Manufacturing Employment Growth Remains Weak

By February 1, 2013Economy

The U.S. economy added 157,000 nonfarm payroll jobs in January, according to the Bureau of Labor Statistics (BLS). This was in-line with the consensus estimate for the month. However, the unemployment rate edged higher from 7.8 percent in December to 7.9 percent in January. BLS included a number of revisions for 2012 to reflect payroll counts and seasonal adjustments. Including these revisions, nonfarm payrolls rose 2.2 million in 2012, or roughly 180,000 per month.

The report clearly illustrates the slow growth in the manufacturing sector since the beginning of 2012. Last month’s estimate of 25,000 workers added in December has now been revised down to just 8,000. In January, the sector added 4,000 net new workers. This reflects the weaknesses that we saw over the second half of the year and manufacturers have lost 7,000 workers since July overall.

In January durable goods industries added 3,000 additional employees on net and nondurables contributed 1,000 jobs. The largest gains were seen among motor vehicle and parts (up 2,500), petroleum and coal products (up 1,500), chemicals (up 1,400), computer and peripheral equipment (up 1,200), and fabricated metal products (up 1,000). These were counteracted by declines in nonmetallic minerals and products (down 1,900), electrical equipment and appliances (down 1,700), machinery (down 1,300), and miscellaneous nondurables (down 1,300), among others.

Average weekly earnings in the manufacturing sector dipped from $980.06 to $976.84 which is consistent with weaker activity. The average number of hours in the workweek also edged slightly lower, from 41.7 to 41.6, with the average overtime hours staying the same at 4.2 hours.

While we have seen modest gains in overall employment nationally, manufacturing growth continues to be slow. With the latest revisions, the manufacturing sector contributed 9.2 percent of all of the nonfarm payroll jobs added in the first six months of 2012. Since then, it has added just 15,000 workers relative to a nonfarm payroll gain of 1.2 million. Something is clearly wrong with that picture.

We need to move back to a position where manufacturing is once again making outsized contributions to growth and employment. We saw manufacturers’ optimism plummet throughout 2012 and many manufacturers pulled back on hiring and investing in their businesses upon worries about slowing sales and fiscal challenges. Clearly that this cautious pattern has continued to start 2013.

The fiscal cliff debate took a toll on the economy as we saw reflected in the fourth quarter GDP. Even though we averted the cliff, Washington still failed to make reforms to spending and entitlement programs, which remain a major concern. There have been some signs of progress in in a few economic indicators, which could give us some hope in the coming months, but until manufacturers feel that the economic landscape is on a firmer footing, hiring will remain skittish.

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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