Here is a summary of this week’s Monday Economic Report:
With the government shutdown over, we will begin to receive some of the postponed data that were due to have been released over the past few weeks. The first of these will be the September jobs numbers, due out tomorrow. They are expected to show roughly 160,000 nonfarm payroll workers added last month, with slightly positive manufacturing job growth. As such, it would be similar to the recent ADP employment report, which observed 166,000 net new nonfarm payroll workers and 1,000 additional manufacturing workers created during the month.
In lieu of government data during the federal budget impasse, our view of larger economic trends are somewhat frozen with what we were seeing before October 1. Manufacturing activity was picking up from softness during the spring, but with less robust growth rates. Improvements in the economies of China and the Eurozone were also helping to stabilize those regions, which should help to increase our exports. In addition, manufacturers were mostly positive about growth in 2014. These trends should still hold moving forward, and we will be looking at upcoming data to support this.
However, the government shutdown has had a negative impact on the economy. I estimate—as do many other economists—that rel GDP will now be 0.5 percentage points lower in the fourth quarter than it would have been otherwise. With the budget extended to only January 15, 2014, economic uncertainties will persist, potentially adding downward risks to growth in the first quarter of next year. My current forecast is for growth of 1.8 percent and 2.8 percent for 2013 and 2014, respectively, both of which are lower than I would have predicted a few weeks ago.
The graph attached to this report shows the impact of rising anxieties in financial markets as the nation neared a possible default on its obligations. Yields on one-month Treasury bills rose from 0.03 percent on September 30 to a peak of 0.32 percent on October 15. After the budget deal, these yields fell back to 0.01 percent. These rates are relevant because the U.S. Treasury rolls over a significant portion of its portfolio each month, with higher yields pushing up borrowing costs.
On the manufacturing front, the data released last week were largely mixed, even as they reflected continued expansion. The Philadelphia Federal Reserve Bank reported strong gains in new orders and overall sentiment, even as the composite index eased slightly for the month. Manufacturers in the region were overwhelmingly positive about future activity, with more than two-thirds expecting higher sales during the next six months.
In contrast, the Empire State Manufacturing Survey reported a deceleration of activity in the New York Federal Reserve region resulting largely from uncertainties surrounding the fiscal shutdown and debt ceiling. The forward-looking measures were cautiously optimistic, with hiring levels still skittish. Similarly, the Federal Reserve’s Beige Book found modest to moderate growth nationally, but with concerns about the economic impact of the shutdown and with somewhat weak hiring growth in the manufacturing sector. Meanwhile, the California Manufacturing Survey from Chapman University showed a slower pace of new orders and production expected in the fourth quarter. Some respondents noted a desire for stronger demand. However, production and shipments were predicted to continue to grow modestly—a finding that would be consistent with most of the recent sentiment surveys for the sector.
This week, in addition to new jobs numbers, we will learn more about recent manufacturing activity, with Flash Purchasing Managers’ Index (PMI) data from Markit for the United States, China and the Eurozone. The Kansas City and Richmond Federal Reserve Banks will release new survey data as well. Note that statistical agencies are revising their calendars as they grapple with a backlog of data to release. For a quick guide overview of the new dates, you can periodically check here.
Chad Moutray is the chief economist, National Association of Manufacturers.
Latest posts by Chad Moutray (see all)
- Philly Fed: Manufacturing Continued to Expand Strongly in October - October 19, 2017
- Housing Starts Disappoint Again in September, Partly on Hurricane Impacts - October 18, 2017
- NAHB: Builders Remain Optimistic About Growth in October - October 17, 2017