Defense

Historically, the defense industry has been one of the most important in the country. In the decades following World War II, the ongoing threat presented by the Cold War between the United States and the Soviet Union required that a large proportion of the nation's energies and resources be devoted to improving our defense capabilities. Defense contractors could be assured of billions of dollars of new contracts each year; interest in space travel and research was also high.

The terrorist activity on U.S. soil in September 2001 led to the execution of immediate defense operations against physical, chemical, and biological threats, cyber attacks, and missile threats to the country. In the past, defense systems were targeted at specific countries or groups, but they have become concentrated more on the threats themselves, according to the Quadrennial Defense Review released to Congress on September 30, 2001. The subsequent wars in Iraq and Afghanistan prompted an increase in defense and military spending for most of the past decade, with slight cuts made starting in 2008. The United States is still the world's leading military power, however, as evidenced by its investment in this area. In July 2024, Statista estimated that U.S. military spending totaled $916 billion in 2023, far greater than second-ranked China ($296 billion) and exceeding the collective total of the next eight largest countries.

By the late 2010s, employment in the aerospace industry, an industry closely linked to the defense industry, had been in steady decline since the early 1990s. According to the U.S. Department of Labor, aerospace manufacturing provided nearly 486,000 wage and salary jobs in 2018, down from about 492,000 in 2014. However, growth had resumed by the early 2020s. The DOL indicated that employment totaled 509,480 in May 2023. Efforts to improve aircraft fuel efficiency and noise pollution and develop drones and small satellites boded well for aerospace engineers, which were expected to experience faster than average employment growth through 2032. Important skill sets for aeronautical engineers include knowledge of collaborative engineering tools and processes, modeling, simulation, and robotics.

In its 2024 Aerospace and Defense Industry Outlook, Deloitte noted that the aerospace and defense industry experienced a comeback in product demand in 2023. In the commercial sector, this reflected air travel activity that, in many parts of the world, exceeded pre-pandemic levels. Demand for weapons, especially those with the latest capabilities, was increasing in an environment marked by growing geopolitical instability. In July 2024, Statista indicated that global military spending reached an all-time high of $2.44 trillion in 2023, up from $2.24 trillion the previous year and $2.11 trillion in 2021. Considering this trend and noting that the DoD had requested a budget of $842 billion for the 2024 fiscal year, up 3.2 percent from 2023, Deloitte’s report observed that the “outlook for the global defense sector remains robust.”

The impact of escalating geopolitical tensions on the defense industry during the early-to-mid-2020s cannot be overstated. In addition to Russia’s invasion of Ukraine in February 2022, significant developments included the eruption of war between Israel and Hamas in October 2023. Both conflicts continued in late 2024. Additionally, threatening behavior against the United States and its allies was escalating. One example was North Korea’s December 2023 test launch of a Hwasong-1 intercontinental ballistic missile, which was theoretically capable of striking any point in the United States, according to CNN. In mid-2024, North Korea and Russia developed a mutual defense agreement, following a meeting between Russian President Vladimir Putin and North Korean leader Kim Jong-un, and Russia held joint naval exercises with China.

After surging 11.5 percent from 2023 to 2024 (from $884 billion to nearly $986 billion), the global aerospace and defense industry was expected to grow at a compound annual rate of 5.8 percent through 2028, according to The Business Research Company. At that time, revenues were forecast to total $1.23 trillion. Technology was a key growth driver. In addition to cloud-based technologies and 3D printing, examples included “design upgradations and modularity for military-style weapons, use of artificial intelligence (AI), day or night decamouflage technology for light weapons, aircraft health monitoring system (AHMS) to enhance maintenance and repair process efficiency, edge computing in defense, the adoption of unmanned combat vehicles, augmented and virtual reality, laser technology in aerospace and defense, robotics and UAVs to shorten maintenance time, companies investing in electricity run aircraft and [a] focus on blockchain to shape aircraft manufacturing.”

Deloitte’s 2024 forecast also emphasized the impact of technology on military spending. The firm indicated that, for the 2024 fiscal year, the DoD requested $1.8 billion in funding for AI alone. This reflected an increase of nearly 64 percent over 2023. The department’s budget request also included $9.3 billion for advanced technology, along with $690 million for “the experimentation and evaluation of advanced technologies for joint warfare.” Deloitte indicated that most of the DoD’s technology funding would be used for strengthening readiness and bolstering military capabilities. However, priorities also included boosting supply chain resiliency and investing in advanced computing, advanced propulsion, microelectronics, and quantum technologies.