Texas manufacturers' new orders index fell from 30.7 to 9.3 in October, yet their six-month hiring outlook jumped from 18.1 to 31.5. With jobs already hard to fill, plants need a workforce plan that holds up whichever way demand breaks.
October's regional factory surveys sent two signals that do not sit comfortably together. Demand growth cooled sharply, most visibly in Texas, where the new orders index lost more than two-thirds of its September value. Yet the same manufacturers sharply raised their expectations for hiring over the next six months. Plants are planning to add people into a softer order book, because the people they already lack are the thing holding them back.
The Dallas Fed's Texas Manufacturing Outlook Survey, released on October 26, showed the new orders index falling from 30.7 to 9.3. Shipments dropped from 24.8 to 8.4, production from 29.5 to 15.8 and capacity utilisation from 23.9 to 13.7. All four readings remain positive, so more Texas firms still reported growth than decline, but the breadth of that growth narrowed sharply in a month.
Forward-looking answers moved the other way. The index for expected employment six months ahead climbed from 18.1 to 31.5, and expected new orders edged up from 39.5 to 41.9. Current employment growth eased from 15.1 to 11.6 while hours worked rose from 5.6 to 10.1, suggesting some plants are leaning on longer shifts rather than new starters. Respondents' comments flagged difficulty finding manual labour alongside margin pressure from diesel and raw material costs.
The Richmond Fed's survey of the Fifth District, published a day later, was weaker. Its composite index stayed at -2, new orders slipped from -6 to -8 and the employment index fell from 7 to 3, while shipments recovered to 0 from -5. The expectations index for employment held at 8. Two regions, two different levels of demand, but in neither did firms signal that they intend to shed staff.
National data explains why. In the National Association of Manufacturers' third-quarter outlook survey of 220 firms, taken from August 11 to 27, respondents expected full-time employment to grow 1.8% over the next 12 months, up from 1.0% in the second quarter, with 44.2% planning an increase. They estimated that 4.79% of their jobs remain unfilled on average; 23.7% put their vacancy share at 5% to 10% and a further 10.2% put it above 10%. Wages are expected to rise 3.1%, a three-year high.
The Bureau of Labor Statistics' job openings survey shows the same tightness from the other side. Manufacturing had 522,000 openings in August, down from 576,000 in July but still an openings rate of 4.0%. Factories hired 332,000 people and lost 311,000, of whom 197,000 quit. A net gain of 21,000 workers across the whole sector, against more than half a million open roles, means most factory hiring is simply replacing people who have left.
The Census Bureau's Quarterly Survey of Plant Capacity Utilization puts a number on what that costs. US plants used 78.5% of their full production capability in the second quarter. Among plants running below full capability, 67.1% blamed insufficient orders, but 22.2% blamed insufficient labour. That share rises to 35.7% in plastics and rubber products, 32.3% in fabricated metal products and 25.6% in machinery. Only 11.5% cited equipment limitations. For a large share of the sector, the binding constraint on output is people, not machines.
Seen through that lens, the Texas numbers are less contradictory than they look. Firms that have spent two years unable to staff every shift know how long it takes to recruit and train an operator, and they expect demand to recover: Texas manufacturers' expected new orders index is still above 40. Holding back on hiring now risks being short-handed again when orders return. The 3.1% wage expectation and the rise in hours worked suggest many are already paying a premium to keep the people they have.
The risk is the opposite error. If October's cooling persists into the winter, plants that hire against a six-month outlook will carry extra labour cost into a weaker quarter, on top of the input cost pressure NAM members still rank as their top concern. The answer is not to choose between hiring and holding, but to build a workforce plan that can absorb either outcome without losing the skills that are hardest to replace.
These steps help plants keep hiring momentum without locking in cost that a soft quarter would expose.
October's surveys do not show manufacturers losing confidence. They show plants betting that the people they cannot find today will matter more than the orders they lost this month. That bet is reasonable, provided the workforce plan behind it can bend if the order book does not.
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