The capital goods industry is comprised of companies that produce goods that are used to produce other goods or services. For example, a company that manufactures machines used to assemble vehicles would be classified as a capital goods company. The industry includes a wide variety of companies of different sizes, many of which are in the manufacturing sector.
There are pros and cons to working in any industry, and individual preferences, skills, and abilities vary significantly. However, if you possess several of the following characteristics, you might enjoy a career in the capital goods industry:
- You enjoy hands-on work and creating tangible products
- You are methodical and place a premium on quality
- You are risk-averse and prefer to plan carefully
- You are patient
- You are a systems and process-oriented thinker
- You prefer predictability and stability
- You thrive on large teams
- You value tradition and legacy
- You appreciate a specific, well-defined role and duties
What Are Capital Goods?
Capital goods are physical assets that are not purchased directly by consumers. This broad definition includes many thousands of different items, ranging from a $5 hammer to a $50 million warehouse. If an item is purchased by a consumer, it is not defined as a capital good. If that same item is purchased by a company for the purpose of producing other goods and services, it is defined as a capital good. For example, a car purchased by an individual for personal use is a consumer good. But, a car purchased by a company 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’ll likely recognize the names of some of the largest capital goods companies in the United States:
- Raytheon
- Honeywell International
- Lockheed Martin
- Deere
- Caterpillar
- Boeing
- 3M
- General Electric
- Northrop Grumman
According to classical economic theory, there are three factors of production: labor, capital, and natural resources. Capital goods constitute the tangible part of capital. (There’s some theoretical debate over whether intangible goods or services, like software, count as capital goods, but we’ll leave that conversation for another day.)
Because of their fundamental role in production, capital goods are used as a leading indicator of the health of the U.S. economy. If companies are buying more of the goods they need to make other goods, that is viewed as a positive signal, and vice versa.
What’s the difference between capital goods and consumer goods?
Capital goods are goods that are used by companies to produce other goods or services while consumer goods are purchased directly by consumers.
Capital Goods Industry Outlook
Companies in the U.S. have produced between roughly $50 and $70 billion of capital goods each month over the past two decades. (This does not include 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 increasing steadily since April of 2020, which indicates 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 about $74 billion, the highest level of all time.
Current trends suggest that the capital goods industry may continue to grow, even as it faces various challenges related to the ongoing pandemic and an increasing preference for remote work. Not all manufacturing jobs fall under the category of capital goods, but there’s significant overlap between the two categories. Since the Bureau of Labor Statistics doesn’t report on capital goods as a category, Deloitte’s “2022 manufacturing industry outlook” provides an approximation for helpful 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.”
Of course, no one has a crystal ball, but the capital goods industry seems to be stable and growing based on its current trajectory.
Careers in Capital Goods
Capital goods is an enormous industry spanning virtually all sectors of the economy. It includes companies of a variety of sizes who employ people with thousands of different job titles. This means that there’s a high likelihood you could find a suitable career path for yourself somewhere in the capital goods industry.
Here are a dozen roles you’ll commonly find at 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
>> Read More: Best paying jobs in capital goods
Pros and Cons of Working in Capital Goods
Due to the wide variety of companies in the capital goods industry, the pros and cons largely depend on the company you work for. However, here are some reasons 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.
- Starting your career - There are many entry-level jobs in capital goods (which often do not require a 4-year degree) that can help people familiarize themselves with a given industry and explore different career paths while earning money.
- Benefits and promotions - Many capital goods companies, especially the larger ones, offer good benefits and provide ample opportunity for mobility and growth.
Cons
- Safety - Since many capital goods jobs involve factory work and other types of manual labor, they present a higher level of risk than many other industries.
- Bureaucracy - Capital goods includes many larger and older companies as well as manufacturing companies that are typically slow to change and adapt to new trends. They may not have the most cutting-edge technology or policies.
- Impact - Although capital goods are critical for a functioning economy, working in the industry probably means you’re less likely to be working on solving the social and environmental problems facing our world.
Final Thoughts
If you’re looking for job security and earning potential during these difficult and uncertain times, consider exploring a career in capital goods. The industry is growing steadily, and there are many different ways to get in depending on your skills and interests.
If you’re already in a career path you enjoy, you can start looking for your desired job titles on the job boards of capital goods companies of interest.
If you’re looking for some direction on where to take your career next, read “What Job Is Right For Me?” and use Teal’s free Work Styles Assessment to gain some clarity on how you work best and get a sense of the roles that might be a good fit.
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