U.S. Jobs Slow to Materialize Despite Billions in Ukraine Defense Spending

On Oct 28, 2023

TL/DR –

The billions of dollars spent by the US government to arm Ukraine and replenish its own military stocks have not yet significantly boosted job numbers due to logistical challenges faced by defense manufacturers. The manufacturers have struggled to hire in a tight labor market, untangle supply chain issues, and restart outdated production lines. While some progress is being made, it could be several more years before production peaks and the jobs impact is widely felt in the US economy.

Federal Funding Struggles to Generate US Jobs amidst Defense Manufacturing Challenges

US federal funding, amounting to billions of dollars, aimed to arm Ukraine and replenish US military reserves, is finding it hard to generate significant new employment. This is a result of logistical difficulties faced by defense manufacturers in scaling production.

Despite the enormous funding, the number of jobs created remains comparatively small, as indicated by corporate filings and company executive remarks. $44 billion has been dedicated to direct security assistance for the Ukraine war, primarily going towards replenishing US ammunition and weapons.

As defense companies struggle to hire workers, negotiate supply chain issues, and reestablish dormant production lines, it might be years before peak production is reached. Cynthia Cook, director of the Defense-Industrial Initiatives Group, suggests that industrial base efficiency incentives make expansion challenging.

President Joe Biden rallied for an additional $61.4 billion in aid for Ukraine, arguing the benefits would be felt both domestically and internationally. However, some Congressional Republicans oppose further Ukraine spending, potentially instigating a government shutdown.

Companies report that increasing production is time-consuming, particularly when it involves restarting manufacturing for long-unused weapon types or hiring for remote locations. Resuming manufacturing can take years, according to William LaPlante, the under secretary of defense for acquisition and sustainment.

Even those companies like Raytheon (previously RTX Corp) experiencing supply chain disruptions have had difficulties meeting demand for weapons used in the Ukrainian war. Raytheon CEO Greg Hayes told investors that it would spend 24 to 36 months following through on contracts.

Lockheed Martin, despite an increased demand, admitted that the business impact will be felt over years rather than months. General Dynamics reported its highest orders level in years, driven by growth in tank sales and expansion of artillery production for the US.

The question that remains is whether the ramping up of production will be maintained or if the US will fall into another cycle of ups and downs.