The Bureau of Labor Statistics said that manufacturers added 28,000 workers on net in July, its fastest pace in eight months. There were also revisions to May and June data, adding another 11,000 to the bottom line. Overall, these data confirm two things that we have noticed in prior reports. First, hiring and manufacturing activity have largely rebounded from weaknesses earlier in the year. Indeed, average employment growth was 9,600 from December to April, but that was edged up to 22,000 over the past three months (May to July).
Second, total hiring has fared pretty well since the third quarter of last year – despite the winter disruptions – with the sector averaging almost 15,000 per month since August. This suggests that the pickup in demand and output seen in other indicators has led to increased hiring. Since the end of the 2009, manufacturers have created 683,000 new workers on net, or 7.3 percent of all nonfarm payrolls added over that time frame.
The July manufacturing job gains mostly resided in the durable goods sectors, which added 30,000 employees for the month. In contrast, nondurable goods firms shed 2,000 workers. The largest employment gains were in transportation equipment (up 19,200, with 14,600 coming from motor vehicles and parts), furniture and related products (up 3,200), fabricated metal products (up 2,600), primary metals (up 1,700) and computer and electronic products (up 1,600).
In contrast, food manufacturing (down 3,600), nonmetallic mineral products (down 1,400), paper and paper products (down 1,100), electrical equipment and appliances (down 1,000) and printing and related support activities (down 1,000) were among the sectors with declining employment in July.
Despite the increase in employment, the average number of hours worked and payroll data for manufacturers both moved down slightly. Manufacturing employees worked an average of 40.9 hours per week in July, with 3.4 hours of overtime. This was down from 41.4 hours and 3.5 hours, respectively. In addition, average weekly earnings dropped from $1,020.92 to $1,018.00. Nonetheless, earnings have generally moved higher, rising 2.7 percent year-over-year from $991.45 in July 2013.
Meanwhile, nonfarm payrolls increased by 209,000 employees in July, the sixth straight month with the economy creating at least 200,000 workers. Since January, nonfarm payrolls have increased by an average of 244,167 per month, which represents progress from the 194,250 average seen for all of 2013.
Still, the unemployment rate rose from 6.1 percent in June to 6.2 percent in July as more Americans came back into the labor market. The participation rate rose marginally, up from 62.8 percent to 62.9 percent. It continues to remains near 30-year lows. In addition, the labor market continues to have sufficient “slack” in it, with part-time employment for economic reasons up from 7.27 million in May to 7.51 million in July.
In conclusion, today’s jobs numbers were positive, particularly for manufacturers, but not overwhelmingly so. Nonfarm payroll growth was below consensus estimates, but it also achieved its sixth consecutive monthly increase of at least 200,000 net new workers. That represents progress, and yet, behind the scenes, we still get a sense that job gains could have been greater. The labor market continues to have too many people who are either underemployed or employed part-time, and the participation rate remains at historic lows.
Even in manufacturing, while we have seen improvements from earlier in the year, one could easily make the case that hiring should be more broad-based. For instance, the auto sector alone accounted for over half of July’s job gains, and the nondurable goods sector continues to struggle. Ideally, we would like to see all sectors within manufacturing experience job gains moving forward.
However, manufacturers continue to express a palpable sense of frustration both with the slowness of economic growth and with the political process. Washington’s burdensome regulatory, tax and health care policies still loom large in business decisions, particularly for the smallest manufacturers. In addition, manufacturers continue to wait on Congress to reauthorize the Ex-Im Bank, which serves as a critical tool for job creation and economic growth for small, medium and large manufacturers.
Chad Moutray is the chief economist, National Association of Manufacturers.