Here are the files for this week’s Monday Economic Report:

While we have seen some modest improvements in manufacturing activity so far in 2013, these gains have not yet translated into significant increases in hiring. Employment numbers for March were disappointing overall, with only 88,000 nonfarm payroll workers added on net. This was well below the expected increase of 200,000 employees and suggests that the U.S. economy still shows signs of uncertainty. Higher payroll taxes and across-the-board federal spending cuts have eaten away at retail sales and slowed employment growth in some key sectors.

Manufacturers lost 3,000 workers on net in March. As we have seen for much of the past year, hiring in the sector continues to be soft. Over the past 12 months, manufacturing has contributed just 4 percent of the net new jobs in the economy. This is a reversal of the outsized role from the two years before that and something that can be reversed with pro-growth policies like those laid out in the NAM’s Growth Agenda and changed perceptions about the economic and political landscape. In the short term, however, the Society for Human Resource Management’s (SHRM) survey of hiring intentions in April suggests that the net percentage of new hiring among manufacturers decelerated over the course of the past month and since this time last year. This contrasts with service sector employment growth, which has picked up of late.

The Purchasing Managers’ Index (PMI) from the Institute for Supply Management (ISM) was also discouraging last week. Manufacturers responding to the survey suggested a slower pace of growth for new orders in March, dampening enthusiasm with a lower-than-expected PMI reading. The ISM PMI fell from 54.2 in February to 51.3 in March. In contrast, two other releases out last week were more encouraging. Factory orders rose a healthy 3.0 percent in February largely on strong demand for aircraft, and construction spending among manufacturers was higher, continuing a steady upward trend and reversing the slight pullback in the second half of last year. However, ideally, both of these gains could be more broad-based, as these gains are highly mixed across the sectors.

One piece of good news in the ISM report was new export orders were rising. With so many manufacturers exploring growth through trade, the higher export numbers were encouraging. The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit narrowed in February, with goods exports up to their second-highest level ever. The bulk of that increase stemmed from a narrowing of the petroleum trade balance, with petroleum imports down and exports higher for the month. Outside of petroleum, manufactured goods exports have grown very slowly in the first two months of 2013, up just 2.5 percent. To make the President’s goal of doubling exports by 2015, this pace will need to pick up significantly. In January and February, total exports to Europe and Japan were down, but exports to our three largest trading partners (Canada, Mexico and China) were higher.

This week is a quieter one on the economic front. The retail sales and consumer confidence figures due out on Friday will be closely watched for clues regarding how the payroll tax increase and sequestration might have impacted spending and overall sentiment. Likewise, the National Federation of Independent Business (NFIB) and the Manufacturers Alliance for Productivity and Innovation (MAPI) will discuss how small businesses and manufacturers are faring in their latest surveys. Data on business and consumer sentiment were largely mixed in March. Aside from those indicators, the other highlights include new data on job openings and producer prices.

Chad Moutray is the chief economist, National Association of Manufacturers.

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit shrank to $42.96 billion in February from $44.46 billion in January. The lower deficit was the result of increased goods exports, up from $130.85 billion to $132.19 billion.

February’s goods exports figure was the second-highest level ever – second only to December 2012’s $132.82 billion. At the same time, goods imports were marginally lower in February, down from $192.55 billion to $192.41 billion. The service sector trade balance was largely unchanged, with the surplus up from $17.24 billion to $17.26 billion.

The petroleum trade balance helps to explain much of the change in the goods market. The petroleum trade deficit narrowed from $24.33 billion in January to $21.21 billion. Unlike the decline in the trade deficit in December, this narrowing did not correspond with a decrease in petroleum prices. The price of West Texas intermediate crude was $88.25 a barrel in December, and it was $95.32 in February. But, the February crude oil price was actually a slight increase from the $94.69 a barrel observed in January. This implies that the increase in petroleum exports and corresponding decrease in petroleum imports might be due to other factors, such as changes in global demand or seasonal adjustments in the data.

The non-petroleum goods trade balance actually widened from $36.97 billion to $38.30 billion. Looking specifically at areas of strength in the goods export market, the largest gains were in the industrial supplies and materials (up $1.83 billion), other goods (up $463 billion, and automotive vehicles (up $169 million). The industrial supplies and materials figure was boosted by an additional $1.08 billion in fuel oil and other petroleum products exports. These gains, though, were counteracted by decreases of non-automotive capital goods (down $758 million), consumer goods (down $312 million), and foods, feeds, and beverages (down $101 million).

In terms of goods imports, industrial supplies and materials were down $2.59 billion, but as we saw in the exports numbers, almost the entire decline stemmed from reduced crude and fuel oils imports. The other major import categories were mostly higher, including increased imports for automotive vehicles and parts (up $1.10 billion), consumer goods (up $695 million), non-automotive capital goods (up $348 million), and foods, feeds, and beverages (up $238 million). (continue reading…)

Today in Seattle the Sierra Club and several other environmental groups announced they intend to file a lawsuit against BNSF Railway and several coal companies over the unprecedented claim that they spill coal into Washington state waterways as a violation of federal law. The continued transportation of our nation’s energy resources is vital to the competitiveness of manufacturers and supports jobs. Lawsuits like this continue to jeopardize our nation’s competitiveness and drives up the cost of manufacturing in the United States.

The Associated Press spoke to Dr. Roger McClellan, past chairman of the Environmental Protection Agency’s clean air scientific advisory committee made the following statement regarding on the issue:

Dr. Roger McClellan, a past chairman of the Environmental Protection Agency’s clean air scientific advisory committee, said “the mere presence of coal by a railroad track or in the water is not a health hazard.”

BNSF said in a statement they are committed to preventing coal dust from escaping while in transit and that the company has safely hauled coal throughout Washington for decades without a single complaint. It is very peculiar that the groups made this announcement of their intent to sue as debate heats up over coal export terminals in Washington state, which would create thousands of construction jobs and help export energy resources. It’s clear that today’s announcement is another way to try to impact the review process of the export terminals.

Manufacturers are committed to protecting the environment and are leaders in sustainability. Threats of lawsuits such as this just make it harder for manufacturers to compete, drive up energy prices and ultimately hurt our economy and jobs.

In today’s Politico former Senator Blanche Lincoln penned and op-ed on the importance of energy exports and the need for government to help industry, hurt it.

In the piece Sen. Lincoln discusses the importance of the pending permits for coal export terminals in the Pacific Northwest. Exports are essential to our competitiveness and it is important that these projects be allowed to move forward without onerous delays such as a one-size fits all environmental review.

Here is an excerpt from Politico:

This expansion, supported by private investment, would allow for the increased export of bulk commodities like coal, agricultural products and other materials. If allowed to move forward, such expansion would lead to more jobs and tax revenue for the entire region — and the nation. But it, and countless other infrastructure projects, could be permanently stalled by an onerous review that would attempt to analyze the cumulative regional environmental impact of these facilities and for every use of everything that is shipped from them: a virtually impossible task that, if followed to its logical end, could result in findings conceivably so inaccurate that they would be utterly useless. This effect, on top of possible reductions in resources to agencies, could produce a real roadblock at a time when we need all hands on deck to help us grow our economy.

Sen. Lincoln hits the nail on the head when she says “we need all hands on deck to help us grow our economy.” Additional reviews and red tape will bog down projects like the coal export terminals and set us further behind our global competitors while we lose out on valuable export opportunities.

Here is the summary from this week’s Monday Economic Report:

The U.S. economy appears to be stabilizing, with several reports showing stronger-than-expected increases in activity, including the latest jobs numbers release on March 8. Nonfarm payrolls rose by 236,000 in February, well above the consensus estimate of around 155,000, and the unemployment rate dropped to 7.7 percent. Manufacturers hired an additional 14,000 workers for the month, which was in-line with the average monthly gain over the course of the past year. However, losses in several sectors offset some of the gains in manufacturing employment. Ideally, we could see stronger job growth, even as these numbers represent a good start. We need to see broad-based manufacturing hiring growth, with the sector creating an average of 20,000 jobs each month. This is consistent with the “20/20 vision” outlined by National Association of Manufacturers (NAM) President and CEO Jay Timmons in his Detroit Economic Club keynote speech last month.

The Federal Reserve Board’s Beige Book noted the “modest to moderate” pace of growth in the economy since its last report, citing strengths in housing and consumer spending in particular. Growth in manufacturing activity was more mixed, as we have seen in recent sentiment surveys from various regional Federal Reserve Banks. In addition to weaknesses in sales and production, respondents mentioned federal budget cutbacks, the regulatory environment and “the unknown effects of the Affordable Care Act” as roadblocks to their competitiveness. This suggests a degree of skittishness in hiring, which might be reducing the overall job growth numbers mentioned above. Nonetheless, the larger Beige Book findings suggest an economic environment that is improving, with wage and pricing pressures under control, at least for now. (continue reading…)

The President released an Executive Order today and an accompanying Fact Sheet outlining a crucial step toward implementing changes to the U.S. Munitions List (USML) as part of the President’s Export Control Reform Initiative.

On March 7, the Administration notified Congress – as required by Section 38(f) of the Arms Export Control Act – of the intended changes to USML Category VIII (Aircraft) and USML Category XIX (Gas Turbine Engines). Congress was reportedly given “pre-notification” in February, including text of the intended rule changes, and now has 30 days to review the modifications before the final rules will be published. The Administration has outlined a 180-day transition period that would follow the final rule.

The NAM has long advocated for a more predictable, efficient and transparent export control system. A study by the Milken Institute in partnership with the NAM previously estimated that modernizing export controls could boost real U.S. economic output by $64 billion and create 160,000 manufacturing jobs. Today’s news is a positive step to modernizing our export control system to keep us from falling behind our global competition.

Public comments on the State Department’s proposed rule for USML Category VIII are online here. Public comments on the Commerce Department’s proposed rule for control of items that no longer warrant control under the USML are onlinehere. Public comments on the State Department’s proposed rule for USML Category XIX are online here. Public comments on the Commerce Department’s proposed rule for control of items that no longer warrant control under the USML are online here. A full listing of proposed rules for USML Categories, and their accompanying Commerce Control List (CCL) categories, is online here.

Lauren Airey is director of trade facilitation policy, National Association of Manufacturers.

Here is the summary for this week’s Global Manufacturing Economic Update:

Last month, we noted that many of our largest trading partners were experiencing progress in their economies, with improving levels of manufacturing activity and other economic indicators. That trend has mostly continued into February. Some countries, such as China and the United Kingdom, have either weakened or slowed down the pace of growth, whereas new orders were strong enough in Germany to allow its manufacturing sector to start expanding again, albeit quite modestly. While the composition of growth has shifted in the past month, seven of the top 10 markets for U.S.-manufactured goods had Purchasing Managers’ Indices (PMIs) greater than 50—the threshold for expansion—in February, suggesting continued improvement from some of the challenges from last fall. The JPMorgan Global Manufacturing PMI has been greater than 50 for three straight months, even as it eased somewhat in the most recent figure.

The United States is growing modestly, making it one of the brighter spots in world economic markets. The Institute for Supply Management’s most recent report found that new orders rose from 53.1 in January to 54.2 in February, with the principal driver being higher sales. In addition, while real GDP barely grew in the fourth quarter of 2012, the data also show that consumers and businesses increased their spending moderately, helping to lessen the blow of reduced federal defense spending and lower inventory replenishment. Nonetheless, manufacturers continue to worry about the U.S. fiscal situation and sales. Non-petroleum goods exports did not change much in January from their December rates, and the 5.5 percent pace of manufactured goods exports in 2012 was well below the 15.9 percent pace of 2011.

The economic woes in Europe continue to negatively impact manufacturers. Manufactured goods exports were essentially flat last year, with the Eurozone’s recession deepening. Real GDP for the continent fell 0.6 percent in the fourth quarter, its fifth straight quarter of declining output, and the Markit Eurozone Manufacturing PMI has contracted for 16 consecutive months. However, all of Europe is not the same. As noted above, Germany’s economy appears to be stabilizing, while others continue to experience reduced sales, production and hiring. The unsettled election in Italy has exacerbated the Eurozone’s problems, reminding world markets about Italy’s large debt obligations and bringing Europe’s sovereign debt crisis once again back into the public eye.

Over the course of the next two weeks, we will get new data on industrial production for a number of countries around the world. Among the highlights to look for: China’s data should reflect the recent pickup in activity, while U.S. production should recover from the decline in manufacturing production observed in January. On the policy front, the Obama Administration formally announced that the United States would move forward with comprehensive trade negotiations with the European Union (EU) and issued its 2013 Trade Policy Agenda, including new initiatives on trade secret protection and localization barriers to trade.

Chad Moutray is the chief economist, National Association of Manufacturers.

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit grew to $44.4 billion in January from a revised $38.1 billion in December. December’s deficit was the lowest level since January 2010, so it might have been expected that the deficit in January would stabilize somewhat.

The consensus estimate was for a deficit of $42.6 billion, making the actual number slightly higher than what was expected. Goods exports dropped from $132.8 billion to $130.8 billion and goods imports rose from $188.9 billion to $192.5 billion.

Much of the shift in the goods trade was the result of changes in petroleum costs. The non-petroleum trade balance was not significantly different in January ($41.3 billion) than it was in December ($41.5 billion). Meanwhile, the price of West Texas intermediate crude was $88.25 a barrel in December, rising to $94.69 in January (and $95.32 in February). The result was an increased cost in petroleum imports, up from $14.9 billion to $16.0 billion. At the same time, petroleum exports dropped from $6.5 billion to $5.4 billion. This caused the petroleum trade balance to increase from $8.3 billion to $10.6 billion. Note that this brings it back to where it was in November, making December’s petroleum balance a bit of an anomaly.

The largest decline in goods exports stemmed from industrial supplies and materials, which declined by $2.6 billion in January. Separating out crude oil, fuel oil, and petroleum products from the industrial supplies numbers, this would have declined by $700 million. Similarly, imports of industrial supplies and materials rose $4.0 billion, with almost $3.7 million of that figure stemming from petroleum.

Given the extent to which the trade balance fell in December, the change in January is more dramatic than it is in reality. As noted above, the bulk of the shift was due to higher petroleum costs. Non-petroleum exports and imports were not dramatically different than they were in December.

We have begun to see some signs of improvement in many of our largest trading partners, with the major exception of the Eurozone as a whole. We need to see higher manufactured goods exports in 2013 than the reported 5.5 percent growth experienced in 2012.

Exports are critically important to creating manufacturing jobs. In January we failed to make progress on the goal of growing exports. Manufacturers are looking to policymakers in Washington move forward with a robust trade agenda that will help open more markets to U.S. manufactured goods exports. If we continue the rest of the year with slow export growth similar to January we won’t reach the goal of doubling exports.

Chad Moutray is chief economist, National Association of Manufacturers.

In today’s Wall Street Journal former Democratic Senator from Louisiana Bennett Johnston penned an op-ed about his past experience with natural gas regulation while he served in the Senate.

In his piece former Senator Johnston discusses the previous attempts by Congress to regulate and then deregulate natural gas. He concludes that from his own experience it is better to allowing the free market to work. Here is an excerpt from the piece:

The free market might not always lead to everyone’s definition of the sweet spot, but experience has shown that it is a better allocator and regulator than bureaucrats and politicians. We should heed the admonition of Adam Smith that demand begets supply: Allow the free market to allocate the nation’s newfound energy bounty.

The abundance of natural gas is helping manufacturers become more competitive by lowering energy costs. A study by PwC and the NAM concluded that the natural gas revolution can create 1 million manufacturing jobs by 2025.

Markit said that manufacturing activity in February continued to expand, but the pace of new orders slowed somewhat from January. The Flash Manufacturing Purchasing Managers’ Index (PMI) for the United States declined from 55.8 to 55.2, suggesting a marginal change in the overall picture. The good news is that output appears to be recovering strongly, up from 56.8 to 58.1. Five months ago, the output index stood at 51.2, illustrating the improvements seen since then. Moreover, February’s output figure is the highest that it has been since March 2011.

The pace of growth for new orders, employment, and input prices eased a bit. These numbers – particularly sales – helped bring the composite index down for the month, even with higher output. The index for new orders dropped from 57.4 to 56.4. While U.S. sales continued to rise, new export orders contracted once more, reversing two months of modest gains and reflecting continuing weaknesses abroad, especially in Europe (see below). Meanwhile, hiring and raw material prices expanded in February, with each at their slowest pace of the last few months.

Markit Chief Economist Chris Williamson said, “Employment rose in February, but the rate of job creation slowed and remained weaker than policymakers would like to see.” He went on to say: “While the survey … paints an encouraging picture of the manufacturing sector, helping to drive a return to growth for the economy as a whole in the first quarter of this year, firms still need to see greater confidence in the longer-term economic outlook for employment numbers to pick up again.”

This improving – but still cautious – economic outlook in the U.S. stands in contrast to what we continue to see in Europe. The Markit Flash Eurozone Manufacturing PMI was essentially unchanged, down from 47.9 in January to 47.8 in February. While this index has improved from the 44.1 figure observed in August, it continues to reflect a challenging environment for businesses on the continent. The PMI has shown contracting levels since August 2011, or for 19 straight months.

Despite the persistent bad news, the rate of decline for new orders slowed in February in the manufacturing sector. One positive to report was an expansion in new export orders, up from 48.8 to 51.7, the first increase in export sales since June 2011. The Markit report attributed this to increased exports to Asia and the U.S., with strength particularly seen in Germany.

Along those lines, the Flash German Manufacturing PMI shifted from a slight contraction (49.8) to a slight expansion (50.1) for the month. As noted in the Eurozone release, the main driver of the higher index reading was stronger growth in sales, both domestic and foreign. The new orders index rose from 48.5 to 52.7; while the new export orders index increased from 48.2 to 54.6. The jump in sales slowed the decline in employment, at least for February, which was a good sign.

Chad Moutray is the chief economist, National Association of Manufacturers.