Manufacturing Employment Declined Again in August

In another sign that manufacturing in the United States remains weaker-than-desired despite some signs of recent progress, employment in the sector fell once again in August. Manufacturers hired 14,000 fewer workers on net in August, and the job gains for the prior two months were revised down by a combined 10,000. All in all, manufacturing employment has fallen by 39,000 year-to-date through August, suggesting continuing cautiousness among manufacturing business leaders to add workers in light of lingering weaknesses in the global economy. It is hard not to be disappointed by these numbers, particularly when combined with yesterday’s ISM data, which found that overall manufacturing activity contracted for the first time since February.

Durable goods firms shed 16,000 workers in August, with nondurable goods manufacturers adding 2,000 jobs for the month. Of the 19 major sectors in manufacturing, all but four had reduced employment in August. The largest declines were seen in the transportation equipment (down 6,400, including a 5,600 decline for motor vehicles and parts), primary metals (down 2,500) and nonmetallic mineral products (down 1,400). In contrast, there were employment gains in August for food manufacturing (up 4,500), paper and paper products (up 700), machinery (up 500) and petroleum and coal products (up 400).Average weekly earnings in the manufacturing sector edged somewhat lower, down from $1,061.62 in July to $1,056.82 in August. On a year-over-year basis, average weekly earnings have increased from $1,036.32, up 2.0 percent for the 12-month period. Average weekly hours were also reduced, down from 40.8 hours to 40.6 hours, with average overtime hours unchanged at 3.3 hours.

Meanwhile, the U.S. economy added 151,000 employees in August, which was below the consensus estimate of around 175,000. On the positive side, nonfarm payrolls have averaged a fairly decent pace of 232,333 workers per month over the last three months, or 181,500 each month year-to-date. The unemployment rate was unchanged at 4.9 percent.

The larger narrative with these jobs numbers will be their impact on the Federal Reserve’s decision-making for its next rate hike. There was increased chatter in recent days about an increased probability for the Federal Open Market Committee to raise short-term rates at its next meeting on September 20–21, particularly in light of comments made in Jackson Hole, Wyoming. That might still be the case, but the softness of job gains in August – especially for manufacturing – will likely give participants some pause. I have long felt that there was always a possibility of an increase in the federal funds rate in September, but rates were more likely to go up in December.

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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