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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Timmons Talks Advanced Manufacturing in Germany

NAM’s President and CEO Jay Timmons is in Hannover, Germany talking up manufacturing in the U.S. and the sleek, technology driven processes that make our nation the best place to make things in the world. Advanced manufacturing is a term that is often used, but the reality is that manufacturers have been the innovation leaders for decades and  ALL manufacturers know that to compete in a global marketplace they must use advanced processes and technologies.  The intersection of technology and manufacturing is a fascinating place – and the next generation of life changing products are coming out of shop floors in the United States.

Manufacturers spend more on research and development than any other sector of our economy. Companies like Harley Davidson, Texas Instruments and others are using sophisticated software and the Internet of Things to become more efficient and move through production more quickly. Timmons told the audience in Hannover these stories and rededicated manufacturers need for, and commitment to, innovation. He voiced his strong  support for the National Network for Manufacturing Innovation, “hubs” that are bringing together the private and public sectors to spur the development of new technologies, partnerships inspired by similar initiatives in Germany.

As Timmons remarked, “Our increasingly competitive global marketplace demands that manufacturers continue to strive for that technological edge.”

It’s trips and partnerships like these that will get us there.

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Ambush Election Comment Period Closes

Today, the comment period closes for the National Labor Relations Board (NLRB) proposed regulation on representation elections – or as we’ve come to call it, the Ambush Election Reg. The NAM has filed extensive comments opposing the regulation, which you can find here.

The NLRB’s proposed regulation fundamentally alters the way union elections are conducted by shortening the time between when a petition for election is filed and the actual election takes place. This time is critical to the process, because an employer is often unaware an organizing campaign was underway until the petition is filed. Under the proposed regulation, employers would have as few as 10-14 days from the day the petition is filed to the election taking place. In that short amount of time the employer must turn over employee contact information, draft a legal position about the election process and proposed collective bargaining unit or forever lose the right to bring it up, and determine how to communicate with its employees in a manner compliant with the National Labor Relations Act. All this would have to happen after retaining proper legal counsel in the event the employer doesn’t have in-house counsel.

The NAM’s comments take issue with virtually all aspects of the proposed regulation, but the central question the Board needs to answer – and so far has refused to answer – is why the change is needed at all. Why is it necessary to strip employers of their rights under the NLRA? Why is it necessary to require employers to disclose private employee information, including what days and times they work? Why is it necessary to fast-forward elections when the Board has met or exceeded its goals for over a decade? These are important questions the NLRB should answer before finalizing regulations that represent the most significant change to the election procedure in 50 years.

The NLRB will be holding a hearing on the proposed changes later this week – a scant three days from the comment deadline. It appears the Board majority really wants to hear and consider what the public has to say about the changes they’re asking for – three days to contemplate thousands of comments is reasonable, right? After all, that’s nearly a third of the time an employer would have before an election. I guess we shouldn’t be surprised, they are trying to institutionalize the ambush right?

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Important Sunscreen Innovation Act Before the House Energy & Commerce Committee

The House Energy and Commerce Committee will hold a hearing today at 3:00 PM about the Sunscreen Innovation Act. You can watch the hearing live here. On March 13, Congress took an historic step forward as Senators Jack Reed (D-RI) and Johnny Isakson (R-GA), and Congressmen Ed Whitfield (R-KY) and John Dingell (D-MI) introduced the bipartisan, bicameral Sunscreen Innovation Act (S. 2141 and H.R.4250). This legislation is a responsible way to alleviate the current backlog of sunscreen ingredients, and streamline the review process so the public can gain access to the most effective and innovative sunscreen products.

The Public Access to SunScreens Coalition (PASS) Coalition is a multi-stakeholder coalition formed to advocate for a regulatory pathway that guarantees a transparent and timely review of new over-the-counter (OTC) sunscreen ingredients by the Food & Drug Administration (FDA). The PASS Coalition is committed to working with the FDA, Congress, the White House, health providers, consumer organizations and stakeholders to establish a regulatory pathway for timely pre-market review of new, safe and effective sunscreen ingredients.

Although there are a variety of sunscreen products currently available in the market for Americans to protect themselves from the sun’s harmful UV rays, consumers have limited choices when it comes to broad-spectrum sunscreen products. That’s because FDA has not approved a new sunscreen ingredient since the 1990s.  Eight new sunscreen applications are currently pending at FDA, some for over a decade.  Each of the eight sunscreen products currently stuck in the FDA backlog have been used in Europe, Canada or Asia for at least five years and in some cases for over 15 years.

Make sure to urge your member of Congress and Senators to co-sponsor the Sunscreen Innovation Act.

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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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NAM’s President and CEO Jay Timmons Voices Manufacturers’ Priorities in Europe

This week, the NAM’s President and CEO Jay Timmons and I are in Brussels, Belgium and Berlin, Germany to advance manufacturing priorities in the Transatlantic Trade and Investment Partnership (T-TIP) negotiations and to strengthen U.S.-European trade and investment ties.

Our first meeting on April 2 was with Member of the European Parliament Robert Sturdy, vice chair of the European Union (EU) Parliament’s International Trade Committee. We discussed ways to strengthen our collaboration in advocating for an ambitious, high-standard, comprehensive T-TIP agreement. Jay and I also discussed critical trade issues with U.S. Ambassador to the EU, Anthony Gardner, and EU Trade Commissioner Karel DeGucht.  We also discussed manufacturers’ T-TIP priorities and opportunities to strengthen our partnership with Business Europe and other leading business organizations and manufacturers. In Berlin, we’ll be meeting with a range of government and business leaders as well as U.S. Ambassador to Germany John Emerson.

Throughout this trip we have been advocating for a T‑TIP agreement that will significantly expand trade and investment between the United States and the EU and address global issues of common concern.  A comprehensive T-TIP would strengthen both our economies, which account for nearly half of global output of goods and services and 30 percent of global trade.

Jay has been emphasizing the importance of an agreement that further opens the transatlantic market, protects innovation and eliminates unnecessary barriers. He has also been identifying key priorities for manufacturers from regulatory coherence and transparency, to tariff elimination, intellectual property and investment protections and data flows, as well as highlighting opportunities for the EU and United States to work together to address common trade and investment challenges in markets around the world.

Next week, we head to Hannover, Germany, where Jay will speak at Hannover Messe 2014, the world’s largest industrial trade fair. In Hannover we will also meet with key policymakers and industry leaders to discuss the challenges and opportunities facing manufacturers on both sides of the Atlantic, including advanced manufacturing, export models and skills training.

Jay will continue strongly voicing the high priority that manufacturers place on expanding international trade and investment ties with the EU and U.S. government leaders, leading European business associations and NAM member companies that are key to shaping the T-TIP negotiations.

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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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Help Wanted: Millennials Manufacture the Future

Millennials are expected to encompass one-third of the eligible electorate in the United States by 2016. They are the future of our country—and the future of the manufacturing workforce.

The need to recruit millennials into the manufacturing army is greater than ever before. Our mantle of economic leadership relies on their drive and determination, and that impact will only increase in the coming years. However, after asking some millennials what manufacturing means to them, and it’s clear they had a lot to learn about the industry.

This is the time for manufacturers to show the next generation of innovators the opportunities and benefits within the manufacturing sector.  Manufacturing is making a comeback, and we need to engage millennials now rather than later.

Watch to learn more on millennial thoughts on manufacturing here:

Help Wanted: Millennials Manufacture the Future

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