U.S. employment numbers jumped significantly higher in January, according to the Bureau of Labor Statistics, with the unemployment rate dropping to 8.3 percent.  Moreover, nonfarm payrolls grew by 243,000, and manufacturers added 50,000 net new workers. These gains were greater than expected, and certainly, much higher than the estimates from ADP released two days ago. Consensus estimates had been for around 150,000 net new jobs with the unemployment rate remaining around 8.5 percent.

These numbers continue to affirm the rebound and importance of manufacturing to our economic recovery. There were 82,000 net new jobs created in the sector in the past two months. This is definitely a sign that manufacturers have picked up their activity of late. Moreover, manufacturers have added 287,000 of the 2,063,000 net new nonfarm payroll jobs generated in the last 13 months (since December 2010); this suggests that nearly 14 percent of all of the jobs generated in that time frame stemmed from manufacturing.

As I noted last month, though, we would be remiss without mentioning the fact that employment remains a significant challenge, even with today’s good news. The “real” unemployment rate – which includes discouraged and underemployed workers – is now 15.1 percent, down from 15.2 percent in December and 16.1 percent last year at this time.

There are currently 2.81 million Americans who are classified as “marginally attached to the labor force,” with 1.06 million being discouraged workers. This is up slightly from last month. (The civilian labor force also grew last month, from 240.58 million to 242.27 million.)

Looking specifically at the January 2012 figures, the bulk of the new jobs in manufacturing came from the durable goods sector, which was up 44,000 for the month. The largest gains came in fabricated metal products (up 10,900), machinery (up 10,500) and transportation equipment (up 10,300). Nondurable goods sector employment rose by 6,000 in January. In that sector, the strongest growth came in the chemicals (up 2,200), printing and related support services (up 1,700) and beverages and tobacco products (up 1,300) sectors.

The average workweek for manufacturers rose from 40.6 hours in December to 40.0 hours in January. The average amount of overtime edged slightly higher from 3.3 to 3.4 hours. Therefore, the average weekly earnings for manufacturing workers rose from $969.93 to $977.51.

Overall, these numbers show renewed strength in the domestic economy, with employment growth in almost every major industrial sector except information, financial services and government. It mirrors other recent economic indicators showing an uptick in activity since October. Moreover, several sentiment surveys suggest that manufacturers are optimistic about future production and employment in 2012, which should bode well for this year’s numbers.

Yet, it is important to remember that significant headwinds exist both in Europe and in the U.S. The labor and housing markets – while improving – still have a long way to go before they are healthy, and consumer and business optimism is mixed with persistent anxieties. Still, we will take good news when we can get it.

Chad Moutray is chief economist, National Association of Manufacturers.

The Bureau of Economic Analysis observed flat consumer spending in December 2011, with personal income up 0.5 percent. The unchanged consumption figures followed five consecutive months of growth, and when adjusted for inflation, real consumption declined by 0.1 percent.

Goods purchases in the month were negative, with spending on both durables and nondurables 0.4 percent lower. Consumers did, however, increase their purchases on services, which rose by 0.2 percent. Still, the longer-term trend for consumption has been positive, as it is up 3.9 percent since December 2010.

Real personal disposable income rose 0.3 percent for the month. The income growth was the fastest pace since February 2011. Manufacturing sector wages increased by $7.4 billion for the month to $707.7 billion, reversing the decline experienced in November.

With strong growth in income and no change in spending, the overall savings rate improved from 3.5 percent in November to 4.0 percent in December. It was 5.2 percent in December 2010, reflecting its general movement downward in the second half of 2011.

There appears to be little inflation in the personal consumption numbers. In fact, while prices rose 0.1 percent for all goods and services, they fell by 0.2 percent for both durable and nondurable goods. Prices have fallen for several months now for nondurables, and this is the third consecutive month of declines for durables.

This suggests a limited ability to pass on any of the higher raw material costs experienced at the producer price level. Year-over-year data, though, suggest greater pricing pass-through for nondurables, with prices up 4.8 percent since December 2010 on nondurable goods compared with a decline of 0.5 percent on durables. The overall inflation rate for all goods and services since last year is 2.4 percent.

Chad Moutray is chief economist, National Association of Manufacturers.

The Bureau of Economic Analysis announced that real gross domestic product (GDP) rose 2.8 percent in the fourth quarter. This was mostly in line with forecasts of 3 percent for the quarter. For 2011, real GDP increased 1.7 percent, down from the 3 percent growth rate of 2010.

This quarter’s growth was led by strong increases in fixed investment (including residential), with healthy gains in consumption, inventories and exports. Specifically, consumers contributed 1.45 percentage points (or roughly half) to GDP, with 1.07 percent from durable goods consumption and another 0.27 percent from nondurables. Gross private domestic investment contributed 2.35 percentage points to growth, with the bulk of that coming from the replenishment of inventories. Both residential and nonresidential spending made positive contributions, as well.

Contributions from net exports were slightly negative, with higher imports offsetting the rise in exports. The largest drag on growth, though, came from government contributions. With defense and state and local government spending cuts, government reduced GDP by 0.93 percentage points.

Overall, these numbers reflect the stronger rebound in economic growth at the end of 2011 that many other indicators have reported earlier. Manufacturing activity, in particular, appeared much healthier in November and December than in the mid-months. With moderate growth in consumer and business spending, the economy turned in its fastest growth pace since the second quarter of 2010.

Moving ahead, manufacturers are optimistic about production, employment and capital spending for 2012, and yet, a number of significant headwinds (particularly from Europe) persist. Moreover, the government sector – which is already providing a drag – will continue to dampen GDP, especially as more austerity measures (including defense and other nondiscretionary spending cuts) start to have real effects on the manufacturing community.

Despite the concerns, we are seeing some positive news and reports that manufacturing is strengthening as seen in this report from the Financial Times. While growth may be slow, it is on the rise and it is expected to continue.

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau reported that new orders for durable manufactured goods rose 3 percent in December. While slower than the 4.3 percent growth rate of November, it does mark the second consecutive month of strong gains – a sign that the sector has recovered from weaknesses in the middle of the year. Capital goods orders increased 4.5 percent for the month, or 2.9 percent for nondefense capital goods items excluding aircraft (also known as “core” capital goods).

Overall, there were several areas of strength in the new orders figures. The fastest monthly gains were seen in nondefense aircraft and parts (up 18.9 percent), machinery (up 6 percent) and primary metals (up 5.1 percent). Nonetheless, there were also declines observed in defense aircraft and parts (down 6.8 percent), computers and related products (down 2.6 percent) and fabricated metal products (down 1.4 percent).

Durable goods shipments also rose in December, up 2.1 percent and reversing the 0.3 percent decline last month. Among shipments, defense capital goods had a strong increase of 8.9 percent. Other leading sectors were communication equipment (up 9.6 percent), primary metals (up 8.2 percent), defense aircraft and parts (up 4.9 percent) and machinery (up 4 percent).

Unfilled orders and inventories grew 1.5 percent and 0.3 percent, respectively, in December, continuing a long streak for both of them. (continue reading…)

The Census Bureau reported that new orders for manufactured goods fell 0.4 percent, with both durables and nondurables declining for the month, down 0.5 percent and 0.3 percent. All percentages are expressed in annual terms. This was the second consecutive month with a decrease, and it was led by steep drop in transportation, down 5.1 percent.  If transportation numbers were excluded, new orders would have increased by 0.2 percent.

Note that today’s numbers reflect more complete information, as the durable goods orders were initially pegged at being down 0.7 percent. As I noted at the time, airplane orders can be sporadic, and recent transactions should improve these figures when the data for November are released on December 23.

There were some areas of strength reflected in new order sales for October. These include primary metals (up 3 percent), machinery (up 2.9 percent) and computers and electronics (up 0.8 percent). Within the transportation sector, motor vehicle orders rose 2.3 percent, reversing declines in the previous two months.

Meanwhile, shipments of manufactured goods increased 0.6 percent in October, up for the fifth consecutive month. Durable goods shipments increased 1.6 percent, with nondurables falling 0.3 percent. Major industries with the fastest growth in shipments for the month included transportation (up 5 percent, led by strong growth in autos and nondefense aircraft), primary metals (up 3.2 percent) and computers and electronics (up 1.8 percent).

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau reported that new orders for durable manufactured goods fell 0.7 percent in October, but the decline was mostly attributable to nondefense aircraft. (All percentages are in annual terms.) Airplane orders are sporadic, creating a lot of volatility in these numbers. (Note that Boeing just received an order for 230 planes from Lion Air, which will show up in the November shipments data.) Outside of aircraft, the transportation sector had stronger gains, with new orders for motor vehicles rising 6.2 percent.  When you exclude transportation from the durable goods numbers, new orders rose 0.7 percent.

Other sectors with strong new order gains for the month included primary metals (up 3 percent), machinery (up 1.6 percent) and all other durable goods (up 1.2 percent). In addition to transportation, other areas with the largest weaknesses for new orders were capital goods (down 6.2 percent), electrical equipment (down 5.2 percent) and communications equipment (down 1.6 percent).

I focus on new orders because it is a good proxy for future production, but this report also notes current activity. Shipments of durable goods increased 1.3 percent in October, reversing the decline from September of 0.5 percent. In this case, the transportation sector led the pack with 5.2 percent higher shipments than the previous month, including 6.4 percent and 8.6 percent gains in motor vehicles and nondefense aircraft shipments, respectively. 

Unfilled orders and inventories grew 0.2 percent and 0.5 percent, respectively, in October, continuing a long streak for both of them.

Overall, this report is more positive than the headline number suggests, and yet, the lower capital goods figures suggest that weaknesses persist in the sector. Excluding aircraft, new orders and shipments for capital goods were down 1.8 percent and 1.1 percent, respectively. Moving forward, a stronger recovery will hinge on those numbers turning around.

The U.S. economy picked up the pace in the third quarter, growing 2.5 percent in advance estimates released this morning from the Bureau of Economic Analysis. This represents the fastest pace this year, with the economy only growing 0.4 and 1.3 percent, respectively, in the first two quarters of this year.

Healthy increases in personal consumption, fixed investment and net exports accounted for the bulk of the real GDP rise. In fact, consumption alone contributed 1.72 percent of real GDP’s growth in the quarter; however, all but 0.35 percent of that was from services.

Manufactured goods did provide a positive contribution both from the sale of more durable goods (contributing 0.31 percent to real GDP) and increased goods exports (contributing 0.45 percent). Meanwhile, inventory reductions subtracted a percentage point from real GDP as businesses moved to reduce their supplies.

Looking at the percentage changes in various components of the GDP release, durable goods consumption was up 4.1 percent in the third quarter, compared to an increase of 0.2 percent for nondurables. The contributions from trade were positive, with goods exports (up 4.7 percent) outpacing goods imports (up 1.8 percent).  (continue reading…)

Today’s durable goods orders release from the U.S. Census Bureau shows 0.8 percent decline in September. (All percentages are in annual terms.) This number only tells part of the story, though, as much of the decline was due to volatility in the transportation sector. Excluding transportation, new orders for manufactured durable goods would have increased by 1.7 percent.  Much of the decline was in the aerospace sector (both for defense and nondefense), which fell significantly after a large rise in August. New orders for motor vehicles also fell by 2.7 percent.

Yet, outside of transportation, the new orders figures reflected some strength. Here are the monthly growth rates for new orders from the major sectors:

• Capital Goods, excluding Aircraft, up 2.4 percent;
• Computers and Electronic Products, up 1.0 percent;
• Defense Capital Goods, up 8.6 percent;
• Electrical Equipment, Appliances, and Components, up 1.9 percent;
• Fabricated Metal Products, up 1.9 percent;
• Machinery, up 1.8 percent; and
• Primary Metals, up 2.6 percent.

These numbers suggest that the larger durable goods industry is showing some broader-based growth as we move into the autumn months.

Looking at other parts of this release, durable goods shipments fell 0.7 percent in September; excluding the transportation sector, shipments would have decreased 0.1 percent. Transportation shipments were down 2.7 percent. The largest increases in shipments were seen in communications equipment, computers and related products, fabricated metal products and primary metals.

Both unfilled orders and inventories continued to grow in September, by 0.8 percent and 0.1 percent, respectively.

Chad Moutray is chief economist, National Association of Manufacturers.

Today’s manufacturing numbers have a bit of déjà vu to them, with industrial production up at the same time that business conditions in the New York region continues to contract.

First, the Federal Reserve reported that industrial production rose 0.2 percent in September, with the August figures revised to indicate that there was no change last month. The numbers in August had previously been reported to be up 0.2 percent. For the manufacturing sector, production rose 0.4 percent in September, building on the 0.7 percent and 0.3 percent increases in July and August. Year-over-year growth in manufacturing production is nearly 4 percent.

Meanwhile, manufacturers’ capacity utilization increased 0.1 percent, from 77.3 in August to 77.4 in September.

Examining the different sectors, the picture is more mixed. Eleven of the sectors experienced gains in production, and eight had declines. Durable and nondurable goods production were up 0.6 percent and 0.2 percent. The sectors with the greatest increases were: wood products (up 2.4 percent), aerospace and miscellaneous transportation (up 2.3 percent), electrical equipment and appliances (up 1.3 percent), paper (up 1.1 percent) and computer and electrical products (up 1 percent). The largest declines were in furniture and related products (down 2.2 percent), apparel and leather (down 1.2 percent) and nonmetallic mineral products (down 0.9 percent).

Overall, these numbers show that manufacturing has experienced reasonable growth in the third quarter of 2011. Manufacturing industrial production is 1.4 percent higher in September than in June (or 5.75 percent at an annual growth rate). That is impressive, and a sign that the sector is starting to improve after a weak second quarter. The durable goods sectors have helped to add significantly to those totals. Moving forward, it will be important for these numbers to continue this growth. (continue reading…)

The Census Bureau reported that new orders for durable goods fell 0.1 percent in August, reversing the 4.1 percent gain last month (All rates of growth are in annual terms). These figures have been highly volatile over the past couple years, up one month and then down the next. Despite this month’s decrease, durable goods new orders are 10.1 percent higher in 2011 than at the same time in 2010.

As the monthly numbers suggest, the sector-specific figures were mixed. The strongest gains for new orders came from the nondefense aircraft and parts (up 23.5 percent), defense aircraft and parts (up 22.5 percent), communications equipment (up 7.8 percent), computers and related products (up 5.5 percent) and nondefense capital goods (up 5.2 percent). These were offset by declines in motor vehicle and parts (down 8.5 percent), defense capital goods (down 5.7 percent), primary metals (down 0.8 percent) and fabricated metal products (down 0.7 percent).

Manufacturers’ shipments were down by 0.2 percent in August, retreating from three consecutive months of increases. These losses were led by the motor vehicle sector, but offset by gains in the shipments of aircraft and machinery. Unfilled orders and inventories both rose by 0.9 percent for the month.

Overall, these figures provide both good and bad news. While the headline number was down, which is quite discouraging, there was definite strength in the aircraft, computers and capital goods sectors.  This is a good sign on the health of those sectors. Machinery did well, too, particularly in terms of shipments for the month. While metals and motor vehicles experienced decreases in new orders and shipments for the month, the larger picture is a positive one for them, as their year-to-date gains are impressive and a sign of a larger rebound, particularly for automobiles.

Of course, recent manufacturing survey data suggest continued weaknesses in terms of production and new orders. For the entire industry to experience a rebound moving forward, many of the sentiment surveys out there will need to reverse course. With that said, durable goods industries have been more resilient than others.

Chad Moutray is chief economist, National Association of Manufacturers.