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Manufacturing Job Postings and Hiring Data Were Weaker in February

The Bureau of Labor Statistics said that manufacturing job openings declined for the third month in a row in February. After peaking at 298,000 in November, the number of job postings in the sector has continued to move lower, with 250,000 openings recorded in February. Weather has negatively impacted overall economic activity over much of this period, and it is possible that winter conditions hampered employment growth, as well. Nonetheless, this is a trend that will hopefully reverse with coming data, and it reverses what had been upward movement from May to November of last year (up from 203,000 to 298,000).

Net hiring has followed a similar pattern and was also lower in February for the third straight month. Manufacturers added 234,000 workers in February, down from 244,000 in January. At the same time, the number of separations – including layoffs, quits, and retirements – fell from 242,000 to 236,000 for the month. As such, net hiring (or hires minus separations) shifted from a net gain of 2,000 in January to a net loss of 2,000 in February. This was well below the net hiring rate of 41,000 observed in November, illustrating the current softness in the labor market.

In contrast, employment numbers in the larger economy improved in February. Total job openings increased from 3,874,000 in January to 4,173,000 in February. This was the fastest pace for job postings since January 2008. Likewise, net hiring in the month in the nonfarm business sector rose from a rather weak 97,000 in January to 203,000 in February. While manufacturers hired fewer workers in the month, there were notable increases for retail trade, leisure and hospitality, and government.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Small Business Confidence in March Recovered Some of its February Decline

The National Federation of Independent Business (NFIB) said that small business confidence in March recovered some of its February decline. The Small Business Optimism Index increased from 91.4 in February to 93.4 in March, but it had fallen from 94.1 in January. Sentiment among small firm owners has generally moved higher over the course of the past year, with quite a bit of volatility. For instance, just over the past six months, the Index has ranged from 91.6 to 94.1, with the government shutdown, weather and persistent uncertainties dampening optimism at times.

Despite the higher headline figure, the underlying data were largely mixed. On the positive side, the percentage of firms saying that the next three months were a “good time to expand” increased from 6 percent to 8 percent, returning it to the level recorded in January but still below December (10 percent). Of those saying that it was not the right time for expansion, the economy was the primary reason.

Still, “poor sales” – a proxy for the current economy – was not listed as the “single most important problem.” Instead, the top concern was a tie between taxes and “red tape,” with each cited by 21 percent of respondents. This was followed by poor sales (14 percent), the cost of insurance (10 percent), and the quality of labor (9 percent). Indeed, the net percentage of respondents saying that they expect higher sales in the next three months rose from 3 percent to 12 percent, reflecting a pickup in sentiment.

Nonetheless, earnings figures remain weak overall, and the employment and capital spending data were less positive. Small business owners said that the hiring slightly declined in March, with the net percentage planning to bring on new workers in the next three months down from 12 percent in January to 7 percent in February to 5 percent in March. Hopefully, the uptick in optimism on sales will reverse this trend in the coming months. Meanwhile, capital spending has edged marginally lower, with capital expenditure plans essentially unchanged so far this year.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Revolving Credit Declined for the Second Straight Month in February

The Federal Reserve Board said that U.S. consumer credit outstanding rose 6.4 percent in February. Total consumer credit was $3.130 trillion, with $854.2 billion in revolving credit and $2.275 trillion in nonrevolving credit.

Over the course of the past 12 months, consumer credit has risen 5.6 percent, but that tells only part of the story. Nonrevolving credit, which includes auto and student loans, increased 7.7 percent over that time frame. However, revolving credit, which includes credit cards and other lines of credit, was up just 0.5 percent. In general, it suggests that Americans have been hesitant to use their credit cards when making purchases since the recession. Along those lines, revolving loans have declined in the first two months of 2014, down 0.3 percent from $856.8 billion in December.

Overall, growth in consumer credit has stemmed largely from increases in nonrevolving debt, especially for auto and student loans. For instance, student and motor vehicle loans increased 8.3 percent and 8.5 percent, respectively, using non-seasonally adjusted data in 2013.

Chad Moutray  is the chief economist, National Association of Manufacturers.

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Monday Economic Report – April 7, 2014

Here is the summary for this week’s Monday Economic Report:

Manufacturers appear to be recovering from softness in the first two months of the year, mainly due to the number of severe winter storms. The Institute for Supply Management (ISM) reported that its Purchasing Managers’ Index (PMI) edged higher, up from 53.2 in February to 53.7 in March. Production began expanding again, with the pace of new orders and exports picking up slightly. Despite some degree of progress in March, sentiment remains lower than just a few months ago. PMI values averaged 56.3 in the second half of last year, with sales and output measures exceeding 60—indicating strong growth—each month from August to December.

Likewise, new factory orders increased 1.6 percent in February, partially offsetting the sharp declines in December and January. Beyond autos and aircraft, however, durable goods sales were just barely higher, suggesting more needs to be done for broader growth in the sector. Meanwhile, the Dallas Federal Reserve Bank’s manufacturing survey reflected a rebound in activity consistent with other Federal Reserve districts. Texas manufacturers remain positive about sales, output, hiring and capital spending moving forward. For example, more than half of respondents anticipate increased demand over the next six months. Still, some cited regulatory, pricing pressure, workforce and foreign competition concerns.

On the hiring front, Friday’s jobs numbers provided mixed news for manufacturers. The sector lost 1,000 workers in March, mainly due to declines in nondurable goods industries. This was particularly disappointing given consensus expectations that were closer to the ADP’s estimates, which had a gain of 5,000 workers for the month. Yet, revisions to January and February data provided some comfort, adding 15,000 more employees than original estimates. As a result, the longer-term trend for manufacturing did not change much despite March’s lower figure. Manufacturers have added more than 600,000 workers since the end of the recession, and since August, the sector has generated an average of 12,125 net new jobs per month. Another positive in this report was that the average number of hours worked and average compensation both rose, findings that mirror the rebound in overall activity.

Meanwhile, the latest international trade figures were also disappointing. The U.S. trade deficit widened from $39.28 billion in January to $42.30 billion in February. This was the highest deficit since September and the result of a decrease in goods exports and an increase in service-sector imports. Petroleum exports were also marginally lower. The numbers were particularly discouraging given that manufactured goods exports in January and February of this year were 0.6 percent lower than the first two months of last year. Still, outside of softness in our goods exports to Canada, the other top-five export markets for U.S.-manufactured goods registered increases year-to-date in 2014 relative to 2013. In addition, there remains cautious optimism that export sales will improve in the coming months.

This week, the focus will be on the release of the minutes from the March Federal Open Market Committee (FOMC) meeting. The minutes will provide additional insights on the internal debates that led the Federal Reserve Board to continue tapering but to also change its forward guidance for short-term interest rates. On Friday, the release of producer price data should continue to show that overall inflation remains minimal. Other highlights include the latest data on consumer confidence, job openings, small business optimism and wholesale trade.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Manufacturing Employment Dropped by 1,000 in March; Revisions Add 15,000 to January and February

Manufacturing employment dropped by 1,000 in March, its first monthly decline in eight months. While this was disappointing, the good news was that manufacturers added 15,000 workers more than previously estimated in January and February, according to the latest Bureau of Labor Statistics revisions. Since August, the manufacturing sector has averaged 12,125 additional workers each month, a sign that the rebound that we have seen since the beginning of the third quarter has resulted in a pickup in hiring. Since the end of 2009, manufacturers have added 602,000 employees, or 7.3 percent of the 8.2 million workers created during that time.

Still, the fact that manufacturers shed 1,000 workers in February was surprising, particularly given consensus estimates that were closer to the ADP estimates released on Wednesday. In March, durable goods firms added 8,000 employees on net, with nondurable goods entities losing 9,000 workers. Miscellaneous durable goods (up 3,000), machinery (up 2,500), nonmetallic mineral products (up 2,100), and transportation equipment (up 1,800) were examples of sectors with increased hiring for the month. Perhaps notably, motor vehicle employment was unchanged.

Yet, these gains were more than offset by declines in hiring for food manufacturing (down 4,600), plastics and rubber products (down 3,700), fabricated metal products (down 2,600), and apparel (down 700), among others.

On the positive side, the average number of hours worked and compensation both increased – a sign that the sector has begun to rebound in terms of overall activity. Average weekly earnings in the manufacturing sector rose from $1,008.17 in February to $1,016.40 in March. At the same time, the typical manufacturing employee worked 41.1 hours, with 3.5 hours of overtime on average. This was up from 40.8 regular hours and 3.4 overtime hours the month before.

In the larger economy, nonfarm payroll growth was in-line with consensus estimates, up 192,000 in March. This was down from a revised 197,000 in February. Moreover, it was close to the average of 190,385 workers added each month in 2013. In general, this suggests that the U.S. economy has rebounded from the falloff in hiring activity seen starting in December, when nonfarm payroll growth was just 84,000. Winter weather has been a factor, but it appears that we have started to move beyond it.

The unemployment rate was unchanged at 6.7 percent. The labor force participation rate edged slightly higher, up from 63.0 percent in both January and February to 63.2 percent in March. Meanwhile, the number of workers employed part-time for economic reasons also rose somewhat, up from 7.2 million to 7.4 million.

In conclusion, manufacturing employment declined unexpectedly in March. Given the recent rebound in new orders and production seen in other economic indicators, the consensus had been for modest gains last month. Still, revisions to January and February were comforting, and the longer-term trend continues to support the lift in manufacturing activity and hiring seen since August. Over the past eight months, the sector has added 12,125 workers on average each month, a nice turnaround from the weaknesses seen last spring.

At the same time, these numbers indicate that there is more work to do for stronger economic growth in the coming months. Manufacturers remain mostly upbeat about demand, output, and employment gains for 2014, but uncertainties continue to persist. As a result, manufacturers want policymakers to adopt pro-growth measures that will help to ensure that their optimistic assessments can come to fruition.

Chad Moutray is the chief economist, National Association of Manufacturers.

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U.S. Trade Deficit Widened Further in February

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit rose from $39.28 billion in January to $42.30 billion in February. This was the highest deficit since September, and it was the result of a decrease in goods exports (down from $133.75 billion to $131.72 billion) and an increase in service sector imports (up from $38.49 billion to $39.29 billion).

The increased goods trade deficit (up from $59.50 billion to $61.73 billion) was almost evenly distributed by petroleum and non-petroleum factors. Petroleum exports declined somewhat (down from $12.34 billion to $11.09 billion), but petroleum imports also decreased slightly (down from $31.68 billion to $31.03 billion).

Looking specifically at goods exports by sector, the February numbers were mostly lower. The exceptions were the consumer goods (up $1.19 billion) and automotive vehicles and parts (up $96 million) sectors. These gains were more than counterbalanced by lower export levels for industrial supplies and materials (down $2.67 billion), non-automotive capital goods (down $894 million), and foods, feeds and beverages (down $18 million).

Growth in manufactured goods exports continue to disappoint. Exports in the first two months of 2014 were $182.75 billion using non-seasonally adjusted data. This was down 0.6 percent from the $183.78 billion observed for January and February 2013. As such, it indicates that manufactured goods exports remain soft despite some economic progress abroad in recent months, continuing a trend that we saw last year.

In 2013, manufactured goods exports rose 2.4 percent, decelerating from the 5.7 percent annual growth rate observed in 2012. It is also well below the 15 percent rate that would be needed to double exports by 2015, as outlined in the President’s National Export Initiative. Hopefully, cautious optimism for better worldwide growth rates will produce improved manufactured goods exports moving forward.

On the positive side, goods exports to our five largest export trading partners were mostly higher year-to-date. For instance, Mexico (up from $35.61 billion to $37.50 billion), China (up from $18.69 billion to $20.24 billion), Japan (up from $10.18 billion to $10.88 billion), and Germany (up from $7.65 billion to $8.22 billion) all notched increases in exports in the first two months of this year relative to last year. The lone holdout was our largest trading partner, Canada (down from $46.35 billion to $46.15 billion), which had marginal declines.

Chad Moutray is the chief economist, National Association of Manufacturers.

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New Factory Orders Rebounded in February from Softness in December and January

The Census Bureau said that new factory orders increased 1.6 percent in February, recovering somewhat from the sharp declines in both December and January. This was consistent with the advance data provided on durable goods the week before, with the sector rebounding from winter weather slowness. New manufactured goods orders have risen from $482.7 billion in August to $488.8 billion in February, an increase of 1.3 percent.

New durable goods orders rose 2.2 percent for the month, lifted by strong sales growth for motor vehicles and aircraft. Excluding transportation, manufacturing orders were up 0.7 percent, with durable goods edging only marginally higher in February, up just 0.1 percent. At the same time, new nondurable manufactured goods increased by 1.0 percent.

Looking specifically at new durable goods orders in February, the data were largely mixed. Areas of strength included transportation equipment (up 7.0 percent), primary metals (up 1.7 percent), fabricated metal products (up 0.4 percent), computers and electronic products (up 0.2 percent), and furniture and related products (up 0.2 percent). But, these were offset by reduced new orders for electrical equipment and appliances (down 1.3 percent) and machinery (down 1.2 percent).

Meanwhile, manufactured goods shipments were up 0.9 percent, also rebounding after lower data in both December and January. Durable and nondurable goods shipments rose 0.8 percent and 1.0 percent, respectively. On a year-over-year basis, shipments have grown from $489.5 billion in February 2013 to $493.5 billion, up 0.8 percent.

Sectors with the largest increases in monthly shipments included textile products (up 4.9 percent), petroleum and coal products (up 2.0 percent), machinery (up 1.7 percent), nonmetallic mineral products (up 1.7 percent), transportation equipment (up 1.5 percent), apparel (up 1.4 percent), and plastics and rubber products (up 1.0 percent). In contrast, there were declining shipments in the following areas: leather and allied products (down 1.6 percent), computers and electronic products (down 1.4 percent), beverage and tobacco products (down 0.7 percent), electrical equipment and appliances (down 0.5 percent), printing (down 0.3 percent), and wood products (down 0.3 percent).

Chad Moutray is the chief economist, National Association of Manufacturers.

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ADP: Manufacturers Added 5,000 Employees in March for the Second Straight Month

Automatic Data Processing (ADP) said that manufacturing employment increased by 5,000 workers for the second straight month in March. As such, hiring in the sector has rebounded somewhat from the decline in employment observed in January due to winter weather conditions. Still, it is also clear that hiring has not fully recovered, with employment growth below the average of 13,000 per month seen from August to December of last year.

Looking at the overall figures, ADP said that there were 191,000 net new private, nonfarm payroll workers generated in March. This brought monthly job growth back to where it was in December, recovering from the much-softer data seen in both January and February (up 121,000 and 178,000, respectively). To put this in perspective, the average monthly job growth in 2013 was 187,000, with an average of 204,000 in the second half of the year.

In March, the largest job gains were seen in the professional and business services (up 53,000); trade, transportation and utilities (up 36,000); construction (up 20,000); and financial activities (up 5,000) sectors. Small and medium-sized establishments (e.g., those with fewer than 500 employees) contributed almost 65 percent of the net new jobs, adding 124,000 workers for the month.

The Bureau of Labor Statistics will release official jobs numbers on Friday, and the expectation is for employment growth similar to the ADP report. Nonfarm payrolls are anticipated to grow around 200,000, with manufacturing employment between 5,000 and 10,000.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Manufacturing Construction Activity Has Risen 17.3 Percent over the Past 12 Months

The Census Bureau reported that manufacturing construction declined slightly, down from $55.80 billion at the annual rate in January to $55.50 billion in February. Still, the larger story was that manufacturers have put significantly more construction dollars in place today than 12 months ago, up from $48.12 billion in February 2013. As such, manufacturing construction has risen 17.3 percent year-over-year. Even more impressive is the fact that the sector has rebounded strongly after falling to $43.94 billion in June.

Overall construction activity increased only marginally in February, up 0.1 percent. Residential spending was lower (off 0.7 percent for the month), pulling down the headline figure. Meanwhile, private, nonresidential construction had decent increases in February, up 1.2 percent. The strongest gains were seen in the communications (up 6.4 percent), power (up 4.4 percent), lodging (up 3.5 percent), and transportation (up 1.6 percent) sectors. In addition to the slight decline in manufacturing for the month, other sectors with decreased spending in February included religious (down 6.9 percent), amusement and recreation (down 1.5 percent), educational (down 0.7 percent), commercial (down 0.6 percent), and office (down 0.2 percent) institutions.

On a year-over-year basis, private construction has grown a whopping 13.0 percent, with residential and nonresidential activity up 13.5 percent and 12.5 percent, respectively. Beyond the manufacturing data discussed above, other bright spots over the past 12 months were in the communications (up 51.5 percent), lodging (up 40.0 percent), amusement and recreation (up 20.3 percent), office (up 19.0 percent), and transportation (up 10.0 percent) sectors.

At the same time, public, nonresidential construction spending was unchanged for the month, with 12.2 percent declines over the past year. The February data were mostly mixed. Public spending dollars were higher for commercial (up 8.4 percent), conservation and development (up 6.3 percent), power (up 6.1 percent), amusement and recreation (up 4.4 percent), and office (up 2.2 percent) projects. But, these were essentially offset by declines in water supply (down 8.9 percent), public safety (down 6.8 percent), transportation (down 2.3 percent), sewage and water disposal (down 1.8 percent), and educational (down 1.2 percent) projects.

Chad Moutray is the chief economist, National Association of Manufacturers.

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ISM: Manufacturers Have Begun to Move Beyond Winter Storms

The Institute for Supply Management’s manufacturing purchasing managers’ index edged slightly higher, up from 53.2 in February to 53.7 in March. This reflects modest gains in overall manufacturing activity since recent weather-related weaknesses. The good news was that production (up from 48.2 to 55.9) began expanding again. The pace of new orders (up from 54.5 to 55.1) also picked up a little, including export sales (up from 53.5 to 55.5).

The sample comments continue to note the negative impact of weather. A food and beverage leader put it bluntly when they said, “We need spring.” Others have begun to move beyond the winter struggles. For instance, a petroleum and coal products manufacturer said, “Business beginning to heat up, along with the weather.” Others noted their increasing optimism. This included the transportation equipment respondent who answered, “Business is good, and we are optimistic that orders will continue to come in at a decent pace.”

Hiring growth remains soft (down from 52.3 to 51.1), and sentiment continued to be lower than just a few months ago. The average PMI value from July to December of last year, for instance, was 56.3, with new orders and production averaging 61.8 and 62.6 during that time frame, respectively. Another positive was that the manufacturing sector has now expanded for 10 straight months.

Overall, manufacturers are cautiously optimistic about future sales and output, and there is hope that the momentum seen in the second half of 2013 return to produce strong returns for 2014. While growth in manufacturing activity remains below where it was at the end of last year, it appears that the drag from winter storms has begun to fade.

Chad Moutray is the chief economist, National Association of Manufacturers.

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