Fewer than half of Wisconsin manufacturers say business climate heading in right direction

Fewer than half of Wisconsin manufacturers believe the business climate is headed in the right direction, highlighting an underlying sense of uncertainty around the economy, according to a new report.

The Wisconsin Center for Manufacturing and Productivity, a public-private partnership that provides resources to manufacturers, released its fourth annual Wisconsin Manufacturing Report Monday. The report provides insight into how manufacturers view the wider economy, the labor market and areas of future investment. 

Its findings are based on a survey of more than 400 manufacturers and a series of focus groups with industry executives from around the state. The surveys were completed in the summer of 2024 and the focus groups were held that fall.

Only 47 percent of manufacturers said the business climate is headed in the right direction, down from 51 percent in 2023 and 50 percent in 2022, according to the report. It’s the first time the share of businesses saying the economy is headed in the right direction dipped below 50 percent since the report launched.

Thirty-nine percent of manufacturers said they believed the economy is either slowing down or heading toward a recession, down from 50 percent in 2022, the report said.

When executives talked about the economy in the focus groups, their concerns centered around “uncertainty,” said Buckley Brinkman, executive director of the Wisconsin Center for Manufacturing and Productivity. 

“We had been predicting a recession for three years and it never came,” he said. “Now, people were a little bit more cautious about where the economy was going, although, overall they were still fairly optimistic about their ability to weather the storm.”

An overwhelming majority of Wisconsin manufacturers, 85 percent, said they were “confident” about their own company’s financial future, the report said. That number was unchanged from 2023.

While manufacturers remain confident about their businesses, the report says there are “at risk” manufacturers in Wisconsin that “may not survive future economic shocks.”

Brinkman acknowledged that the surveys were conducted before President Donald Trump took office and began threatening and implementing new tariffs on Wisconsin’s largest trading partners. He says there’s more uncertainty now than when the survey was conducted due to evolving federal plans for tariffs.

“It’s one of the things that has manufacturers concerned right now,” he said. “Manufacturers are really flexible, but you need to be able to count on having relatively stable markets so that you can make the capital investments and the other investments that you need to be healthy in the long term.”

While tariffs have elevated uncertainty, Rockwell Automation, a Milwaukee-based industrial automation and control systems manufacturer, does not expect them to have a “material impact” on profitability in 2025, said Christian Rothe, the company’s chief financial officer during a Feb. 11 earnings call.

Rothe said the company’s “tariff mitigation plan” included enacting price increases on products affected by the duties.

“These actions are disruptive for our customers, of course, and there will likely be some noise in the near-term,” he said. “We are working hard to minimize that disruption and ensure continued levels of customer service.”

Hiring challenges have eased in recent years

Beyond gauging economic sentiment, the report also found that finding and keeping talented workers remained a top concern for manufacturers. But companies also reported less difficulty finding workers in the last couple years.

The share of firms that say it’s “very difficult” to find the workers they need has declined steadily each year from 57 percent in 2021 to 32 percent in 2024, the report said. The share of manufacturers reporting open positions also fell from 58 percent in 2021 to 52 percent last year.

“Companies are sharing with us that they’re not having as hard of a time, but it’s not easy either,” said Ann Franz, executive director of the Northeast Wisconsin Manufacturing Alliance. “Companies this past fall were not hiring as many individuals, so if you’re not hiring, you’re not going to have a hard time finding talent.”

To boost productivity and compensate for the ongoing labor shortage, manufacturers are turning to technology and automation, she said.

Nearly two-thirds of Wisconsin manufacturers say automation is important to their future, the report said.

According to the report, the share of companies who say they’re either using or planning to use artificial intelligence increased from 23 percent to 33 percent. Meanwhile, the share who have no plans to use AI and don’t think it will impact their business fell from 50 percent to 31 percent. 

While technology is expected to help companies meet future challenges, a “significant number of companies” are under stress and not ready to make the changes necessary to remain competitive, the report said. 

Brinkman says those companies tend to be smaller and have been relatively slow to update their operations in recent decades.

“They’ve been able to do what they’ve always done and make a decent living,” Brinkman said. “If you need employees, there aren’t any, so automation becomes important in adopting new technology so you can improve your productivity.”

But investing in automation can be expensive, and the more technology companies add to their operation, the more they need to invest in cybersecurity as well, he said.

“This is really concerning now, as technology begins to accelerate, because these folks can be left behind,” Brinkman said. “I don’t think we’re going to see less manufacturing in Wisconsin, but it’s possible that we could see less manufacturers.”