Is the Capital Goods Industry a Good Career Path?

Exploring a Career in the Capital Goods Sector

The capital goods sector is made up of businesses that create items used to produce other goods or services. Consider a company that produces machinery for assembling automobiles; this would be considered a capital goods company. The sector encompasses a wide array of businesses of varying sizes, many of which are involved in manufacturing.

Working in any sector has advantages and disadvantages, and individual preferences, talents, and skills differ greatly. However, if you have several of the qualities listed below, you might find a job in the capital goods sector appealing:

• You enjoy working with your hands and producing tangible goods.
• You are meticulous and value quality.
• You are risk-averse and prefer careful planning.
• You are patient.
• You are a systematic and process-oriented thinker.
• You value predictability and stability.
• You thrive in large teams.
• You value tradition and legacy.
• You value a defined role and responsibilities.

Understanding Capital Goods

Capital goods are tangible assets that consumers do not purchase directly. This broad definition encompasses a wide range of items, from a $5 hammer to a $50 million warehouse. An item is not considered a capital good if a consumer purchases it. If a business purchases the same item to produce other goods and services, it is considered a capital good. For example, a car purchased by an individual for personal use is a consumer good. However, a car purchased by a business for business deliveries is a capital good.

Categories of capital goods include:

• Buildings
• Equipment
• Machines
• Tools
• Vehicles

Many people have never heard the term "capital goods," but they will likely recognize the names of some of the largest capital goods companies:

• Raytheon
• Honeywell International
• Lockheed Martin
• Deere
• Caterpillar
• Boeing
• 3M
• General Electric
• Northrop Grumman

Classical economic theory states that there are three factors of production: labor, capital, and natural resources. Capital goods are the tangible component of capital. (There is some theoretical debate over whether intangible goods or services, such as software, qualify as capital goods, but we will save that discussion for another day.)

Capital goods are used as a leading indicator of the health of the U.S. economy because of their fundamental role in production. If businesses are purchasing more of the goods they need to create other goods, it is seen as a positive sign, and vice versa.

Capital Goods vs. Consumer Goods

Capital goods are used by businesses to create other goods or services, whereas consumer goods are purchased directly by consumers.

Capital Goods Industry: An Outlook

Over the last two decades, U.S. companies have produced roughly $50 to $70 billion in capital goods each month. (This excludes capital goods related to defense or aircraft.)

Data on manufacturers' new orders for capital goods from Federal Reserve Economic Data (FRED) shows that numbers have been steadily increasing since April 2020, indicating that demand for capital goods is growing at a time when some other industries are struggling due to inflation and other macroeconomic factors. New orders for June 2022 (the most recent month with available data) were approximately $74 billion, the highest level ever recorded.

Current trends suggest that the capital goods industry may continue to grow, despite challenges related to the ongoing pandemic and an increasing preference for remote work. While not all manufacturing jobs fall under the category of capital goods, there is significant overlap between the two. Deloitte's "2022 manufacturing industry outlook" provides a helpful approximation for analysis in this area: "As industrial production and capacity utilization surpassed pre-pandemic levels midyear, strong increases in new orders for all major sub-sectors signal growth continuing in 2022."

While predictions are difficult, the capital goods industry appears to be stable and expanding based on its current trajectory.

Career Opportunities in Capital Goods

The capital goods sector is a vast industry that spans nearly every sector of the economy. It includes businesses of all sizes that employ people in a wide range of job roles. This suggests that you can likely find a suitable career path for yourself somewhere in the capital goods sector. The following are a dozen positions commonly found in capital goods companies:

• Computer-Aided Design Technician
• Electrical Engineer
• Forklift Operator
• Industrial Designer
• Machine Operator
• Management Analyst
• Marketing Manager
• Mechanical Engineer
• Occupational Safety and Health Specialist
• Quality Control Inspector
• Sales Manager
• Welder

Advantages and Disadvantages of Working in Capital Goods

Due to the wide variety of companies in the capital goods industry, the advantages and disadvantages are largely determined by the company for which you work. However, here are some reasons why you might enjoy working for a company that produces capital goods.

Pros

• Stability - Many capital goods companies have been around for a long time and have a proven and fairly stable business model.
• Starting your career - There are numerous entry-level jobs in capital goods (many of which do not require a four-year degree) that can help people become acquainted with a given industry and explore various career paths while earning money.
• Benefits and promotions - Many capital goods companies, particularly the larger ones, offer excellent benefits and ample opportunities for advancement and growth.

Cons

• Safety - Because many capital goods jobs involve factory work and other types of manual labor, they carry a higher level of risk than many other industries.
• Bureaucracy - Capital goods includes many larger and older companies, as well as manufacturing companies, which are typically slow to change and adapt to new trends. They may lack cutting-edge technology or policies.
• Impact - While capital goods are essential for a functioning economy, working in the industry may make you less likely to be working on solving the social and environmental issues confronting our world.

Final Thoughts

If you are seeking job security and earning potential during these challenging and uncertain times, consider pursuing a career in capital goods. The industry is steadily growing, and there are numerous ways to get involved, depending on your skills and interests.

If you are already on a career path that you enjoy, you can begin searching for your desired job titles on the job boards of capital goods companies that interest you.

Frequently Asked Questions

What are the long-term career prospects in the capital goods industry?

The capital goods industry often provides stable long-term career prospects due to its essential role in the production of goods and infrastructure development. As economies expand and technology advances, there is a consistent demand for skilled professionals to design, manufacture, and maintain capital goods. Furthermore, with the rise of automation and smart technologies, there are new opportunities for career advancement in fields such as robotics, AI, and sustainable manufacturing processes.

What types of roles are available in the capital goods sector for new graduates?

New graduates can find a variety of roles in the capital goods sector, ranging from engineering positions (mechanical, electrical, civil, or industrial) to sales, management, and operations. There are also opportunities in research and development, supply chain management, and quality control. The industry values fresh talent with innovative ideas, technical skills, and the ability to adapt to the evolving manufacturing landscape.

How can one advance their career in the capital goods industry?

Advancing a career in the capital goods industry typically involves gaining experience, pursuing further education or certifications, and developing a specialization in a niche area. Networking within the industry, taking on challenging projects, and staying updated with the latest technological trends can also contribute to career progression. Employers often look for individuals who demonstrate leadership skills, a strong work ethic, and the ability to drive efficiency and innovation.