July 26, 2024 - Manufacturing competitors Caterpillar and John Deere are implementing layoffs as material prices rise across the industry, say experts familiar with the sector.

Deere laid off 170 manufacturing employees on Wednesday, following hundreds more workers in the Quad Cities area the past few months.

A Caterpillar spokesperson confirmed on Thursday that the company implemented a one-week layoff for employees in East Peoria to align with customer demand.

Bradley University Associate Dean Joshua Lewer from the Department of Economics said layoffs are cyclical for manufacturers like CAT and John Deere, depending on the climate of the agriculture and mining industries.

“The prices of each of their equipment can be more expensive, so it’s a large capital outlay on an end user,” Lewer said. “I think [high] interest rates are having an effect here on manufacturing.”

Iowa State University professor Peter Orazem said the effects of these layoffs trickle down to supply chain businesses which sell steel and other materials to both companies.

“This is going to be a serious problem, not just because John Deere is such a large employer, but because a lot of inputs John Deere uses are produced in the area.” Inputs refer to other companies producing things for CAT and Deere.

Lewer said manufacturers will sometime cut jobs if they’re anticipating a sales slowdown.

“Sometimes, [it] even leads to a self-fulfilling prophecy where recessions occur because [companies] are making cuts, planning for there to be a slowdown and then ultimately it becomes a slowdown,” Lewer said. “If everyone does it, it could lead to an overall economic issue, macroeconomic issue.”

According to Industrial Technology Research (ITR), an economics firm, U.S. mining production and metalworking machinery is in a recession phase. However, researchers expect most markets to thrive in 2025.