Manufacturing Employment Falls in November

By December 7, 2012Economy

Nonfarm payroll gains were slightly higher than anticipated in November, according to the Bureau of Labor Statistics. The consensus estimate had been for roughly 100,000 or so nonfarm payroll workers added in the month, and today BLS reported that there were 146,000 additional workers added in November.

Part of the higher figure stems from the fact that Hurricane Sandy had less of an impact than some economists expected. The other surprising element was the reduction in the unemployment rate from 7.9 percent to 7.7 percent. This phenomenon was largely the result of a reduced participation rate, from 63.8 percent to 63.6 percent.

In November we saw more bad news for the manufacturing sector. Manufacturers shed 7,000 workers in November, building on the weak economic environment that we have seen since July. The industry has lost 26,000 workers on net in the past four months. Prior to that point, the manufacturing sector had added 172,000 employees in the months of January through July, or 16.3 percent of all of the nonfarm payroll jobs created in the first seven months of the year. It is clear that this outsized role in net job creation has come to a standstill since the summer.

Slower sales growth and uncertainties related to the U.S. economic climate have taken their toll on the manufacturing sector. The latest NAM/IndustryWeek Survey of Manufacturers released yesterday, reiterates this point. There has been a substantial deterioration in the percentage of manufacturers who say that their company’s business outlook is positive. More troublesome the survey showed that average expectations for capital spending and hiring over the next 12 months has turned negative for the first time since 2009. In fact, almost 43 percent of respondents said that they had reduced or slowed down their business investment, and more than 36 percent said that they have reduced employment or stopped hiring.

Looking more specifically at the November manufacturing employment numbers, the durable goods sectors did better than nondurables. Durable goods firms added 11,000 workers on net and nondurable goods companies lost 18,000 employees. The strongest growth came from the motor vehicles and parts (up 9,700), fabricated metal products (up 4,500), and wood products (up 3,300) sectors. At the same time, these gains were offset by losses in the chemical (down 9,100), computer and electronic products (down 3,700), paper and paper products (down 1,400), and miscellaneous (down 1,300) manufacturers, among others.

Despite the downtick in overall manufacturing employment, the average number of hours in the workweek edged slightly higher, up from 40.5 to 40.6. This increase was consistent for both durable and nondurable goods industries. The average amount of overtime was the same at 3.2 hours. The average weekly earnings for manufacturing workers rose from $971.60 to $976.02.

While this jobs report was better than expected it provides little comfort for manufacturers. Job growth has been choppy since July, and business leaders remain extremely anxious about where the economy is headed and the fiscal cliff. In fact, more than 84 percent of manufacturers list political uncertainties and the prospect of the fiscal cliff as their top concern. In order to grow manufacturing jobs we need to quickly address our fiscal challenges and move back to a discussion of growth and global competitiveness. Washington must move forward with bold leadership to address the uncertainty so manufacturing can return to leading our recovery and making outsized contributions to real GDP and employment.

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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