Above-average manufacturing wage pressures are likely to last well into 2024, the finance chiefs of Ingersoll Rand Inc. and Lincoln Electric Holdings Inc. told attendees of separate investment bank events June 7.
Both Vikram Kini of Ingersoll Rand and Gabe Bruno of Lincoln Electric told their audiences that, after roughly two years of steep increases, they expect some improvement in labor cost inflation in what remains of 2023 and what lies ahead next year. But, both executives also added that the tight market will take more than another quarter or two to return to historical norms.
“I’m not sure we view labor inflation as any more of a headwind [going] into ’24 than it was into ’23,” Kini told an audience at Deutsche Bank’s Global Industrials, Materials & Building Products Conference in New York City. “Are we probably going to see comparable levels? […] Realistically, that’s probably not that far off.”
Up the Eastern seaboard in Boston, Bruno delivered a similar message to attendees of the Stifel 2023 Cross Sector Insight Conference. This year, Lincoln—which markets welding and related products around the world—has faced labor inflation of 4% to 4.5%, about a percentage point higher than its historical average. That number, he said, will fall—just not quickly.
“I think you’ll see a little more leveling off,” Bruno said. “Whether you get back to 3-3.5% may take a little more time. But we’ll get back to a little more normalized environment in the next six to nine months.”
Kini and Bruno delivered their remarks on the same day job-listing site Indeed published data showing annual wage growth slowing to 5.3% in May from more than 9% in early 2022. Indeed Director of Economic Research Nick Bunker told American Public Media’s Marketplace that he expects that figure to drop to pre-pandemic levels (a little less than 3%) by early next year.
That will likely require a significant loosening of the labor market, which itself would call for demand for goods and services to weaken further. But both Kini and Bruno said Ingersoll Rand and Lincoln Electric aren’t yet seeing such a slackening in industrial demand. Ingersoll Rand’s first-quarter sales trends, Kini said, have held up during the spring. And Bruno said the Lincoln Electric team is still “seeing good strength broadly in the Americas” in part because of longer-term automation and plant investment trends.
Another sign that manufacturing wage inflation may not recede meaningfully soon: The National Association of Manufacturing second-quarter outlook survey showed that attracting and retaining a quality workforce remains industrial leaders' top challenge by a large margin.
