Stronger Manufacturing Gains in December, Challenges Remain

By January 4, 2013Economy

According to the Bureau of Labor Statistics the manufacturing sector added 25,000 net new workers in December, its strongest monthly gain since March. This stands in contrast to the ADP figures released yesterday, which have found six straight months of declining manufacturing employment. The official government data reflect a more-positive uptick for the sector.

Over the course of 2012, manufacturers hired an additional 180,000 workers on net, or 10 percent of all nonfarm payroll jobs created this year, the majority of which were created in the first half of 2012. This was slower growth than we had hoped to see, clearly the fiscal cliff and other uncertainties had an impact in the second half of the year. 

Looking more specifically at the December manufacturing employment numbers, durable and nondurable goods sectors added 11,000 and 14,000 workers, respectively. Most of these gains can be largely contributed to rebuilding after Sandy as construction jobs also saw an increase of 30,000.

The largest gains were seen in the motor vehicle and parts (up 4,800), food manufacturing (up 4,500), chemicals (up 4,300), nonmetallic mineral products (up 3,500), plastics and rubber products (up 2,100), and machinery (up 2,000) businesses.

Even with this uptick in December several areas of weakness were found in manufacturing. We saw losses in electrical equipment and appliances (down 2,100), fabricated metal products (down 700), paper and paper products (down 500), apparel (down 400), and furniture and related products (down 400).

The average weekly hours figures were somewhat mixed. While the average manufacturing employee worked 41.6 hours, which was unchanged from the previous month, durable goods workers time on the job edged lower from 41.9 hours on average to 41.8 hours. The average amount of overtime was marginally higher, up from 4.1 hours to 4.2 hours, with an increase in overtime from the nondurable goods sector contributing to the increase.

The December jobs report shows an economy that is growing modestly, but not enough to bring down the unemployment rate in a material way. Unemployment remains elevated at 7.8 percent, with “real” unemployment unchanged this month at 14.4 percent.

The good news in this report is the strong gains in manufacturing and construction as well as several other sectors. However, even as we have seen some indications of improvement, hiring expectations have tended to lag behind with many manufacturers pulling back on employment and capital spending plans. We saw this in the last quarter in the run up to the fiscal cliff.

Some of the uncertainties in the economy have been removed with the fiscal cliff agreement, but Congress failed to address the debt and deficit issues which will still be a drag on the economy. Washington must move forward with pro-growth policies to allow manufacturers to grow in 2013.

We are seeing the global economy stabilizing, outside of Europe and Japan.  And if Washington is able to tackle some of the country’s difficult fiscal issues this will lead to the manufacturing sector returning to the outsized contributions that we saw earlier in the year.

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

Leave a Reply