Manufacturers added 14,000 workers on net in August, according to the Bureau of Labor Statistics. The good news is that this was the fastest job growth since February, but this announcement comes with a cost. The data for June and July were revised lower, subtracting another 14,000 from total. Much of that change stemmed from revisions to employment in the motor vehicles sector. The original data for autos had an increase of 9,100 workers for July; instead, the segment shed 10,400 employees for the month as automakers retooled for the next model year.
The underlying story here is that manufacturing employment continues to grow at a disappointing pace. The sector lost workers for five straight months from March to July, with 39,000 fewer employees during that time. Over the course of the past 12 months, the sector has added just 20,000 additional workers, or less than 1 percent of the 2.2 million nonfarm payroll workers hired during that time. In contrast, the manufacturing sector produced outsized gains of 10.4 percent of all of the net new jobs in the years of 2010 and 2011. Clearly, we need to get back to where the sector is growing strongly and adding new workers at a faster pace.
Looking specifically at manufacturing sector employment in August, durable goods industries added 22,000 workers on net for the month, of which 19,500 stemmed from motor vehicles, as discussed above. Nondurable goods businesses lost 8,000 workers in comparison. As a result, outside of autos (which was related to resuming production as we start the new model year), overall hiring growth remains soft. Gains in the nonmetallic mineral products (up 1,700) and fabricated metal products (up 1,000), for instance, were largely offset by declines in the plastics and rubber products (down 3,200) and printing and related support activities (down 2,600) sectors, among others.
On the positive side, there were marginal increases in both earnings and hours worked in the manufacturing sector in August; although, these mostly compensated for declines in July. Manufacturing employees worked an average of 40.8 hours and 3.4 overtime hours in August, up from 40.7 hours and 3.2 overtime hours in July. Average weekly earnings rose from $992.67 in July to $998.38 in August, essentially the same as was observed in June.
Meanwhile, nonfarm payrolls increased by 169,000 in August, a figure that was mostly in-line with consensus expectations. These data were also revised lower, subtracting another 74,000 from the total increases of June and July. The average number of nonfarm payroll workers added each month so far in 2013 was 180,250. This suggests that the U.S. economy continues to churn out the same average as last year, which added 182,750 on average each month.
At the same time, the unemployment rate declined from 7.4 percent in July to 7.3 percent in August. This was the lowest rate since December 2008. On the other hand, it coincided with yet another decline in the participation rate, from 63.4 percent to 63.2 percent. The last time the participation rate was that low was August 1978.
These data show that, despite the recent uptick in activity in the U.S. economy, overall hiring remains quite sluggish. In the manufacturing sector, it was nice to see positive growth in employment for the first time since February, but downward revisions in the previous two months temper our enthusiasm. The fact that the sector has only generated 20,000 net new workers over the past 12 months is a sign that we need to get manufacturing growth flourishing again. Output and demand have been inadequate to necessitate additional hiring.
While manufacturers remain optimistic about increases in activity moving forward, policymakers need to seek ways to grow the economy. This will help to ensure that the manufacturing sector once again makes outsized contributions to real GDP and employment, as it did in the two years after the recession.
Chad Moutray is the chief economist, National Association of Manufacturers.