Manufacturing employment declined by 3,000 in March according to the Bureau of Labor Statistics, its first decrease since September. Manufacturing employment has been soft over much of the past year, with just a few exceptions. The sector has added 77,000 net new workers over the past 12 months.
Over that time frame, there were 1.9 million nonfarm payroll workers hired, implying that manufacturers created just 4 percent of all of the net new jobs since March 2012. That really illustrates how uncertainty and weak global demand have impacted a sector that had before last year been providing outsized growth for output and employment. Since the end of the recession, manufacturers have hired an additional 510,000 workers, or roughly 9 percent of all new jobs.
Looking specifically at the manufacturing employment numbers for March, the durable goods sectors added 4,000 additional workers, with nondurable goods industries shedding 7,000. The largest monthly gains were seen in the fabricated metal products (up 3,400), machinery (up 3,000), primary metals (up 2,000), and plastics and rubber products (up 1,200) sectors. In contrast, some of the sectors with declining employment for the month included apparel (down 2,500), food products (down 1,600), wood products (down 1,300), and textile product mills (down 1,000).
The data on hours worked and compensation in the manufacturing sector were largely unchanged in March. The average weekly earnings for the industry edged marginally lower from $987.74 to $986.14. On the positive side, weekly earnings remain higher than the $978.84 average observed in January. In terms of average weekly hours, they also were slightly off, down from 40.9 to 40.8. This was somewhat counteracted by an increase in the average overtime hours of 3.4 in March, up from 3.3 in February.
The overall U.S. economy added just 88,000 nonfarm payroll jobs in March, well below the consensus estimate of around 200,000. This suggests that overall hiring has slowed considerably from January and February, both of which were revised higher from their earlier estimates. January’s nonfarm job growth changed from 119,000 as originally suggested to 148,000, and February’s data rose from 236,000 to 268,000. That 59,000-worker upward revision helps take at least some of the sting out of these poor numbers, but this is still a very negative report.
The other headline number from the BLS jobs numbers is that that unemployment rate fell from 7.7 percent to 7.6 percent. On the surface this looks like good news with unemployment down 0.6 percentage points from the 8.2 percent rate observed in March 2012. However, the rate fell in March due to a decline in the participation rate. Last year at this time, the participation rate was 63.8, and it was 63.5 in February. The rate fell to 63.3 percent in March, its lowest level since May 1979.
Today’s employment report suggests that there are significant weaknesses in the U.S. economy, even as we have seen some progress in 2013. It’s becoming clear that higher taxes and across-the-board federal spending cuts have had an impact. Federal government employment declined by 14,000 in March. Much of these losses came from the U.S. Postal Service which was down 11,700. At the same time, we continue to hear anecdotal evidence from several retailers that increased payroll taxes have reduced sales, with 24,100 fewer workers in the retail trade sector.
For manufacturers it is also clear that the sector has not been able to muster any broad-based momentum in terms of job creation. While we have seen evidence of higher sales and production in many economic indicators so far this year, it has not necessarily translated into increased hiring. There is still a skittishness and uncertainty to hire on the part of many businesses. Until business leaders sense that the economy is on a firmer footing, there will continue to be a hesitancy to increase employment. Washington continues to move from one crisis which is taking its toll on our economy and job creation.
It’s also important to note the unknown in these data is the impact that the Affordable Care Act has had on hiring. We will continue to watch this closely over the next year as we move towards the law’s implantation. Concerns related to the law and health insurance rose to the number one concern in the first quarter NAM/IndustryWeek Survey of Manufacturers released last month.
Chad Moutray is chief economist, National Association of Manufacturers.