ADP said that manufacturing employment fell by 15,000 in September, declining for the fifth time year-to-date. Indeed, the sector has shed 7,000 workers through the first nine months of 2015, according to ADP, reflecting the significant challenges faced by businesses right now. A number of headwinds have hampered demand, production and hiring growth, ranging from the strong dollar to economic softness abroad to lower crude oil prices. To illustrate just how much has changed in the labor market so far this year, manufacturers hired roughly 19,000 new workers per month on average in the second half of 2014, when activity was growing more robustly.
In the larger economy, nonfarm private businesses added 200,000 workers in September, improving upon the 169,000 and 186,000 readings observed in July and August, respectively. Year-to-date, the U.S. economy has added 195,000 nonfarm private sector workers each month on average, down from 248,000 in the second half of last year. Still, labor market growth remains decent overall despite continued sluggishness seen in the manufacturing sector.
In September, the largest job gains were in trade, transportation and utilities (up 39,000); construction (up 35,000); professional and business services (up 29,000) and financial activities (up 15,000). The construction gains mirror recent strength in the housing market. In contrast to past months where small and medium-sized businesses (e.g., those with less than 500 employees) were the primary job creators, large businesses accounted for just over half (53 percent) of all net new workers in September.
The Bureau of Labor Statistics will release new jobs numbers tomorrow, with a consensus estimate of 200,000. As such, that would be consistent with today’s ADP report. For manufacturers, I would expect continued softness, but I would anticipate employment growth in the sector being flat or slightly positive, differentiating it from the ADP release. The BLS data had manufacturers losing 17,000 workers in August (unlike the ADP gain for that month of 4,000), and I would submit that it is likely that there will be modest progress after that sharp decline.
Chad Moutray is the chief economist, National Association of Manufacturers.