Manufacturers Added 15,000 Workers in July, the Fastest Pace Since January

By August 7, 2015Economy

The Bureau of Labor Statistics said that manufacturers added 15,000 net new workers in July, the fastest pace since January. This was an encouraging figure – one that is closer to the monthly average of last year when activity in the sector was growing more robustly. Yet, it is important to note that manufacturing employment growth in the sector was more spotty than we might prefer, suggesting that we are not out of the woods yet from recent weaknesses. Nondurable goods firms added 23,000 workers, led by food (up 9,100), plastics and rubber products (up 5,800), paper and paper products (up 2,500) and petroleum and coal products (up 1,400). In contrast, durable goods hiring remained challenged, down by 8,000. The largest declines were seen in the computer and electronic products (down 3,100), machinery (down 1,600), motor vehicles and parts (down 1,400) and primary metals (down 1,100).

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 market-opening trade agreements and the need for smarter tax and regulatory policies. Recent regulations being pushed by the Administration, including this week’s greenhouse gas regulation and the upcoming stricter ozone standard will add considerable burdens on manufacturers— ultimately impacting energy prices and other costs all along the supply chain. If we want to see manufacturing numbers continue to tick up, it’s important Washington considers the broader impacts of these regulations. Manufacturers urge policymakers to consider pro-growth measures that will help improve our competitiveness, and more urgently, 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.

On the positive side, manufacturing employment rose to 12.35 million. I continue to predict that employment in the sector should reach or exceed 12.41 million by year’s end. Compensation was also higher for the month, with average weekly earnings up from $1,018.65 in June to $1,025.23 in July. Average weekly hours edged up from 40.6 to 40.7 hours, with average overtime hours unchanged at 3.4 hours.

Looking at the larger economy, nonfarm payrolls increased by 215,000 workers in July. This was near the consensus estimate, even as it was below the 260,000 and 231,000 figures observed in May and June, respectively. Still, nonfarm payrolls have risen by at least 200,000 in 15 of the past 17 months, averaging almost 250,000 over that time frame. That is positive news, indicating strength in the overall labor market. The unemployment rate remained at 5.3 percent in July, matching its lowest level since August 2008. At the same time, the participation rate was also unchanged at 62.6 percent, the least since October 1977. This will continue to fuel the debate that there continues to be sufficient “slack” in employment, suggesting that there remains room for improvement in employment numbers.

The Federal Reserve is likely to look at this report favorably, focusing on healthy nonfarm employment gains over the past year and a half. While it will acknowledge that hiring strength needs to be stronger, particularly in the manufacturing sector, the Federal Open Market Committee could begin to raise short-term interest rates at its September 16–17 meeting. This will hinge, of course, on rebounds in other economic indicators between now and then, including for manufacturing activity.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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