The manufacturing sector “is going to be a real positive” for the jobs market over the next two years, a veteran economist says, as factories will shake off their recent sluggishness and produce growth outpacing that of the economy as a whole.
Speaking to the UHY Annual Manufacturing Outlook held in Albany on Sept. 26, Hugh Johnson said leading indicators as well as investor sentiment suggests the U.S. economy will continue to expand in 2025 and 2026, with the first part of next year being the trough for both GDP and employment growth.
“The message of the financial markets is that the economy will continue to expand through 2025 and ’26,” Johnson said. “Although it’s going to be a little bit of a close call, I would say—given the momentum in the economy—I think that the outcome for the economy is going to be positive.”
Johnson’s firm, Hugh Johnson Economics, expects manufacturing to put up stronger growth numbers than the broader economy in the next two years, carried in large part by motor vehicle and computer-related production. For 2025, Johnson is forecasting GDP to grow 1.8% but thinks manufacturing will grow 2.3%. In 2026, he expects manufacturing’s growth of 2.5% to outpace the total economy by 0.3 percentage points.
On the employment front, Johnson is similarly optimistic manufacturers will pick up the pace on the hiring front. His team sees hiring regaining steam this quarter and next—it’s forecasting that firms will add 48,500 jobs, more than offsetting the less of 15,000 in the first half of this year—and then further expand their payrolls. In 2025, Johnson expects manufacturers will hire a net of 103,000 people; in 2026, he expects growth will accelerate to 150,000.
Hints of that expected growth showed up in the Sept. 30 release of the latest Chicago Business Barometer from the Institute for Supply Management-Chicago and Market News International. The index again came in below the 50 break-even point—it has indicated contraction since November—but topped economists’ expectations thanks to its order backlogs and employment components “improving significantly.”
Also in the camp thinking that 2025 will mark a turnaround for industrial production—albeit later than Johnson is forecasting—is the executive team at shipping giant FedEx Corp. Speaking recently on the heels of reporting quarterly earnings, FedEx leaders said they are “cautiously optimistic that industrial production will moderately improve in the second half” of the company’s fiscal year, which ends May 31.
“But we are dialing in pretty low growth expectations at this point because of the environment we are seeing,” President and CEO Raj Subramaniam told analysts.
