The economy remains a mixed bag for manufacturers, with job numbers drawing back for the second month this year. The numbers indicate obstacles still stand in the way of unleashing the economic potential of the manufacturing sector. The Bureau of Labor Statistics reported that manufacturing employment declined by 16,000 in February, somewhat offsetting the 23,000-worker increase observed in January. In addition, data revisions subtracted another 13,000 workers from the December and January original estimates. As such, manufacturers have added just 7,000 net new workers year-to-date through the first two months of 2016, a sluggish pace that speaks to the ongoing challenges seen in the sector from the strong U.S. dollar and falling commodity prices.
On the one hand, the labor market appears to be moving in the right direction, with nonfarm payrolls averaging gains of around 225,000 per month over the last 14 months and the unemployment rate down to 4.9 percent. Indeed, the February job gains were stronger than expected, which was encouraging. However, look at the larger picture: There are currently 12.33 million workers in the manufacturing sector, with manufacturers adding 874,000 more employees since the Great Recession. Yet, the sector added only 26,000 net new workers in 2015—12,000 since February.
This mixed message likely complicates what the Federal Reserve will do at its March meeting, but the Federal Open Market Committee (FOMC) will still likely hit the pause button on rate increases as it waits for broader signs of strength in the U.S. economy, including manufacturing. However, the April and June FOMC meetings remain on the table.
Manufacturing’s challenges are far from over. Global anxieties and weak commodity markets continue to dampen demand and production, and as a result, hiring growth remains quite soft. It is clear that manufacturers are pulling back on hiring in light of the current headwinds—many of which exist because Washington has not managed to act on them. In terms of policies that will help to turn around the manufacturing sector, business leaders will continue to embrace pro-growth initiatives, such as those outlined in the NAM’s “Competing to Win” document, especially in this all-important election year.
Latest posts by Chad Moutray (see all)
- Kansas City Fed: Manufacturing Outlook Remained Very Optimistic, but Firms See Accelerating Costs - February 22, 2018
- Existing Home Sales Start the New Year Slower, with Supplies Limited - February 21, 2018
- IHS Markit: U.S. Manufacturing Activity Improved in January to its Best Month since October 2014 - February 21, 2018