The Bureau of Labor Statistics reported that hiring in the manufacturing sector rose in February to its best reading since November 2007, according to the latest Job Openings and Labor Turnover Survey data. The manufacturing sector hired 380,000 workers in February, up from 360,000 in January. That reflected stronger activity for both durable (up from 212,000 to 215,000) and nondurable (up from 149,000 to 165,000) goods businesses. At the same time, total separations—including layoffs, quits and retirements—rose from 343,000 to 352,000, a level not seen since May 2009.
As a result, net hiring (or hires minus separations) rose from 17,000 in January to 28,000 in February, a four-month high. More importantly, however, net hiring has averaged a rather healthy 16,417 over the past 12 months, with a robust average of 25,142 over the past seven months.
Meanwhile, there were 426,000 manufacturing job openings in February, inching up from 424,000 in January. That was the strongest reading since September (445,000), which was a pace not seen since January 2001. In fact, the job postings rate in February was only the sixth time since the indicator started in December 2000 that openings have exceeded 400,000. In the latest figures, nondurable goods firms posted more jobs in February (up from 152,000 to 158,000), which was just enough to offset a slightly slower pace of openings for durable goods manufacturers (down from 273,000 to 269,000).
The pace of job openings has continued to trend higher overall. For comparison purposes, monthly job openings in the sector averaged 389,667 in 2017, up from 341,250 in 2016. Moving forward, renewed strength for job openings would be anticipated in the coming months.
Turning to the larger economy, job openings for nonfarm payroll businesses dropped from 6,228,000 in January to 6,052,000 in February. January’s rate was the second highest in the survey’s history, narrowly edged out by the 6,231,000 openings in September. In the latest data, job openings increased in financial activities, government, health care and social assistance, information, manufacturing and other services sectors. At the same time, net hiring among nonfarm businesses continued to be very solid, at 255,000 and 315,000 in January and February, respectively.
ADP reported that manufacturers added 29,000 workers in March, the fastest monthly growth in employment in the sector since October 2014. This once again illustrates the robustness of the labor market in light of strong increases in manufacturing activity and improvements in the overall outlook. Indeed, manufacturing business leaders have hired at a healthy rate since the end of 2016, averaging nearly 15,700 per month over the past 15 months. In contrast, manufacturing employment was more sluggish in 2016, illustrating the turnaround in the labor market since then. More importantly, continued strength in job growth is expected moving forward. Read More
The Institute for Supply Management (ISM) reported that manufacturing activity continued to expand solidly in March, even as it pulled back from the best reading since May 2004 in February. The ISM Manufacturing Purchasing Managers’ Index declined from 60.8 in February to 59.3 in March, but the data continue to indicate strength in the sector overall. Indeed, the indices for new orders (down from 64.2 to 61.9) and production (down from 62.0 to 61.0) have exceeded 60—a threshold suggesting robust expansions for both measures—since at least June 2017. Exports (down from 62.8 to 58.7) and employment (down from 59.7 to 57.3) growth also remain quite healthy despite some deceleration in the March figures. Exports, for instance, had expanded at the fastest rate since April 2011 in February, with international sales helping to fuel stronger overall demand. Read More
The Census Bureau said that new durable goods orders rebounded, up 3.1 percent in February after falling by 3.5 percent in January. Much of that volatility stemmed from shifts in aircraft and parts sales, which can have large swings from month to month. The increase in February was also buoyed by stronger motor vehicles and parts orders (up 1.6 percent), and with solid gains in aircraft and automobiles, transportation equipment orders jumped 7.1 percent in February. Excluding transportation equipment, new durable goods orders increased 1.2 percent in February.
New durable goods orders have trended strongly higher over the course of the past 12 months, soaring 6.9 percent since February 2017. One of the more important measures in this release is new orders for core capital goods (or nondefense capital goods excluding aircraft), which can often be seen as a proxy for capital spending in the U.S. economy. In February, new orders for core capital goods were up 1.8 percent, but like the headline number above, the year-over-year pace was a very healthy 8.0 percent. Read More
The Kansas City Federal Reserve Bank reported that manufacturing activity continued to expand strongly in March, with the composite index of general business conditions unchanged at 17. Employment remained one of the bright spots in the latest survey (up from 23 to 26), with the index rising to a new all-time high in the survey’s 17-year history. This reflects an ever-tightening labor market, with the average workweek also widening to the best reading in seven years (up from 11 to 15). At the same time, production (down from 21 to 20) and shipments (down from 24 to 12) slowed a little in March, with new orders contracting for the first time since August 2016 (down from 16 to -1). Exports were also softer than desired (down from 2 to 1). Read More
As expected, the Federal Open Market Committee (FOMC) ended its March 20–21 meeting by hiking short-term rates by 25 basis points. This was the first FOMC meeting chaired by Jay Powell, and the Federal Reserve is likely to increase the federal funds rate at least two (and maybe three) more times in 2018. The economic projections of the participants were consistent with two more rate hikes this year, with the midpoint of the federal funds rate rising from 1.625 percent now to 2.1 percent by year’s end. It is worth noting that the Federal Reserve’s current outlook is more aggressive than it was in December for the next two years. Respondents now see the federal funds rate increasing to 2.9 percent and 3.4 percent by year’s end in 2019 and 2020, respectively, up from 2.7 percent and 3.1 percent three months ago. As always, the actual pace of rate hikes will hinge on incoming data.
The acceleration of rate hikes likely stems from expectations of faster growth, especially after passage of tax reform and continued signs of strength in the global economy. In December, the Federal Reserve forecasted 2.5, 2.1 and 2.0 percent growth for 2018, 2019 and 2020, respectively. That outlook has risen for real GDP growth of 2.7, 2.4 and 2.0 percent in the latest survey. The FOMC also anticipates that the unemployment rate will fall to 3.8 percent in 2018 and 3.6 percent in 2019. The December projections called for 3.9 percent in both years. Read More