Below is the summary from this week’s Monday Economic Report:
On Friday, the Bureau of Labor Statistics (BLS) announced that the unemployment rate fell from 8.1 percent in August to 7.8 percent in September. This unexpected drop was largely the result of 873,000 additional employees counted in the household survey, with a sizable portion of that stemming from more people working part time because they could not find full-time work. The household survey is more volatile than the separate survey of business establishments (from which the sector-by-sector job gains or losses are derived). As such, it will be closely watched next month to see if this increase holds. I suspect that it will not, with the unemployment rate possibly creeping back up to 8 percent or more in the coming months.
The lower unemployment rate does not change the fact that the economy remains weak, especially for the manufacturing sector. There were just 114,000 non-farm payroll jobs added in September, with 16,000 fewer manufacturing workers. This was the seventh consecutive month of overall disappointing non-farm payroll growth, and manufacturers have now lost 38,000 employees in just the past two months. This speaks to the significant weaknesses seen in the global economy and uncertainties about U.S. growth heading into 2013.
Data on manufacturing activity last week was mixed. The Census Bureau noted steep declines in new durable goods orders. This decrease was mainly in the transportation sector, particularly for aircraft, but sales and shipments of durable goods were largely down across-the-board. However, nondurable goods activity was higher. The Census Bureau also found that manufacturing construction spending declined in August for the third straight month.
Meanwhile, two other datasets reported recent improvements. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index surprisingly rose from 49.6 in August to 51.5 in September. New orders helped to lift the overall index, even as export sales continued to contract. The importance of this data is that the ISM index suggested modest growth last month, ending what would have been the fourth consecutive month of contracting activity. Part of these gains could have been in the auto sector, as AutoData reported that motor vehicle sales jumped last month from 14.5 million to 14.9 million units sold at the annual rate.
This week, one of the highlights will be the international trade numbers, which come out on Thursday. As noted in our new publication, Global Manufacturing Economic Update, six of our top 10 trading partners are experiencing contracting activity right now, hurting our ability to grow exports there. The July trade numbers reflected this weaker activity, with August export and import data expected to be similar. Other economic indicators to look for in the coming days include the latest Beige Book findings from the Federal Reserve and information on job openings, consumer sentiment and producer prices. Manufacturing surveys will also be released from both the Manufacturers Alliance for Productivity and Innovation (MAPI) and Chapman University in California.
Chad Moutray is chief economist, National Association of Manufacturers.