Manufacturing Employment Falls in August

By September 7, 2012Economy

The U.S. economy added just 96,000 net new workers in August, according to the Bureau of Labor Statistics (BLS). This continues a trend of disappointing jobs reports since the spring. For manufacturers, it also reflects the weaknesses that we saw the other day, with 15,000 fewer employees on net than in July. The largest declines were in the motor vehicle sector. The decline in manufacturing employment was the first since September.

The unemployment rate did fall to 8.1 percent in August from 8.3 percent in July. While this might seem positive on the surface, it reflects a decline in both the labor force and the participation rate. The participation rate is now 63.5 percent, down from 63.7 percent. This is the lowest participation rate since September 1981. With fewer individuals in the labor force, the unemployment rate dropped even though the job creation numbers were weak. The so-called “real” unemployment rate – which includes underemployed and discouraged workers – was 14.7 percent.

Looking specifically at the manufacturing sector, nondurable goods industries outpaced their durable goods counterparts in August, with nondurables up 2,000 and durables down 17,000. The motor vehicle and parts sector dominated the losses, down 8.000. The BLS press release explains this as follows: “Auto manufacturers laid off fewer workers for factory retooling than usual in July, and fewer workers than usual were recalled in August.”

Other sectors with declining employment in August were fabricated metal products (down 3,100), primary metals (down 2,600), computer and electronics products (down 1,800), apparel (down 1,500), wood products (down 1,400), and nonmetallic mineral products (down 1,200). These were somewhat offset by gains in the following manufacturing industries: food manufacturing (up 4,800), machinery (up 1,700), furniture and related products (up 1,600), and plastics and rubber products (up 800).

Mirroring the lower employment levels, the average workweek for manufacturers dropped slightly from 40.7 hours in July to 40.5 hours in August. The average amount of overtime remained the same at 3.2 hours; however, it did drop 0.1 percentage points for durable goods. Likewise, the average weekly earnings for manufacturing workers fell from $977.21 to $972.41.

Overall, these figures continue to highlight weaknesses in the manufacturing sector, not unlike other indicators released in the last few weeks. Slowing global sales and uncertainties about the domestic economy have taken a toll, with manufacturers on edge and activity slowing to a standstill. With that in mind, the drop in manufacturing employment was not surprising, even as it is such a disappointment. Even the drop in the unemployment rate is not as good as it might seem on the surface, as it clearly indicates that fewer Americans are willing to take part in the labor force.

These anxieties about where the economy is headed are not going to go away anytime soon, and as such, it will be important for policymakers to act sooner rather than later to address some of them. In particular, a failure to address the fiscal abyss, including budget sequestration, risks sending the economy lower. Manufacturers know this as much as the public does, and the failure to act is hampering growth.

Chad Moutray is chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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