Manufacturing employment fell by 8,000 workers in May according to the Bureau of Labor Statistics. With the latest revisions to the data, this was the third consecutive month of declining employment in the sector, a sign of just how weak activity has become in recent months. Manufacturers have added just 41,000 workers over the past 12 months or just 1.9 percent of total non-farm jobs created, signifying that the sector’s contributions are well below what we need to see. Since the second half of 2012, the manufacturers have been challenged by slowing global sales, U.S. fiscal woes, higher taxes, and reduced government spending. To the extent that the industry is growing, it has been modest at best, dampening the enthusiasm for job growth.
The decline in manufacturing employment occurred in both durable and nondurable goods industries, down by 2,000 and 6,000 respectively. Areas of strength included motor vehicles (up 2,400), wood products (up 1,300), computer and peripheral equipment (up 1,100), and chemicals (up 900). But, these gains were lessened by declines in the printing and related support (down 3,200), machinery (down 3,100), food manufacturing (down 2,800), and primary metals (down 2,200) sectors, among others.
On the positive side, the average weekly earnings of workers in the manufacturing sector rose slightly, up from $803.40 to $804.65. Likewise, the average number of hours worked were unchanged at 41.8 hours, with overtime hours off from 4.3 hours to 4.2 hours on average.
The Bureau of Labor Statistics said that nonfarm payrolls rose by 175,000 in May, just slightly above the expectations of around 165,000. At the same time, the labor participation rate edged up somewhat from 63.3 percent in April to 63.4 percent in May. This contributed to the unemployment rate increasing from 7.5 percent to 7.6 percent.
The May report confirms that the U.S. economy is modestly growing. The service sector appears to be the main beneficiary of this growth. For manufacturers, these data are quite frustrating, as they are indicative of many of the larger trends that we are seeing for the sector. Recent reports show that new orders have been soft, with exports challenged by weaker economies overseas and persistent domestic uncertainties.
Manufacturing needs to be firing on all cylinders if we are going to have robust economic growth. When manufacturers are once again making significant contributions to output and employment, as they have overall since the end of the recession, we will see significant economic growth. Washington must move forward with policies that will help eliminate the headwinds and uncertainties that are limiting hiring and growth.
Chad Moutray is chief economist, National Association of Manufacturers.