Tag: hiring

Richmond Fed: Manufacturing Activity Expanding at a Modest Pace

The Richmond Federal Reserve Bank said that manufacturing activity grew at a modest pace, expanding for the fourth straight month. The composite index of general business conditions edged slightly higher, up from 4 in June to 7 in July. Note that historical data in the Richmond Fed survey were revised in this edition to reflect new seasonal adjustments.

Despite the improved top-line figure, the underlying data were largely mixed. The biggest positive was hiring, with the employment index up from 4 to 13. This was the fastest pace of hiring growth since December, which was encouraging. Wage (up from 12 to 16) and shipments (up from 2 to 3) were also higher. Yet, new orders (5) expanded at the same pace, and both capacity utilization (down from 7 to 4) and the average workweek (down from 5 to 3) decelerated somewhat for the month.

Still, manufacturers in the Richmond Fed’s district were mostly upbeat about the next six months, with forward-looking measures increasing in July for many indicators. For instance, new orders (up from 27 to 34), shipments (up from 24 to 36), capacity utilization (up from 18 to 29), employment (up from 12 to 19) and capital expenditures (up from 18 to 19) were all higher, with each suggesting relatively healthy paces of growth.

Inflationary pressures have picked up a bit for the month, but remain mostly in-check. Manufacturers in the region said that prices paid for raw materials grew 1.99 percent at the annual rate in July, up from 1.47 percent in June. Looking ahead six months, respondents expect input costs to increase an annualized 1.89 percent, up only marginally from 1.84 percent the month before.

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

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Empire State Survey Shows Manufacturing Growth at a Four-Year High in July

The Empire State Manufacturing Survey from the New York Federal Reserve Bank increased to its highest level in July since April 2010. The composite index of general business conditions rose from 19.3 in June to 25.6 in July, suggesting that manufacturing activity expanded strongly in the month. The jump in the headline figure was due largely to a drop in the percentage of respondents saying that conditions were worse, down from 21.1 percent in June to 15.0 percent in July. In contrast, 40.6 percent of manufacturers taking the survey said that they felt business was improving, up just slightly from the 40.4 percent who said the same thing the month before.

The underlying data were mostly positive, particularly for shipments (up from 14.2 to 23.6) and employment (up from 10.8 to 17.1). New orders also edged somewhat higher, up from 18.4 to 18.8, mostly from a drop in those saying that sales were lower. Yet, the data also had a couple weaknesses, with the average workweek (down from 9.7 to 2.3) easing a bit and pricing pressures (up from 17.2 to 25.0) picking up.

Looking ahead six months, manufacturers in the New York Fed district continued to be mostly optimistic, albeit with less enthusiasm than the month before. The forward-looking composite index decreased from 39.8 to 28.5, but the data still suggest relatively healthy gains moving forward. Growth rates were slower for a number of indicators, including new orders (down from 44.5 to 25.6), shipments (down from 45.2 to 24.6), hiring (down from 20.4 to 17.1) and capital spending (down from 11.8 to 9.1).

In all, 38.2 percent of respondents anticipate sales to be higher six months from now, with 49.2 percent expanding no changes. Other highlights include a slight increase in technology spending plans (up from 3.2 to 10.2), and reduced levels for inventories (down from 6.5 to -4.6) and the average workweek (down from zero to -4.6).

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

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Michigan Created the Most Manufacturing Jobs in May

The Bureau of Labor Statistics said that Michigan added the most net new jobs in May, hiring an additional 4,500 workers for the month on net. This speaks to the continued rebound of the automotive sector, which added 5,000 employees nationally in May and 10,100 year-to-date. Other states with the most manufacturing jobs hired in May included Minnesota (up 2,900), Ohio (up 2,900), Missouri (up 2,100), Texas (up 1,500), and South Carolina (up 1,400).

Many of these same states had observed the biggest gains in manufacturing employment through the first five months of 2014. For instance, Ohio gets the prize for the largest employment gains among manufacturers year-to-date, adding 7,300 workers on net from January through May. Missouri (up 6,100), Minnesota (up 5,700), Indiana (up 5,100), and Texas (up 5,000) rounded out the top five states.

Looking at the unemployment rate, the state with the lowest rate continues to be North Dakota (2.6 percent), with shale exploration helping to propel economic growth and fuel a skills shortage. Vermont (3.3 percent), Nebraska (3.6 percent), Utah (3.6 percent), South Dakota (3.8 percent), and Wyoming (3.8 percent) also have super-low unemployment rates. At the other end of the spectrum, the state with the highest unemployment rate was Rhode Island (8.2 percent), closely followed by Nevada (7.9 percent), Kentucky (7.7 percent), Mississippi (7.7 percent), and California (7.6 percent).

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

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Philly Fed: Manufacturing Activity Expanded Strongly in June

The Federal Reserve Bank of Philadelphia said that manufacturing activity expanded strongly in June, extending the spring rebound in the region. The Business Outlook Survey’s composite index of general business activity increased from 15.4 in May to 17.8 in June, averaging 16.6 over the past three months. The underlying numbers were mostly positive. There were faster rates of growth for new orders (up from 10.5 to 16.8), shipments (up from 14.2 to 15.5), hiring (up from 7.8 to 11.9), and the average workweek (up from 2.9 to 7.3). Over 39 percent of respondents said that new orders were higher in the month, up from 34.8 percent in the prior survey.

Pricing pressures remain elevated, with raw material costs continuing to edge higher. The index for prices paid rose from 23.0 to 35.0, with 36.2 percent of those taking the survey suggesting that input costs had increased in June. Just over 60 percent said that raw material prices were unchanged, with just 1.2 percent indicating a decline. Moving forward six months, 44.5 percent anticipate their costs to rise, with none expecting them to fall. For the most part, this mirrors the recent producer price index data which has shown core inflation picking up somewhat.

Looking toward the second half of 2014, manufacturers in the Philly Fed district were mostly upbeat. In a special question on production expectations, 73.9 percent of respondents said that they anticipate increased production in the coming months, with nearly 48 percent predicting output growth of more than 4 percent. This corresponds with 59.7 percent who predict increased new orders over the next 6 months.

Employment growth is also expected to increase, but with some mixed news overall. The good news is that 29.0 percent say that they plan to hire additional workers in a special question. Yet, that figure is slightly dwarfed by those who do not indent to hire but plan to increase output through productivity gains (27.5 percent) or more hours for existing staff (11.6 percent). This suggests that firms remain slightly hesitant about adding to their workforce, even as we have seen progress of late on the employment front.

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

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Empire State Survey: Stronger Growth in Manufacturing Sustained in June

The Empire State Manufacturing Survey from the New York Federal Reserve Bank continued to reflect strong growth in June. The composite index of general business conditions remained quite elevated, up from 19.0 in May to 19.3 in June, essentially sustaining the sharp increase seen the month before. In all, just over 40 percent of survey respondents said that business conditions were better in June, with 21.1 percent suggesting that they had worsened. Similar to last month, this was the fastest pace for the composite index since June 2010.

A nice jump in sales helped to push manufacturing sentiment higher for the month, with the index for new orders rising from 10.4 in May to 18.4 in June. The percentage of those taking the survey who reported increasing new orders rose from 31.9 percent to 40.7 percent. The length of the average workweek also widened (up from 2.2 to 9.7). Still, there was some easing in other components, including shipments (down from 17.4 to 14.2) and employment (down from 20.9 to 10.8). The latter suggests a slight deceleration in hiring, but still a decent pace.

Looking ahead six months, manufacturers in the New York Fed district continued to be mostly optimistic. While the forward-looking composite index eased slightly for the month (down from 44.0 to 39.8), this figure still indicates strong growth over the next six months, and other figures suggest accelerating levels of activity. For instance, the pace of new orders (up from 36.7 to 44.5), shipments (up from 33.8 to 45.2), all hiring (up from 17.6 to 20.4) are all expected to pick up in the coming months. Indeed, 55.4 percent anticipate increased new orders over the next six months, which is positive news.

On the down side, the average employee workweek is anticipated to be unchanged (up from -3.3 to zero) moving forward, and the pace of expected capital expenditures (down from 19.8 to 11.8) and technology spending (down from 4.4 to 3.2) both eased this month. Over one-quarter of respondents still plan to increase capital spending in the months ahead, but these figures suggest some cautiousness on the investment side, which we would like to see change.

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

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Manufacturing Job Postings and Net Hiring Picked Up Slightly in April

The Bureau of Labor Statistics said that manufacturing job openings picked up slightly, rising from 258,000 in February to 264,000 in March to 272,000 in April. This suggests that manufacturers have begun to post more openings over the past couple months, rebounding from winter-related softness in January and February. Nonetheless, overall job postings in the sector remain below their recent peak of 298,000 in November, indicating that there is still room for improvement. For instance, these gains were mixed, with increases in durable goods manufacturing job postings (up from 165,000 to 173,000) but reductions for nondurable goods firms (down from 99,000 to 94,000).

The Job Openings and Labor Turnover Survey (JOLTS) data also show a small bump-up in net hiring in April. Interestingly, this increase on net comes from a decline in both hires and separations for the month. The number of manufacturing hires decreased from 248,000 in March to 243,000 in April. At the same time, manufacturing separations – including layoffs, quits and retirements – fell from 243,000 to 231,000. As such, net hiring (or hires minus separations) increased from 5,000 to 12,000.

Net hiring has averaged 9,000 each month from February to April, which represented progress from the net gains of 6,000 and 2,000 in November and December, respectively. Yet, it also remains well below the 22,500 average experienced between August and November of last year when demand and production were expanding more robustly.

Meanwhile, job postings accelerated strongly in April for the larger economy. Total job openings rose from 4,166,000 in March to 4,455,000 in April. This was the fastest pace for job postings since August 2007. This higher figure stemmed from increased postings in the durable goods manufacturing; leisure and hospitality; professional and business services; state and local government; and trade, transportation and utilities.

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

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Small Business Confidence Rose to Its Highest Level Since September 2007

The National Federation of Independent Business (NFIB) reported that small business confidence rose its highest level since September 2007. The Small Business Optimism Index increased from 95.2 in April to 96.6 in May, and it has rebounded quite nicely after plummeting in February to 91.4. While the index remains below the threshold of 100 which would signify more-robust growth for smaller firms, it is clear that small business owners have become somewhat more upbeat over the past few months. The results of the NFIB report were similar to latest findings in the NAM/IndustryWeek Survey of Manufacturers, which noted sales, capital spending and hiring intentions at a two-year high.

Indeed, the NFIB small business respondents reported an uptick in sales expectations, up from a net percentage of 10 percent in April anticipating greater sales in the next three months to 15 percent in May. This matched the percentage seen in January, which was the highest level since mid-2007. Hiring plans for the next three months also picked up slightly, increasing from a net percentage of 8 percent to 10 percent. Twenty-four percent of those taking the survey have job openings that they have not been able to fill, unchanged from the prior month. At same time, 24 percent are planning to make a capital expenditure in the next three to six months.

Ten percent of small businesses say that the next three months are a “good time to expand,” up from 8 percent in the last survey. Still, earnings remain somewhat weak, and for those who suggest that it is not a good time for expansion, the top reasons cited include economic conditions and the political environment. The top concerns include taxes (25 percent) and government regulations and red tape (20 percent), both of which receive the most citations on the “single most important problem” list.

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

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Business Economists Anticipate 2.5 Percent Growth in Real GDP in 2014

Economists with the National Association for Business Economics (NABE) expect the economy to pick up in the second half of this year. Yet, overall estimates for growth for 2014 as a whole have fallen over the course of the past few months, with activity starting off somewhat disappointing in the first quarter. Economists now estimate real GDP growth of 2.5 percent for this year, down from 2.7 percent in the March survey and 2.8 percent in the December survey. This implies growth exceeding 3 percent in each of the remaining three quarters this year. In addition, survey respondents anticipate 3.1 percent growth in 2015.

Looking at the manufacturing sector, business economists expect industrial production to accelerate this year, with current estimates of 3.7 percent for 2014. That would be an improvement from the 3.2 percent growth rate forecasted three months ago. These results are consistent with the mostly upbeat data seen in the latest NAM/IndustryWeek Survey of Manufacturers, which predicted 4.0 percent growth in manufacturing output through the end of this year and sales rising at their fastest pace in two years.

In terms of auto production, light vehicle sales should rise from an average of 15.5 million annualized units in 2013 to 16.1 million and 16.5 million in 2014 and 2015, respectively. Meanwhile, housing starts are anticipated to grow rapidly, particularly next year, up from an expected 1.03 million in 2014 to 1.30 million in 2015. Capital spending should improve, as well, with relatively healthy gains for fixed investments in nonresidential structures, equipment and software, and intellectual property products.

Labor market growth has picked up since the last survey, not unlike the data seen in the most recent jobs report. Those taking the survey predict that nonfarm payrolls will average 209,000 per month in 2014, up from 188,000 each month in the last survey. With that said, business economists still predict a slow decline in the unemployment rate, averaging 6.2 percent this year.

A number of special questions focused on the Federal Reserve Board and monetary policy. Over ninety percent felt that the Fed would end its asset purchase program by year’s end, with the vast majority feeling that it would end in the fourth quarter. Similarly, 86 percent felt that short-term rates would rise in 2015, with over half anticipating the federal funds rate to increase in the second half of next year. In terms of global worries, the majority of respondents feel that the Russia/Ukraine crisis will hurt growth in Europe (84 percent) and that China will face a debt crisis in the next few years (51 percent). At the same time, nearly half suggest that deflationary concerns will hinder the economic recovery in Europe.

Chad Moutray is the chief economist, National Association of Manufacturers. Note that he was one of the panelists for the NABE Outlook Survey. 

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Manufacturers More Upbeat About Activity, but Frustrated with the Political Process

The latest NAM/IndustryWeek Survey of Manufacturers found that the percentage of respondents who were positive in their company’s outlook was essentially unchanged from last time. In the June survey, 85.9 percent of those taking the survey were either somewhat or very positive in their outlook, down just slightly from 86.1 percent in March. These data are consistent with a pickup in activity in the second half of this year, with a regression model predicting 4.0 percent growth in manufacturing production between now and the fourth quarter of 2014.

Overall, it is clear that manufacturers have been more upbeat in 2014 relative to last year, and this can be perhaps better seen in the underlying data. For instance, sales are expected to grow 4.1 percent on average over the next 12 months, up from 3.0 percent six months ago and 3.6 percent in the previous survey. In fact, the pace of growth marks the fastest pace in two years – definitely a sign of progress. Capital investment and hiring plans were also moving in the right direction, with almost half of the respondents saying that they plan to add workers over the next year and 41.5 percent noting higher capital spending levels this year than last.

Despite the cautious optimism in the months ahead, the NAM/IndustryWeek survey also captured a lot of frustration with Washington. The top business challenges continue to be rising health care costs (72.7 percent) and an unfavorable business climate (71.4 percent). When asked about policy priorities for the next few years, slowing entitlement spending (84.4 percent), finding a long-term budget deal (82.9 percent), reducing regulatory burdens (81.9 percent), and controlling health care costs (78.5 percent) were at the top of the list.

Moreover, while we have moved beyond the budget showdown of last fall, concerns continue to mount that Washington is not solving the country’s problems. In the most recent survey, 79.3 percent of respondents said that the country was on the “wrong track,” with just 5 percent suggesting that it was “headed in the right direction.”

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

nam industry week

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Monday Economic Report – June 9, 2014

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

The latest NAM/IndustryWeek Survey of Manufacturers—being released today—found that roughly 86 percent of manufacturers were either somewhat or very positive about their own company’s outlook, essentially unchanged from three months ago. Yet, the underlying data show higher levels of anticipated activity across the board over the next 12 months. For instance, sales are expected to grow 4.1 percent on average over the next year, up from an average of 3.6 percent in the last survey and the fastest pace in two years. Capital spending and hiring plans were also anticipated to increase, with almost half of respondents planning to add workers in the coming months.

Nonetheless, the survey also found that manufacturers remain frustrated with the slower-than-expected pace of economic growth this year and with the political process. The top challenges continue to be health care costs, the tax and regulatory environment and the skills gap. Along those lines, the Federal Reserve’s Beige Book reported that manufacturing activity expanded across the country in its analysis, with rebounds noted in many of its districts. In addition, several businesses are having difficulty finding skilled workers, a challenge that has concerned manufacturers for some time. For instance, a recent study from Accenture and the Manufacturing Institute found that more than 75 percent of manufacturers have a moderate to severe shortage of skilled resources.

Several data releases last week support the view that the economy is rebounding. For instance, the number of nonfarm payroll workers rose by 217,000 in May, with an average of 231,000 over the past four months. This helped push nonfarm payrolls over its pre-recessionary levels for the first time—a feat that took roughly five years. The news for manufacturers was more mixed. While manufacturing has averaged just shy of 12,000 additional workers per month since August, the pace has slowed this year, and May’s 10,000-worker gain stemmed mainly from durable goods firms. We would like to see broader-based job increases in the sector moving forward, with monthly hiring growth between 15,000 and 20,000 on average.

Meanwhile, the Institute for Supply Management’s Purchasing Managers’ Index (PMI) has risen each month since January, up from 54.9 in April to 55.5 in May. The data were mostly positive, with higher levels for both new orders (up from 55.1 to 56.9) and production (up from 55.7 to 61.0). The output index exceeded 60—signifying strong monthly gains—for the first time since December. At the same time, new factory orders increased for the third straight month, up 0.7 percent in April and building on healthy figures for both February and March. This release was another sign of recovery in manufacturing sales after weather-related softness in December and January. Yet, the underlying data also indicated some weaknesses beyond defense capital goods spending. Excluding defense, new durable goods orders would have shrank by 0.1 percent for the month. As such, there is room for improvement even with the recent rebound in activity.

While total construction spending increased for the third straight month, manufacturing construction declined 1.1 percent in April, and it has been down slightly since December. Still, the longer-term trend remains more encouraging, up 7.3 percent year-over-year. On the trade front, manufactured goods exports have seen marginal gains so far in the early months of 2014 relative to 2013, but we have seen increased exports in each of the top-five export markets so far this year. Still, export growth has been disappointing of late, and due to a significant increase in goods imports in April, the trade deficit rose to its highest level in 12 months. One positive continues to be energy, with the petroleum trade deficit narrowing on increased exports and fewer imports.

This week, we will get new data releases for consumer confidence, job openings, producer prices, retail trade and small business sentiment. In particular, we will see if Americans are becoming more confident and if the rebound will translate into increased purchasing. The expectation is that May retail sales will bounce back from slower April numbers. Regarding inflation, producer prices in April were higher mainly due to increased costs for food—namely, meat, eggs and dairy products. Energy costs were also up a bit. Analysts will be looking to see if core inflation creeps ever closer to the Federal Reserve’s 2 percent goal, which is anticipated.

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

nam industry week - jun2014

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