All Posts By

Chad Moutray

Jobs Numbers in September Pulled Lower Largely on Damaging Hurricane Impacts

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The Bureau of Labor Statistics said that manufacturers lost 1,000 workers in September, with the overall jobs numbers negatively impacts by damaging hurricanes in the month. In addition, the July and August data were also revised lower, subtracting 32,000 from prior manufacturing job growth estimates. Despite the disappointing figures in September, the reduced hiring is likely a temporary phenomenon, with employment expectations continuing to be very strong overall. Indeed, manufacturers have accelerated the pace of hiring since December, adding 122,000 workers on net over that 10-month time frame. That is a definite improvement following the loss of 16,000 workers seen in 2016 as a whole and a sign that firms have stepped up their hiring as a result of a stronger economic outlook and increased demand and production activity. Indeed, since the end of the Great Recession, manufacturing employment has risen by nearly one million workers, with 12.45 million employees in the sector in this report.

On this Manufacturing Day, it is important to remember that the ability to attract and retain a quality workforce is in a virtual tie for first place as one of the top challenges for manufacturers, according to the latest NAM Manufacturers’ Outlook Survey. As the labor market has tightened, workforce development challenges have become more pressing for business leaders in the sector. In addition, we have also seen some upward pressure on wages. In this release, average weekly earnings for manufacturing workers rose from $1,080.99 in August to $1,085.88 in September, with that figure up 2.0 percent over the past 12 months. Read More

U.S. Trade Deficit Fell to Its Lowest Level in 11 Months in August

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The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit fell from $43.56 billion in July to $42.40 billion in August, its lowest level in 11 months. The improvement in the deficit in August came from somewhat higher goods exports (up from $128.64 billion to $129.21 billion) combined with a slight decline in goods imports (down from $193.93 billion to $193.63 billion). In addition, the service sector trade surplus (up from $21.74 billion to $22.03 billion) was at its highest point since June 2015. Read More

ADP: Manufacturing Employment Remained a Bright Spot in September, with 18,000 New Workers

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ADP said that manufacturing employment remained a bright spot in September, with the sector adding 18,000 net new workers for the month. As such, it extended the rather-robust increase seen in August, and year-to-date, manufacturers have hired 158,000 additional employees on net. That translates into an average of just over 17,500 per month, and it represents a significant turnaround from 2016’s more-sluggish pace of hiring. This is another sign that the labor market has tightened in the sector as the overall outlook has improved, and we hope that this bodes well for continued job growth moving forward.

With that said, total nonfarm private employment rose by just 135,000 in September, off from 228,000 in August. These date were likely negatively impacted by devastating hurricanes in the month. Even with some softness in the latest figures, nonfarm private payrolls have increased by nearly 222,000 per month on average year-to-date, which was notably higher than the 179,327 workers added each month in the second half of 2016. In September, the largest employment growth included professional and business services (up 51,000), construction (up 29,000), education and health services (up 29,000), and leisure and hospitality (up 20,000).

Personal Spending Growth Slowed in August

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The Bureau of Economic Analysis reported that personal spending increased 0.1 percent in August, slowing from a gain of 0.3 percent in July. Nondurable goods spending rose 0.3 percent for the month, but that was offset by a 1.1 percent decline in durable goods, especially for motor vehicles. Despite the mixed results in the latest data, Americans have continued to spend at relatively healthy rates overall. Indeed, personal spending has increased 3.9 percent over the past 12 months. Breaking that figure down, spending on durable and nondurable goods has risen 3.5 percent and 3.1 percent year-over-year, respectively. For its part, the saving rate was unchanged at 3.6 percent in August, and it continued to indicate accelerated spending, down from a saving rate of 4.9 percent one year ago. Read More

Kansas City Fed: Manufacturing Activity Expanded at a Six-Month High in September

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The Kansas City Federal Reserve Bank said that manufacturing activity expanded at a six-month high in the latest survey data. The composite index of general business conditions edged up from 16 in August to 17 in September, its highest point since February. With that said, the underlying data were mixed. On the positive side, there was continued strength in production (unchanged at 22), shipments (up from 23 to 25) and employment (up from 14 to 18). Exports (up from 4 to 6) also grew modestly. At the same time, new orders (down from 25 to 10) and the average workweek (down from 9 to 7) slowed somewhat in September, even as the pace of growth for each remained decent overall.

Meanwhile, manufacturers continued to be optimistic about the next six months. The forward-looking composite index increased from 23 to 26. Roughly half of those completing the survey expect sales, production and shipments to be higher moving forward, with 37 percent and 32 percent seeing more hiring and capital spending, respectively. Beyond those issues, 49 percent of business leaders also predict a pickup in raw material costs in the months ahead.

Real GDP Growth in the Second Quarter Upped Slightly to 3.1 Percent

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The second revision to real GDP growth for the second quarter changed slightly from its last estimate. The Bureau of Economic Analysis upped its estimate of growth in the U.S. economy in the second quarter from 3.0 percent to 3.1 percent. While there were small tweaks in a few areas, the higher figure mainly corresponded with slightly better spending on inventories.

I continue to anticipate 2.2 percent growth for 2017 as a whole. However, Hurricanes Harvey, Irma and Maria will impact forecasts for the third and fourth quarters. I expect 2.3 percent growth in the third quarter, with weather reducing overall output by at least 0.5 percent in the current quarter. However, fourth-quarter growth will be better than predicted originally as the tremendous damage is repaired in Florida, Texas and the Caribbean. I estimate 3.0 percent growth in the fourth quarter—at least for now.

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Durable Goods Orders Bounced Back in August, with Strong Year-Over-Year Growth

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The Census Bureau said that growth in new durable goods orders increased by 1.7 percent in August, bouncing back somewhat after dropping 6.8 percent in July. This data has been highly volatile over the past three months, largely on large swings in nondefense aircraft and parts orders, which are often bulked together surrounding major trade shows. Excluding transportation equipment, new durable goods orders were up by 0.2 percent in August, easing from the 0.8 percent gain seen in July. New durable goods orders have generally trended in the right direction over the course of the past 12 months. New durable goods have risen 5.1 percent since August 2016, or excluding transportation equipment, the year-over-year gain was 6.1 percent.   Read More

Richmond Fed: Manufacturing Activity Expanded More Strongly in September

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The Richmond Federal Reserve Bank said that manufacturing activity in its district expanded more strongly in September, with activity accelerating at its fastest pace since February. The composite index of general business activity rose from 14 in August to 19 in September. Overall, this report continues to reflect a manufacturing sector that has made significant progress over the past year, and in September, new orders (up from 17 to 20), shipments (up from 8 to 22), capacity utilization (up from 10 to 16) and the average workweek (up from 10 to 16) indicated relatively solid growth. At the same time, employment (down from 17 to 15) in the mid-Atlantic region slowed slightly for the month, even as hiring activity remained quite robust. Read More

Dallas Fed: Manufacturing Activity Strengthened in September

By | Economy, Shopfloor Economics | No Comments

The Dallas Federal Reserve Bank reported that manufacturing activity strengthened once again. The composite index of general business activity rose from 17.0 in August to 21.3 in September, its fastest pace since February. Overall, the data reflect continued progress in the Texas economy, buoyed by a recovery in the energy sector most importantly. One year ago, the headline index was -2.1, and year-to-date through the first three quarters of 2017, it has averaged 18.6, illustrating significant improvements over the past 12 months. In September, the underlying data were mixed but still encouraging overall. This included new orders (up from 14.3 to 18.6), production (down from 20.3 to 19.5), shipments (up from 18.1 to 27.4), employment (up from 9.9 to 16.3), hours worked (up from 14.5 to 18.4) and capital expenditures (down from 14.5 to 13.6).

Moving forward, manufacturing leaders remained very positive about the next six months, with the forward-looking measure increasing from 29.2 to 34.5. More than 55 percent of those completing the survey felt that production would rise in the coming months, and 45.1 percent and 34.6 percent anticipate more hiring and capital spending, respectively. At the same time, pricing pressures for raw materials (up from 26.0 to 35.9) were also anticipated to accelerate somewhat.