Below is the summary of this week’s Monday Economic Report:
Manufacturers continue to experience significant headwinds in the U.S. and global economy. Global sales continue to struggle, and manufacturers are increasingly worried about the uncertain political and business environment. However, last week’s indicators provided a more positive view of recent improvements in the economic landscape, both here and abroad. (For more on the international perspective, see the most recent Global Manufacturing Economic Update, which was released on Friday, November 2.)
There were 13,000 net new workers hired in the manufacturing sector in October, helping to reverse the downwardly-revised 27,000 jobs lost in August and September, and overall non-farm payrolls rose higher than expected, up 171,000. Combined with revisions in the prior two month’s data, the last jobs report before the election provided some possibly encouraging signs. Yet, it also reflected an unemployment rate that continues to be highly elevated, at 7.9 percent, and total job growth that is well below its potential. Nonetheless, perceived improvements on the jobs front have led to higher consumer confidence, with the Conference Board’s measure up from 61.3 in August to 72.2 in October. Americans have also increased their overall spending, despite dipping into their savings to do so. The savings rate fell to 3.3 percent, its lowest level since November 2011.
Manufacturing activity was more mixed depending on the source. Factory orders rebounded in September after an extremely disappointing August. In addition, the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) edged slightly higher from 51.5 in September to 51.7 in October, confirming that the sector continues to grow modestly, with new orders picking up. However, hiring continues to be weak, and export sales remain negative. The Markit U.S. Manufacturing PMI showed a similar finding, but with orders easing. Beyond these national surveys, the Chicago and Dallas regions showed signs of weakness. Slowing auto sales have been the culprit in the Midwest, while respondents to the Texas survey were worried about the current political and economic environment. Despite manufacturers’ uncertainty, there is cautious optimism about future orders and production.
This week, all eyes will be on tomorrow’s election, particularly with so many manufacturers concerned about its potential impact. The most recent NAM/IndustryWeek Survey of Manufacturers shows that nearly 79 percent of respondents cited political uncertainties as their top challenge. Beyond the election, the main economic indicator will come on Thursday with the release of new trade numbers. There has been some progress on the economic front in many countries outside of Europe, but persistent weaknesses remain. That should dampen export growth, as we have seen in recent months. Other highlights include the latest on consumer credit, job openings and wholesale trade.
Chad Moutray is the chief economist at the National Association of Manufacturers.