Manufacturing employment edged up by 1,000 in June, stabilizing a little after declining by 2,000 in May. On the positive side, it was the sixth increase in net hiring in the past seven months, with the sector adding 71,000 workers over that time frame. That stands in sharp contrast to the loss of 16,000 workers for all of 2016, and overall, the data suggest an increased willingness among manufacturers to add new workers since November. Yet, job growth in May and June in the manufacturing sector has been underwhelming, especially when compared to sentiment surveys—such as the one from Institute for Supply Management released earlier in the week—that have indicated relatively healthy expansions in employment. With that in mind, I would continue to expect better job gains moving forward, particularly given the improved demand and production outlook and stronger economic growth globally.
In June, the underlying manufacturing data were mixed. Employment among durable goods firms rose by 9,000 for the month, but this was nearly offset by a decline of 8,000 jobs for nondurable goods businesses. It was the second straight month with declines in nondurable goods employment growth, led by weaknesses in food manufacturing (down 3,300), paper and paper products (down 2,800) and apparel (down 1,000) in this release. In addition, motor vehicles and parts (down 1,300) has also continued to struggle on softer-than-desired sales year to date. Perhaps notably, employment in the food sector rose in non-seasonally adjusted data, so perhaps its decline could reflect those seasonal adjustments. Indeed, over the past 12 months, food manufacturing notched the fastest job growth in the sector, adding 28,300 since June 2016.
Among the bright spots, manufacturing sectors with the largest job gains in June included machinery (up 3,500), electrical equipment and appliances (up 2,800), primary metals (up 2,300), furniture and related products (up 1,800) and computer and electronic products (up 1,000). In addition to food manufacturing, the largest year-over-year gains from June 2016 to 2017 included the following: miscellaneous nondurable goods (up 16,400), machinery (up 15,000), fabricated metal products (up 14,700) and primary metals (up 7,700).
Average weekly earnings for manufacturing employees were also positive, up from $1,078.14 in May to $1,081.61 in June. That represented a 2.3 percent year-over-year increase in average weekly earnings, up from $1,056.98 in June 2016. Average weekly hours for manufacturing workers edged up from 40.7 to 40.8, but average overtime hours were unchanged at 3.3.
Meanwhile, job growth in the U.S. economy rebounded in June, with nonfarm payrolls up by 222,000. In addition, the May data were revised higher, up from an earlier estimate of 138,000 to 152,000. In the first half of 2017, nonfarm payrolls have increased by nearly 180,000 on average each month—a decent pace, but off the 193,167 average in the second half of 2016. In addition, the unemployment rate rose from 4.3 percent in May—a 10-year low—to 4.4 percent, with the participation rate inching up from 62.7 percent to 62.8 percent.
Overall, the labor market continues to show signs of strength, which should be enough for the Federal Reserve to maintain its policies toward normalization, both in interest rates and in the size of its balance sheet. Yet, the sluggish manufacturing employment growth in manufacturing in May and June should also serve as a reminder that—even with notable progress over the past year—growth in the U.S. economy still has a lot of room for improvement.