“Manufacturers have benefited from pro-growth policies, including tax and regulatory reform, as well as pent-up demand globally…”
The Bureau of Economic Analysis said that the U.S. economy grew by an annualized 4.1 percent in the second quarter of 2018, the best reading since the third quarter of 2014 and up from 2.2 percent growth in the first quarter. Robust growth in consumer and business spending and exports boosted the data. Since the end of the Great Recession, the U.S. economy has expanded 2.2 percent on average. Moving forward, real GDP should grow by roughly 3 percent in 2018, which would be the strongest growth rate since 2005.
Indeed, over the past six months, tax reform and regulatory relief have sparked the robust manufacturing job growth manufacturers predicted. The business optimism of our member companies stands at a record high, and 86 percent of them plan to invest in new plants and equipment, 77 percent plan to increase hiring, and 72 percent plan to increase wages and benefits for workers. That is driving the robust growth we are now seeing reflected in today’s report, placing an urgent need to grow and upskill the manufacturing workforce. Read More
“Manufacturing gross output increased from $6.228 trillion in the fourth quarter to $6.347 trillion in the first quarter, a new all-time high.”
The Federal Reserve reported that manufacturing production rebounded strongly in June after pulling back in May due to a fire at an auto supplier. Output in the sector increased 0.8 percent in June after falling 1.0 percent in May. So far in 2018, manufacturing production has seesawed from month to month, but up 1.0 percent over that time frame. Over the past 12 months, production in the sector has risen a respectable 1.9 percent, up from 1.7 percent in the previous release. My forecast for 2018 is for manufacturing production to increase 2.2 percent, which would indicate an uptick in output in the second half of this year. Similarly, manufacturing capacity utilization rose from 75.0 percent in May to 75.5 percent in June, which remains not far from April’s rate (75.8 percent), which was the best reading since August 2015.
In June, durable and nondurable goods manufacturing increased 1.6 percent and 0.1 percent, respectively. The largest increase came from motor vehicles and parts, which soared by 7.8 percent in June after dropping by 8.6 percent in May. Beyond automotive, other manufacturing sectors with increased production for the month included computer and electronic products (up 1.5 percent), wood products (up 1.2 percent), aerospace and miscellaneous transportation equipment (up 1.0 percent), fabricated metal products (up 0.9 percent), textile and product mills (up 0.9 percent), machinery (up 0.7 percent) and petroleum and coal products (up 0.6 percent), among others.
In contrast, output declined for apparel and leather (down 3.1 percent), nonmetallic mineral products (down 1.1 percent), furniture and related products (down 0.5 percent), miscellaneous durable goods (down 0.5 percent), plastics and rubber products (down 0.3 percent) and food, beverage and tobacco products (down 0.2 percent).
Meanwhile, total industrial production also recovered in June, up 0.6 percent after declining 0.5 percent in May. Mining output increased 1.2 percent in June, but utilities production fell 1.5 percent. Over the past 12 months, industrial production has risen 3.8 percent, up from 3.2 percent in the prior release and the fastest year-over-year pace since July 2014. Mining and utilities have grown 12.9 percent and 5.0 percent year-over-year, respectively. In addition, capacity utilization ticked up from 77.7 percent to 78.0 percent. That was just shy of the 78.2 percent reading in April, which was the best rate since February 2015.
The Bureau of Labor Statistics reported that job openings in the manufacturing sector pulled back in May from April’s pace, which was the best reading since January 2001. Manufacturers posted 441,000 job openings in May, down slightly from 452,000 in April. In the latest figures, there were fewer job openings in both the durable (down from 281,000 to 272,000) and nondurable (down from 171,000 to 169,000) goods sectors. More importantly, the number of manufacturing job postings has remained highly elevated even with the easing in May, exceeding 400,000 for the fifth consecutive month (and in nine of the past 12 months). Monthly job openings in the sector have averaged 430,400 year-to-date in 2018, up from averages of 341,250 and 389,667 for all of 2016 and 2017, respectively. Moving forward, continued strength in job openings is anticipated in the coming months.
Net hiring among manufacturers remains encouraging, even with some slower activity over the past few months. There were 346,000 hires in the sector in May, down from 358,000 in April. Hiring eased a bit for both durable (down from 213,000 to 202,000) and nondurable (down from 145,000 to 143,000) goods manufacturers, but the numbers have still trended in the right direction. At the same time, total separations—including layoffs, quits and retirements—declined from 343,000 to 333,000. As a result, net hiring (or hires minus separations) edged down from 15,000 in April to 13,000 in May. It was the 13th consecutive monthly increase in manufacturing net hiring, averaging 18,538 over that time frame.
Meanwhile, job openings for nonfarm payroll businesses declined from April’s all-time high, dropping from 6,840,000 in April to 6,638,000 in May. It remained the second-highest reading, however, and job openings in the U.S. economy continued to exceed the number of people looking for work (6,065,000 in May and 6,564,000 in June). This is a sign of a very tight labor market and helps to explain why workforce recruitment and retention are such large challenges right now.