Here is the summary from this week’s Monday Economic Report:
The U.S. economy appears to be stabilizing, with several reports showing stronger-than-expected increases in activity, including the latest jobs numbers release on March 8. Nonfarm payrolls rose by 236,000 in February, well above the consensus estimate of around 155,000, and the unemployment rate dropped to 7.7 percent. Manufacturers hired an additional 14,000 workers for the month, which was in-line with the average monthly gain over the course of the past year. However, losses in several sectors offset some of the gains in manufacturing employment. Ideally, we could see stronger job growth, even as these numbers represent a good start. We need to see broad-based manufacturing hiring growth, with the sector creating an average of 20,000 jobs each month. This is consistent with the “20/20 vision” outlined by National Association of Manufacturers (NAM) President and CEO Jay Timmons in his Detroit Economic Club keynote speech last month.
The Federal Reserve Board’s Beige Book noted the “modest to moderate” pace of growth in the economy since its last report, citing strengths in housing and consumer spending in particular. Growth in manufacturing activity was more mixed, as we have seen in recent sentiment surveys from various regional Federal Reserve Banks. In addition to weaknesses in sales and production, respondents mentioned federal budget cutbacks, the regulatory environment and “the unknown effects of the Affordable Care Act” as roadblocks to their competitiveness. This suggests a degree of skittishness in hiring, which might be reducing the overall job growth numbers mentioned above. Nonetheless, the larger Beige Book findings suggest an economic environment that is improving, with wage and pricing pressures under control, at least for now.
The headline number for factory orders reflected a 2.0 percent decline in January, but decreased aircraft sales, both for defense and nondefense orders, explained much of the fall. Excluding transportation, new manufactured goods orders rose 1.3 percent. Strong sales growth in machinery, electrical equipment and appliances, and fabricated metal products boosted these numbers. Likewise, the trade deficit widened from $38.1 billion in December to $44.4 billion in January. Higher per-barrel petroleum costs fueled most of the increase in the deficit. Non-petroleum goods exports changed little from December.
This morning, we will release the latest results from the NAM/IndustryWeek Survey of Manufacturers. Over the course of last year, the percentage of manufacturers saying that they were positive about their own company’s outlook declined from nearly 89 percent last March to around 52 percent in December due to worries about the fiscal cliff and slowing sales. The new numbers show some improvements since then, with roughly 70 percent positive today. Estimates for sales, employment and capital investment spending have all improved in the past three months. However, the data have essentially returned to where they were in September, and the U.S. fiscal situation and other persistent headwinds continue to drive economic uncertainty.
Other highlights this week include the most recent data on consumer confidence, consumer and producer prices, industrial production, retail sales and small business optimism.
Chad Moutray is the chief economist, National Association of Manufacturers.
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