Cashing in on CHIPS: Letter from the Chief Economist

Technically, this story starts in 1823 when a German scientist named Thomas Johann Seebeck first observed the effect of the metals that would later be called semiconductors. But we’ll jump ahead to 1990, when semiconductors were being mass-produced in computer chips and the United States was responsible for 37% of all global production.

Fast forward to 2022, and the US is down to 12% of the global manufacturing share, while logistics issues are disrupting all kinds of supply chains (electronics included). In response, Congress passes the CHIPS Act, allocating over $52 billion for research, development, manufacturing, and workforce development related to semiconductors and computer chips.

So the United States is preparing to launch into a new era of resurgent semiconductor manufacturing. But a dramatic increase in the domestic production of semiconductors requires a dramatic increase in the number of US workers producing them. How can that need be met? 

This is our answer. Today, Lightcast released Rebuilding Our Semiconductor Workforce: Making the Most of the CHIPS Act. 

Lightcast data and statistical models show that this investment could double American semiconductor production. Our estimates show that making that happen would require over 230,000 workers—and what the report explores is where those workers could come from, what skills they need, the most promising locations for semiconductor manufacturing locations, and future trends to watch for in the industry. 

For example, here’s how those 230,000 workers would be divided up by type of work: 

And below is our projected demand for skills related to semiconductor jobs, where we’re seeing increases for skills related to  AI, data visualization, and logistics skills. As the industry sets up for rapid growth and development, it’s important that businesses, communities, and educators know what’s on the way so they aren’t left behind. 

The report also lays out how workers from different jobs can transition into the fast-growing semiconductor industry using adjacent skills. But of course when those workers leave for new jobs making computer chips, they leave a vacancy behind, and the report also shows what it will take to backfill those jobs and make sure the whole economy benefits.

And I think it will. This is an exciting project because it’s tied so closely to an initiative that’s already underway and has the potential to reshape the future in ways we can’t even see yet. Investment from the CHIPS Act is happening, and through the data and analysis in this report, we can help make sure everyone makes the most of it. 

You can download your copy of Rebuilding Our Semiconductor Workforce: Making the Most of the CHIPS Act right here, right now. 

Economic News

Many economists, myself included, expected job openings to go down in this week’s JOLTS, showing data from December. Interest rates are up, a recession has been long predicted, and layoffs are in the news. 

So many economists, myself included, were surprised when job openings went up, rising by about 500,000 to 11 million. This is the latest in a long line of indicators the labor market is separate from the economy and more resilient than it’s been in past cycles. About 2 million people are sitting out the labor force, relative to past participation rates, and until those people come back, employers are going to be looking for employees. 

Quits held steady and layoffs ticked up just slightly, not showing the big cuts we’ve seen over the past few weeks. In our live discussion yesterday morning, my colleague Layla O’Kane said, rightly, “There has been a lot of public concern about whether tech layoffs are bleeding into other areas of the job market. From what we’re seeing in this report, that isn’t the case.”

You can catch our entire recap here, and keep an eye out for a more complete summary of JOLTS and the employment situation release on the Lightcast blog next week. On Friday, when the employment situation release comes out, our team will be ready again with their live analysis. 

But JOLTS wasn’t the only piece of economic news from the past few days. On Tuesday, the Employment Cost Index (ECI) came in lower than expected, at 1% growth for the last quarter of 2022. That is also good news for “team soft landing,” especially since the wages have remained stubborn despite interest rate hikes from the Federal Reserve. The deceleration in wage growth is great news, but the Fed isn’t ready to celebrate and pop the champagne yet, because the recent numbers from ECI imply an underlying inflation of higher than 3%. 

And that was highlighted in yesterday’s announcement from the central bank. The Fed increased rates by 0.25%, as expected, but more important than the rate increase itself were Chair Jerome Powell’s comments. He implied that rate hikes aren’t over, saying: “We’re going to be cautious about declaring victory and sending signals that we think the game is won.” 

So perhaps we haven’t won the fight against inflation, but I’ll be cautiously optimistic and say we’re in the lead.

Until next week,