Manufacturing Forecast (CONT’D FROM PAGE 26)
Board Converting NEWS INTERNET DIRECTORY
ment, so filling the labor pipeline and maintaining a skilled workforce is a pretty significant concern,” said Palisin. “A more positive year has meant a further tightening of the labor market so I think the problem will continue to be a chronic one.” Oxford Economics supports this prognosis, expecting the unemployment rate to end 2026 at 4.2 percent and re- main there through 2027. It was 4.5 percent at the end of 2025. (An unemployment rate of between 4 percent and 6 percent is believed to represent “full employment.”) Consumer Confidence Consumer spending is an important factor in the econ- omy and thus a vital support for the manufacturing sec- tor, accounting for some 70 percent of GDP. Despite the nation’s healthy economy, though, lower- and middle-in- come consumers are discontented and are holding back at the cash register. A big problem is that, for many, wage increases have not kept pace with inflation. “Three things are weighing most on consumer confi- dence,” said Michael Brisson, Senior Economist at Moody's Analytics ( economy.com ). “One is the cost of living, par- ticularly the recent run up at the gas pump, a second is job security in a market where openings have thinned out, and a third is general uncertainty around economic policy.” Brisson sees a deceleration in consumer spending ahead. Retail sales are expected to increase by 2.5 percent in 2027, roughly half the 4.9 percent increase expected for 2026. There’s nothing like rising income to soothe the con- sumer, and here the story is mixed. “We’re not seeing the eight to 10-percent plus increases in hourly entry level wages that we saw during the pandemic, but we're still seeing increases that are higher than the pre-pandem- ic levels,” said Palisin. “We anticipate continuing upward pressure in wages in 2027, given the shrinkage in the pool of available workers.” Palisin noted that the acute shortage of machinists and skilled welders and fabricators may result in more wage increases for those workers. The Road Ahead As we enter the early months of 2027, economists sug- gest manufactures watch these key indicators for an idea of how the year will turn out: • Interest rates: “What companies should be hoping for is that the forecasts of economists are wrong and that in- terest rates begin to decline,” said Basu. “But it seems unlikely that inflation is going to approach the Federal Reserve's 2 percent target anytime soon. So it’s quite likely that interest rates will remain high or even rise from current levels.” • Employment: “I would be looking at the employment figures and especially the unemployment rate,” said Conerly. “Persistent low unemployment is a sign that the economy is doing well, but also a sign that the Fed
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28 November 9, 2026
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