MT Magazine November/December 2024

NOVEMBER/DECEMBER 2024

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The post-COVID economy has seen several instances where trends broke from established assumptions, deviating from historical trajectories. Following an initial drop during the opening months of 2020, personal expenditures on durable goods moved to a higher plane of growth compared to the growth trend exhibited between the end of the financial crisis and the beginning of 2020. This elevated demand from consumers, along with elevated business investment and government spending on military and other manufactured goods, caused a fundamental shift in the manufacturing economy. This article will explore how demand for automation responded to these historic shifts, the impact on manufacturing jobs, and what impacts these shifting trends have had on productivity. Measuring Automation Defining automation can be more art than science. Because automation can be broadly defined as any improved or added technology that increases the efficiency of a manufacturing operation, its growth can be somewhat difficult to track over time because what was once considered “added” automation may now be considered a standard or common part of a machine. This ubiquity can be seen in the adoption of CNC controls, automatic tool changers, bar feeders, or even simultaneous 5-axis machining. The next steps down the automation path can be seen in technologies that have become more common in recent times, such as pallet pools, predictive maintenance, and even AI-enabled machining. It is easy to equate automation with robotics, but robotics represents only a portion of the technologies available that can add efficiencies to a manufacturing operation. Given the broad scope of automation, its adoption can’t be measured in just the number of robots added to shop floors each year. A more accurate measure would consider all added features and quality improvements of particular machines. We can approximate the adoption of automation by combining two different data series: the average value of orders as reported by the U.S. Manufacturing Technology Orders (USMTO) report, published by AMT – The Association For Manufacturing Technology; and the producer price index (PPI) for metal cutting machinery, published by the U.S. Bureau of Labor Statistics, which can be thought of as the rate of inflation for machine tools. The difference between the change in inflation and the change in average order value over time indicates the additional automation added to the base value of each machine order. One drawback to this methodology is that as once-novel features become more common, the prices to build and implement those features tend to fall as economies of scale begin to take hold. This makes the method less useful when comparing demand for automation across longer time spans, but it is still helpful in

comparing shorter-term demand. While it’s easy to think of automation as discrete components of an order, an integrated robot, a bar feeder, or some other added feature, it is important to remember that this methodology also captures the effects of demand shifting to higher-value machines with added features or complexities. Machines that perform more complex operations may not be traditionally considered automation, but they should be, as they reduce the time to complete a part that would otherwise require refixturing or being moved between two or more machines. By indexing both the PPI and the average order value to January 2019, we initially see a dip in the average value of orders below the PPI. It is important to remember that orders of manufacturing technology, measured by USMTO, experienced a larger decline between 2018 and 2019 than from 2019 to 2020. That environment of declining orders in 2019-2020 meant customers were generally ordering additional machinery only when capacity needs required it, a buying pattern typically associated with periods of declining average order values. In May 2020, average order value hit bottom and began a rapid ascent, surpassing the PPI by June 2021. Like inflation in the wider economy, prices of machine tools, measured by the PPI, continued to accelerate before tapering off at an elevated level. At the same time, average order values accelerated, averaging 6.7% per month above the rate of inflation, showing a sustained level of demand for automation. This methodology accounts for nearly $370 million in automation sold with machinery in 2023, a 73% increase from 2022. Through the first eight months of 2024, $230 million of order value can be attributed to automation, a 17% increase over the first eight months of 2023. Labor Markets Similar to how automation is popularly misunderstood, the effects of automation on labor demand in manufacturing is generally perceived as having an inverse correlation. Research has quantified the effects of globalization and technology changes in the 1990s on the availability of jobs in manufacturing. Manufacturing employment in the United States peaked in the summer of 1979 with nearly 20 million people employed in the sector. Since then, following each recession, manufacturing employment has failed to return to its previous peak as the economy recovered. That changed following the COVID recession in early 2020. Manufacturing employment declined rapidly like many other sectors during the recession, but it rebounded just as quickly as the service sector afterwards, surpassing the pre-pandemic peak by July 2022. Manufacturing employment continued to grow, eventually averaging out to about 110,000 jobs above the high prior to the COVID recession. Since achieving that heightened level, job growth in the manufacturing sector has been stagnant, averaging a monthly