The Bureau of Labor Statistics said that manufacturers added 4,000 net new workers in June. This was slightly lower than the 7,000 additional employees added in May, and in general, it continues a softer-than-desired pace for the first half of 2015, particularly over the past five months. The sector added an average of just 6,167 workers per month in the first half of this year, a much slower rate of hiring than observed in the second half of 2014, which averaged 20,667 per month. The good news is that manufacturing job gains were positive in both May and June, recovering from being flat in April.
The U.S. labor market has shown signs of modest improvement in the past two months, rebounding from slower hiring in the spring months. However, job growth remains less-than-ideal, particularly in the manufacturing sector. We would like to see healthier gains across-the-board for manufacturing employment, which continues to be relatively soft, with demand and production dampened by a number of challenges in the U.S. and global economy.
Much of this softness has resulted from headwinds such as the stronger U.S. dollar and weaker export growth. As such, global competitiveness becomes even more important, putting the spotlight on trade agreements and the need for smarter tax and regulatory policies. Manufacturers urge policymakers to consider pro-growth measures that will help improve our competitiveness, and perhaps more timely, we urge Congress to reauthorize the Export-Import Bank, which is a vital tool for manufacturers of all sizes as we compete abroad for new business.
Durable and nondurable goods manufacturers each added 2,000 workers on net in June. While the net job increases were positive, employment growth remains far from robust, and the underlying figures were mostly mixed. The largest increases were seen in the food manufacturing (up 4,900), electrical equipment and appliances (up 1,300), furniture and related products (up 1,100) and motor vehicles and parts (up 500) sectors. In contrast, these gains were mostly offset by declining employment for fabricated metal products (down 4,500), textile mills (down 1,900), paper and paper products (down 1,600), computer and electronic products (down 900) and printing and related support activities (down 800).
Despite the net increase in manufacturing employment in June, hours and compensation in the sector both slipped a bit for the month. Average weekly earnings for manufacturing workers dropped from $1,025.30 in May to $1,020.76 in June. In addition, employees in the sector worked 40.7 hours on average, down from 40.8 hours. At the same time, average overtime hours ticked marginally higher, up from 3.3 to 3.4 hours.
Meanwhile, nonfarm payroll employment increased by 223,000 in June, down from 254,000 in May. This was largely in-line with consensus expectations, and it was the second straight month with nonfarm payrolls exceeding 200,000, indicating a rebound from springtime weakness in the labor market. Nonfarm payrolls have now exceeded 200,000 in 14 of the past 16 months, averaging 250,750 over that time frame. That represents decent job growth overall, and we would expect a similar pace moving forward in the second half of 2015.
The unemployment rate declined from 5.5 percent to 5.3 percent, its lowest level since April 2008. At least part of this decline can be explained by a drop in the participation rate from 62.9 percent to 62.6 percent, the least since October 1977. This could indicate that the unemployment rate might go back up slightly, assuming more Americans came back into the labor force in the coming months.
Chad Moutray is the chief economist, National Association of Manufacturers.