.3 percent expected employment to reduce.

Tim Shaler


Tim Shaler is a professional investor and economist based in Southern California. He is a regular columnist for The Epoch Times, where he exclusively provides some of his original economic analysis.

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