The U.S. industrial sector is facing a nationwide labor shortage crisis. While the issue is affecting businesses all over the country, there are a number of cities taking a bigger hit than most.
As a result, companies in key regions are struggling to fill essential roles, leading to disruptions in productivity and supply chains.
In this guide, we'll examine the five U.S. cities facing the biggest labor shortages in the industrial sector. We also discuss the factors driving these shortages, the impact on businesses and supply chains, and the strategies you can use to help your company weather the storm.
The 5 U.S. Cities With The Highest Industrial Labor Shortages
First, let's take an in-depth look at the U.S. cities where industrial labor shortages are having a significant impact.
1. Phoenix, Arizona
In recent years, Phoenix has been one of the great success stories within the U.S. manufacturing industry, largely driven by semiconductor projects.
This is demonstrated by the fact that, since 2020, industry giants like the Taiwan Semiconductor Manufacturing Company (TSMC) have invested over $102 billion in capital within the city, leading to more than 15,700 manufacturing job openings.
Yet, the sheer rate of expansion in Phoenix has caused a serious shortage of skilled labor. As a result, TSMC's project in the state faces significant construction delays because there are simply not enough skilled workers available. This has led to the company now planning to hire experienced workers from abroad to meet production deadlines.
2. Houston, Texas
Houston's industrial economy is versatile, encompassing oil, gas, and manufacturing. The good news is that the industry is continuing to grow rapidly, with over 17,800 jobs added to Houston's construction sector alone in 2024.
The bad news is that this growth has created intense competition for skilled labor and has led to a shortage of workers. This is now causing hiring bottlenecks and pushing up wages across industrial operations.
3. San Francisco Bay Area, California
The San Francisco Bay Area is widely regarded as a focal point for global economic shifts, and the occurances here are often used as a way of understanding America's labor shortage.
Currently, its industrial sector is experiencing labor shortages in manufacturing and logistics. This issue has many causes, including the high cost of living and housing affordability challenges. Some of the other factors include:
Economic restructuring
Demographic changes
A lack of investment in education and training
4. Lima, Ohio
Lima is another U.S. city contending with labor shortages in the manufacturing sector. This is largely because much of the state's labor force has traditionally included immigrants.
So, the potential revocation of Temporary Protected Status (TPS) for Haitian workers has created real fears that the labor pool is about to shrink drastically.
5. New York City, New York
As with Lima, NYC's industrial sector is heavily reliant on immigrant labor, particularly within the construction industry. Since the city is already facing a labor shortage, proposed crackdowns on immigrants working in NYC could devastate manufacturing timelines and construction projects.
This is due to the fact that an estimated 470,100 undocumented workers live in NYC, representing almost 15% of the state's immigrant workforce.
The Factors Driving Industrial Labor Shortages
The labor statistics above are concerning, and we've touched upon some of the causes. Now, we'll discuss the primary drivers of the industrial labor shortage in the U.S. in more detail:
Shifts in career preferences: Increasingly, younger generations are more interested in careers in tech and services rather than jobs in the industrial sector.
An aging workforce and early retirements: Many workers from the "Baby Boomer" generation are now retiring from the industrial sector. This has caused a declining labor force participation rate and a shortage of experienced workers.
Wage competition and working conditions: New and unemployed workers are more attracted to industries with higher wages and better working conditions, creating a shift away from traditional industrial roles.
Immigration policies and enforcement: Stricter immigration policies and increased ICE raids have reduced the availability of immigrant manufacturing, logistics, and construction workers.
Automation and technological advancements: Automation and AI are increasingly integrated into industrial processes. As a result, the demand for workers with higher skill levels has risen while the supply of such workers has not kept up.
Reshoring of manufacturing: The reshoring of manufacturing operations has increased the demand for skilled labor. Yet, the existing U.S. workforce lacks the necessary skills, creating labor shortages in the areas experiencing reshoring.
The Impact On Businesses & Supply Chains
Of course, the state of the U.S. labor market is having a huge effect on businesses and supply chains in the industrial sector. This includes:
Strain on supply chains: The shrinking labor pool has caused bottlenecks in supply chains, which affects the timely delivery of goods and services.
Production delays and increased costs: Labor shortages are leading to significantly extended production timelines and much higher operational costs.
Quality control issues: Both understaffing and high employee turnover create environments where product quality and consistency are compromised.
Strategies For Overcoming Staffing Challenges
Consider these strategies to help you overcome industrial staffing challenges:
Invest in training and upskilling: To address the skills gap, offer apprenticeships, on-the-job training, and verification programs. Investing in upskilling helps you fill roles faster and improves retention.
Enhance recruitment efforts: Attracting a new generation of industrial workers means rethinking how you recruit. This involves implementing things like community outreach programs, stronger employer branding, and recruitment campaigns that target underrepresented groups.
Thoughtfully implement automation: Automation is helpful for filling labor gaps, but you should aim to augment employee roles rather than replace them. For example, robotics can be used for simple, repetitive tasks so that human workers can focus on higher-value responsibilities.
Improve wages and benefits: Since many workers are choosing industries with better levels of pay, you should consider offering more competitive compensation. Plus, offering benefits like flexible shifts and sign-on bonuses is a good way to make your business more attractive.
Partner with reliable labor solutions: One of the most effective ways you can resolve your worker shortage is to partner with a staffing solution like Traba. Our platform gives you access to a huge pool of pre-vetted, highly-skilled workers, ready to fill in at short notice.
Future Industrial Labor Market Trends
So, what does the future look like for the industrial labor market in the U.S.? Here are the key trends:
Reshoring
In a move to strengthen domestic supply chains, the movement to bring manufacturing back to the U.S. is likely to continue. While this does have some benefits, it will also place more pressure on the industrial labor market.
Therefore, if businesses fail to invest in training and development, they'll find themselves unprepared for the capacity increases that come along with reshoring.
Demographic shifts
As older workers retire and younger generations take their place, there will continue to be a shift in workplace expectations. For instance, younger workers tend to value upskilling, flexibility, and purpose more than their older counterparts.
This means your business will need to adapt its culture and offerings if it wants to attract top, young talent.
Use of data in workforce planning
The contracting labor force means that predictive workforce analytics will become essential for all industrial businesses. With these tools, you can forecast:
Regional workforce availability
Economic indicators
Labor needs based on production schedules
By using analytics, you can create an agile labor pool that helps you meet your operational needs.
Public and private sector collaboration
Both the public and private industrial sectors are feeling the pain of the current labor shortage. Moving forward, there will be more collaboration between industry, government, and academia to try to find a solution. This will likely include an increase in:
Grants for manufacturing training
Tax credits for apprenticeships
Regional workforce development boards
These types of solutions will be most common in the specific areas and cities hit hardest by shortages.
FAQs
What is the Worker Shortage Index?
The Worker Shortage Index is a metric used to compare the number of job openings to the number of unemployed workers. If the index is above 1.0, it means there are more job openings than available workers. For instance, if the score is 2.0, there are two job openings for every unemployed worker.
How do the causes of industrial labor shortages differ between urban and rural areas?
There are significant differences in the factors that cause labor shortages in urban and rural areas. For instance, in urban areas, shortages are often driven by intense competition, higher living costs, and a rapidly changing job market.
On the other hand, in rural areas, these shortages are usually caused by population decline, limited access to transportation, and fewer training programs.
Final Thoughts
Unfortunately, labor shortages in the U.S. industrial sector aren't going away any time soon. Cities like NYC and Phoenix will continue to be tested in the coming years, and businesses will have to find ways to adapt if they're going to overcome this challenge.
So, use the strategies in this guide and stay updated on emerging trends in the labor market to keep your company ahead of the game.
You can also address worker shortages by signing up for Traba. Take a look at the worker roles we fill and get ready to make shift vacancies a thing of the past.
