According to First Research Industry Profiles, the furniture manufacturing industry in the US generates about $65 billion in sales from 20,000 companies. The average company operates a single plant and produces less than $50 million in annual revenue. Some sectors, such as metal office furniture, are highly concentrated, but the industry as a whole is fragmented: the largest 50 companies hold less than 40 percent of the market. The industry is fairly labor-intensive: average annual revenue per worker is about $130,000.
U.S. furniture manufacturers generally specialize in either household furniture ($40 billion market) or office furniture ($25 billion). The office/contract furniture segment includes establishments primarily engaged in manufacturing furniture systems and/or office and store fixtures. The furniture may be made on a stock or custom basis and may be assembled or unassembled (i.e., knockdown).
Compared to the household furniture segment, the contract/office furniture industry has many companies with sales exceeding $1 billion. However, as others, the financial crisis obviously affected this industry as well.
A report by the Bureau of Labor Statistics revealed that employment fell dramatically in November, with nearly 600.000 job losses for American businesses across the major industry sectors, a figure which has far exceeded economists` expectations.
The Bureau`s report also showed an increase in unemployment rates from 6.5 percent to 6.7 percent. Both the number of unemployed persons (10.3 million) and the unemployment rate (6.7 percent) continued to increase in November. Since the start of the recession in December 2007, as recently announced by the National Bureau of Economic Research, the number of unemployed persons increased by 2.7 million, and the unemployment rate rose by 1.7 percentage points (www.bls.gov).
In November, employment continued to decline in manufacturing (-85,000), with widespread job losses occurring among the component industries. Manufacturing employment has declined by 604,000 since December. Within durable goods manufacturing, job losses occurred in November in fabricated metal products (-15,000), machinery (-11,000), wood products (-9,000), furniture and related products (-7,000), primary metals (-7,000), and computer and electronic products (-7,000). Employment in transportation equipment edged up, as a return of 27,000 aerospace workers from strike more than offset a job loss in motor vehicle and parts (-13,000). In the nondurable goods component, job losses occurred in plastics and rubber products (-12,000), printing and related support activities (-5,000), and textile mills (-5,000).
The third-quarter decline in manufacturing productivity was driven by a 10.2 percent decline in nondurable goods productivity; the largest in the series. In durable goods manufacturing, a 5.8 percent decline in output was outpaced by an 8.4 percent drop in hours, yielding a productivity increase of 2.9 percent (www.bls.gov).
The average hourly compensation of all manufacturing workers rose 4.7 percent in the third quarter of 2008, and increased more in the durable goods sector, 6.1 percent, than in the nondurable goods sector, 2.6 percent. Real hourly compensation for all manufacturing workers declined 1.9 percent in the third quarter, following declines of 0.5 percent and 2.7 percent in the first and second quarters of 2008.
Both the decrease in productivity and the increase in hourly compensation contributed to a 7.6 percent increase in unit labor costs in manufacturing during the third quarter--much higher than the 4.0 percent increase over the last four quarters and the 0.3 percent rate from 2000 to 2007. Unit labor costs increased 3.1 percent in durable goods industries and 14.3 percent in nondurable goods industries during the third quarter.
According to Bureau of Economic Analysis of the U.S. Department of Commerce, profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $14.6 billion in the third quarter, compared with a decrease of $60.2 billion in the second quarter. Current-production cash flow (net cash flow), including inventory valuation and capital consumption adjustments (the internal funds available to corporations for investment), increased $43.5 billion in the third quarter, in contrast to a decrease of $60.5 billion in the second quarter.
Like other industries, the furniture manufacturing industry is not immune to the worsening global economic situation. Furniture manufacturers witnessed a decline in orders over the past few months as the financial situation worsened and consumer demand decreased. In response, businesses remain careful, yet hopeful.
Mark Bassil, the vice president and the co-founder of MAiSPACE, the leader in the contract furniture industry, reaffirmed its company`s commitment to excellence and innovation. These are tough times for all businesses and MAiSPACE is no different, but what differentiates us from others is our dedication to our customers and our insatiable quest for quality.
Economy And Office Furniture Industry Trends
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