Here are the files for this week’s Monday Economic Report:
While we have seen some modest improvements in manufacturing activity so far in 2013, these gains have not yet translated into significant increases in hiring. Employment numbers for March were disappointing overall, with only 88,000 nonfarm payroll workers added on net. This was well below the expected increase of 200,000 employees and suggests that the U.S. economy still shows signs of uncertainty. Higher payroll taxes and across-the-board federal spending cuts have eaten away at retail sales and slowed employment growth in some key sectors.
Manufacturers lost 3,000 workers on net in March. As we have seen for much of the past year, hiring in the sector continues to be soft. Over the past 12 months, manufacturing has contributed just 4 percent of the net new jobs in the economy. This is a reversal of the outsized role from the two years before that and something that can be reversed with pro-growth policies like those laid out in the NAM’s Growth Agenda and changed perceptions about the economic and political landscape. In the short term, however, the Society for Human Resource Management’s (SHRM) survey of hiring intentions in April suggests that the net percentage of new hiring among manufacturers decelerated over the course of the past month and since this time last year. This contrasts with service sector employment growth, which has picked up of late.
The Purchasing Managers’ Index (PMI) from the Institute for Supply Management (ISM) was also discouraging last week. Manufacturers responding to the survey suggested a slower pace of growth for new orders in March, dampening enthusiasm with a lower-than-expected PMI reading. The ISM PMI fell from 54.2 in February to 51.3 in March. In contrast, two other releases out last week were more encouraging. Factory orders rose a healthy 3.0 percent in February largely on strong demand for aircraft, and construction spending among manufacturers was higher, continuing a steady upward trend and reversing the slight pullback in the second half of last year. However, ideally, both of these gains could be more broad-based, as these gains are highly mixed across the sectors.
One piece of good news in the ISM report was new export orders were rising. With so many manufacturers exploring growth through trade, the higher export numbers were encouraging. The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit narrowed in February, with goods exports up to their second-highest level ever. The bulk of that increase stemmed from a narrowing of the petroleum trade balance, with petroleum imports down and exports higher for the month. Outside of petroleum, manufactured goods exports have grown very slowly in the first two months of 2013, up just 2.5 percent. To make the President’s goal of doubling exports by 2015, this pace will need to pick up significantly. In January and February, total exports to Europe and Japan were down, but exports to our three largest trading partners (Canada, Mexico and China) were higher.
This week is a quieter one on the economic front. The retail sales and consumer confidence figures due out on Friday will be closely watched for clues regarding how the payroll tax increase and sequestration might have impacted spending and overall sentiment. Likewise, the National Federation of Independent Business (NFIB) and the Manufacturers Alliance for Productivity and Innovation (MAPI) will discuss how small businesses and manufacturers are faring in their latest surveys. Data on business and consumer sentiment were largely mixed in March. Aside from those indicators, the other highlights include new data on job openings and producer prices.
Chad Moutray is the chief economist, National Association of Manufacturers.