Here is the summary from this week’s Monday Economic Report:
As we saw in last week’s report, there was modest progress in manufacturing activity in June. While the previous write-up discussed improvements in sales and output from regional sentiment surveys, the noted gains this time were found in the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) report. The index rose from 49.0 in May to 50.9 in June, just barely expanding after contracting for the first time since November. Rebounds in new orders and production spurred the higher figure. Even with these gains, concerns remain, with sluggish (but positive) domestic and global sales dampening more robust growth. The one notable challenge was hiring, with the PMI measure for employment slightly negative.
Friday’s jobs report from the Bureau of Labor Statistics confirmed this finding. Manufacturing employment declined by 6,000 in June, falling for the fourth consecutive month. The sector has added just 1 percent of all net new jobs over the past 12 months, a sluggish pace that suggests a continued hesitance to bring on new workers, particularly in light of softer demand.
In contrast, the larger macroeconomy has fared better, producing 195,000 net new nonfarm payroll workers for the month and significant revisions to both April and May of 70,000 workers total. Yet, the employment numbers also indicated an increase in part-time employees, helping to boost the “real” unemployment rate—which includes those who are marginally attached to the labor force—from 13.8 percent to 14.3 percent. (The more widely reported unemployment rate was unchanged at 7.6 percent.) Nonetheless, market observers saw the jobs report as a positive development, with an average of 201,833 new nonfarm workers added each month so far in 2013. This indicates a pickup in the hiring pace of 2011 and 2012, which averaged 175,000 and 182,500 each month, respectively.
On the trade front, the U.S. trade deficit rose from $40.1 billion in April to $45.0 billion in May. While goods exports were marginally lower for the month, goods imports increased by $4.2 billion. Manufactured goods exports have increased just 1 percent in the first five months of 2013 relative to the same time period in 2012. Such slow export growth is one reason that manufacturing demand has been soft this year. Reduced sales to the European Union are a large factor, with manufactured goods exports to the region down 6.2 percent in the year-to-date comparisons of 2012 and 2013. Beyond manufacturing, lackluster export growth also makes it harder for the United States to double exports by 2015, a priority the President outlined in his National Export Initiative.
This week, there will be two additional manufacturing surveys to analyze, including one from Chapman University in California and another from the Manufacturers Alliance for Productivity and Innovation (MAPI). Hopefully, they will show continued progress on new orders, output and overall sentiment. Beyond these reports, we will also get new data on consumer confidence, consumer credit, job openings, producer prices and wholesale trade.
Chad Moutray is the chief economist, National Association of Manufacturers.
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