Tag: hiring

Small Business Confidence in March Recovered Some of its February Decline

The National Federation of Independent Business (NFIB) said that small business confidence in March recovered some of its February decline. The Small Business Optimism Index increased from 91.4 in February to 93.4 in March, but it had fallen from 94.1 in January. Sentiment among small firm owners has generally moved higher over the course of the past year, with quite a bit of volatility. For instance, just over the past six months, the Index has ranged from 91.6 to 94.1, with the government shutdown, weather and persistent uncertainties dampening optimism at times.

Despite the higher headline figure, the underlying data were largely mixed. On the positive side, the percentage of firms saying that the next three months were a “good time to expand” increased from 6 percent to 8 percent, returning it to the level recorded in January but still below December (10 percent). Of those saying that it was not the right time for expansion, the economy was the primary reason.

Still, “poor sales” – a proxy for the current economy – was not listed as the “single most important problem.” Instead, the top concern was a tie between taxes and “red tape,” with each cited by 21 percent of respondents. This was followed by poor sales (14 percent), the cost of insurance (10 percent), and the quality of labor (9 percent). Indeed, the net percentage of respondents saying that they expect higher sales in the next three months rose from 3 percent to 12 percent, reflecting a pickup in sentiment.

Nonetheless, earnings figures remain weak overall, and the employment and capital spending data were less positive. Small business owners said that the hiring slightly declined in March, with the net percentage planning to bring on new workers in the next three months down from 12 percent in January to 7 percent in February to 5 percent in March. Hopefully, the uptick in optimism on sales will reverse this trend in the coming months. Meanwhile, capital spending has edged marginally lower, with capital expenditure plans essentially unchanged so far this year.

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

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Monday Economic Report – April 7, 2014

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

Manufacturers appear to be recovering from softness in the first two months of the year, mainly due to the number of severe winter storms. The Institute for Supply Management (ISM) reported that its Purchasing Managers’ Index (PMI) edged higher, up from 53.2 in February to 53.7 in March. Production began expanding again, with the pace of new orders and exports picking up slightly. Despite some degree of progress in March, sentiment remains lower than just a few months ago. PMI values averaged 56.3 in the second half of last year, with sales and output measures exceeding 60—indicating strong growth—each month from August to December.

Likewise, new factory orders increased 1.6 percent in February, partially offsetting the sharp declines in December and January. Beyond autos and aircraft, however, durable goods sales were just barely higher, suggesting more needs to be done for broader growth in the sector. Meanwhile, the Dallas Federal Reserve Bank’s manufacturing survey reflected a rebound in activity consistent with other Federal Reserve districts. Texas manufacturers remain positive about sales, output, hiring and capital spending moving forward. For example, more than half of respondents anticipate increased demand over the next six months. Still, some cited regulatory, pricing pressure, workforce and foreign competition concerns.

On the hiring front, Friday’s jobs numbers provided mixed news for manufacturers. The sector lost 1,000 workers in March, mainly due to declines in nondurable goods industries. This was particularly disappointing given consensus expectations that were closer to the ADP’s estimates, which had a gain of 5,000 workers for the month. Yet, revisions to January and February data provided some comfort, adding 15,000 more employees than original estimates. As a result, the longer-term trend for manufacturing did not change much despite March’s lower figure. Manufacturers have added more than 600,000 workers since the end of the recession, and since August, the sector has generated an average of 12,125 net new jobs per month. Another positive in this report was that the average number of hours worked and average compensation both rose, findings that mirror the rebound in overall activity.

Meanwhile, the latest international trade figures were also disappointing. The U.S. trade deficit widened from $39.28 billion in January to $42.30 billion in February. This was the highest deficit since September and the result of a decrease in goods exports and an increase in service-sector imports. Petroleum exports were also marginally lower. The numbers were particularly discouraging given that manufactured goods exports in January and February of this year were 0.6 percent lower than the first two months of last year. Still, outside of softness in our goods exports to Canada, the other top-five export markets for U.S.-manufactured goods registered increases year-to-date in 2014 relative to 2013. In addition, there remains cautious optimism that export sales will improve in the coming months.

This week, the focus will be on the release of the minutes from the March Federal Open Market Committee (FOMC) meeting. The minutes will provide additional insights on the internal debates that led the Federal Reserve Board to continue tapering but to also change its forward guidance for short-term interest rates. On Friday, the release of producer price data should continue to show that overall inflation remains minimal. Other highlights include the latest data on consumer confidence, job openings, small business optimism and wholesale trade.

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

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ADP: Manufacturers Added 5,000 Employees in March for the Second Straight Month

Automatic Data Processing (ADP) said that manufacturing employment increased by 5,000 workers for the second straight month in March. As such, hiring in the sector has rebounded somewhat from the decline in employment observed in January due to winter weather conditions. Still, it is also clear that hiring has not fully recovered, with employment growth below the average of 13,000 per month seen from August to December of last year.

Looking at the overall figures, ADP said that there were 191,000 net new private, nonfarm payroll workers generated in March. This brought monthly job growth back to where it was in December, recovering from the much-softer data seen in both January and February (up 121,000 and 178,000, respectively). To put this in perspective, the average monthly job growth in 2013 was 187,000, with an average of 204,000 in the second half of the year.

In March, the largest job gains were seen in the professional and business services (up 53,000); trade, transportation and utilities (up 36,000); construction (up 20,000); and financial activities (up 5,000) sectors. Small and medium-sized establishments (e.g., those with fewer than 500 employees) contributed almost 65 percent of the net new jobs, adding 124,000 workers for the month.

The Bureau of Labor Statistics will release official jobs numbers on Friday, and the expectation is for employment growth similar to the ADP report. Nonfarm payrolls are anticipated to grow around 200,000, with manufacturing employment between 5,000 and 10,000.

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

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ISM: Manufacturers Have Begun to Move Beyond Winter Storms

The Institute for Supply Management’s manufacturing purchasing managers’ index edged slightly higher, up from 53.2 in February to 53.7 in March. This reflects modest gains in overall manufacturing activity since recent weather-related weaknesses. The good news was that production (up from 48.2 to 55.9) began expanding again. The pace of new orders (up from 54.5 to 55.1) also picked up a little, including export sales (up from 53.5 to 55.5).

The sample comments continue to note the negative impact of weather. A food and beverage leader put it bluntly when they said, “We need spring.” Others have begun to move beyond the winter struggles. For instance, a petroleum and coal products manufacturer said, “Business beginning to heat up, along with the weather.” Others noted their increasing optimism. This included the transportation equipment respondent who answered, “Business is good, and we are optimistic that orders will continue to come in at a decent pace.”

Hiring growth remains soft (down from 52.3 to 51.1), and sentiment continued to be lower than just a few months ago. The average PMI value from July to December of last year, for instance, was 56.3, with new orders and production averaging 61.8 and 62.6 during that time frame, respectively. Another positive was that the manufacturing sector has now expanded for 10 straight months.

Overall, manufacturers are cautiously optimistic about future sales and output, and there is hope that the momentum seen in the second half of 2013 return to produce strong returns for 2014. While growth in manufacturing activity remains below where it was at the end of last year, it appears that the drag from winter storms has begun to fade.

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

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After Slowing in February, Manufacturers in Texas Saw a Pick Up in Activity in March

The Federal Reserve Bank of Dallas said that manufacturing activity picked up in March, rebounding from the easing experienced in February. The index for a company’s own outlook increased from 3.4 in February to 9.1 in March, with the percentage of respondents saying that their outlook improved for the month rising from 17.2 percent to 22.6 percent. In general, manufacturers were somewhat more optimistic in March, and looking at a longer-run trend, businesses have reported expanding levels of activity for 11 straight months.

The underlying data tend to support the acceleration in activity for the month. For instance, the index for new orders rose from 9.5 to 14.7. Just over 31 percent of those taking the survey said that their sales were higher in March, with 16.7 percent reporting declines. Other indicators also reflected stronger growth, including production (up from 10.8 to 17.1), capacity utilization (up from 9.1 to 13.1), shipments (up from 13.3 to 19.5), employment (up from 9.9 to 15.0), and capital expenditures (up from 7.0 to 14.1).

Some of these data points were at levels not seen in a while. This was a sign that some of the weather-related weaknesses that were pervasive in the February report have started to dissipate. For example, the hiring data were at their fastest pace since June 2012, with almost one-quarter of respondents saying that they added workers in this survey. At the same time, the production index was at its highest point in 9 months, with the shipment measure at a four-year peak.

Looking ahead six months, Texas manufacturers remain positive about future levels of activity. For example, over half of the respondents anticipate higher sales over the coming months. Similar findings can be noted for production, capacity utilization, shipments, employment, and capital spending over the next six months. The sample comments mostly tend to support this rather upbeat assessment, with some respondents citing regulatory, pricing pressure, workforce, and foreign competition concerns. As such, it is clear that manufacturers are cautiously optimistic about activity moving forward, even as some anxieties persist.

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

 

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Kansas City Fed: Manufacturing Activity Picked Up in March

The Kansas City Federal Reserve Bank said that manufacturing activity picked up in March, expanding for the third straight month. The composite index of general business activity rose from 4 in February to 10 in March. This was the highest point since February 2012. The largest increase was in the production index, which increased from 3 to 22. Indeed, the percentage of survey respondents who said that their output had declined in the month fell from 28 percent in February to 11 percent in March. This improvement was likely the result of better weather, which caused a number of delays in production in the previous report.

In terms of other indicators, there was also notable progress for new orders (up from 5 to 13), shipments (up from 10 to 16), and exports (up from -1 to 6). As with the production index above, the shifts were largely due to fewer people saying that there were decreases. For instance, 39 percent of those taking the survey said that their new orders had increased in the month (up from 35 percent last month); whereas, 14 percent noted decreased sales (down from 24 percent).

Hiring was one area where weaknesses remain. The index for the number of employees declined has declined from 11 in January to 3 in February to zero in March. Two-thirds of respondents said that their employment levels were unchanged, with the other answers nearly split equally. Moreover, looking ahead six months, employment growth was also only barely positive on net, unlike in several other regional surveys.

Fortunately, other forward-looking measures are more upbeat. Nearly half of those taking the survey anticipate increased production, shipments, and new orders over the next six months. Roughly one-quarter of survey participants said that they plan to increase capital spending, with 15 percent anticipating declines. One other finding that was surprisingly soft was export growth, with just 11 percent of Kansas City Fed manufacturers saying that they expect increased international sales. Hopefully, this figure improves in coming months.

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

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Richmond Fed: Manufacturing Activity Contracted Once Again in March

The Richmond Federal Reserve Bank said that manufacturing activity in its District has contracted for two consecutive months. The composite index declined slightly from -6 in February to -7 in March, both of which represent a dramatic shift from the expansion noted in January (12). As such, respondents to the Richmond Fed survey did not observe the rebound from weather-related softness that was noted in similar surveys from the New York and Philadelphia Federal Reserve Banks.

Instead, growth continued to be lackluster, with new orders (unchanged at -9), shipments (down from -6 to -9), and capacity utilization (down from -7 to -14) all declining for the second straight month. Employment levels were flat. According to the Richmond Fed’s report, “A participant commented that weather has `wreaked havoc’ on demand for the past two months, but he anticipated that his company will be very busy once the weather improves.”

Indeed, manufacturers in the region remained mostly upbeat about the future despite the current weaknesses. The index for expected new orders six months from now improved from 15 in February to 30 in March, returning to where it was in January. Similar rises were seen in the forward-looking measures for shipments (up from 17 to 31), capacity utilization (up from 12 to 29), employment (up from 12 to 22), and capital expenditures (up from 9 to 18). The employment figure was notable because it suggested that the pace of hiring was now at its fastest pace since December 2010.

The prices paid for raw materials edged slightly lower for the month, down from 1.19 percent at the annual rate in February to 0.85 percent in March. Pricing pressures six months from now also eased, down from 2.25 percent to 1.81 percent.

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

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Markit: Chinese Manufacturing Activity Has Contracted in Each Month So Far in 2014

The HSBC Flash China Manufacturing Purchasing Managers’ index (PMI) continued to decelerate, down from 48.5 in February to 48.1 in March. The index has contracted for three consecutive months, with March’s pace being the slowest since July. As noted in the most recent Global Manufacturing Economic Update, these data mirror the easing that we have seen in other indicators, including industrial production, fixed asset investment, and retail sales. As such, they also suggest that real GDP might fall below the 7.7 percent rate seen in the fourth quarter.

Flash data give us an advance estimate of manufacturing activity incorporating “approximately 85% of the usual monthly survey replies,” with the final PMI data for the month released on April 1. The March data reflect decelerating levels of activity for new orders (down from 48.1 to 46.9) and output (down from 49.2 to 47.3). On the positive side, export sales shifted from contraction (49.3) to a slight expansion (51.4), and employment growth declined at a slower rate (up from 46.9 to 49.3).

Hongbin Qu, HSBC’s China Chief Economist and the Co-Head of Asian Economic Research, said, “Weakness is broadly-based with domestic demand softening further. We expect Beijing to launch a series of policy measures to stabilize growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower.”

Meanwhile, Eurozone manufacturers have seen expanding levels of activity for nine straight months, with continued modest growth in March. Nonetheless, the Markit Flash Eurozone Manufacturing PMI edged slightly lower, down from 53.2 in February to 53.0 in March. The underlying data were mixed. Sales growth picked up marginally from 54.1 to 54.4, but production (down from 55.5 to 55.4), exports (down from 54.7 to 53.6), and hiring (down from 50.4 to 50.3) moved slightly lower. Still, growth in output and new orders remained relatively healthy, even with some easing in many of the key figures.

One of the lagging economies in Europe has been France, which had contracting levels of manufacturing activity in all but 2 of the past 27 months. The good news was that French manufacturing sentiment turned positive once again in March, with the Markit Flash France Manufacturing PMI up from 49.7 to 51.9. Activity was up across the board, and growth in new orders (up from 46.6 to 53.3) were at their highest level since June 2011. Elsewhere in Europe, German manufacturing activity slowed a bit, down from 54.8 to 53.8. Despite the deceleration, output (down from 57.6 to 57.0) and sales (down from 57.2 to 55.6) growth remained strong.

Likewise, the Markit Flash U.S. Manufacturing PMI moved lower for the month, down from 57.1 to 55.5. February’s figure reflected the strong rebound from January’s weather-related softness due to severe winter storms. Much like the European data, the larger story is the continued modest growth for manufacturers in the U.S. market. For instance, new orders (down from 58.8 to 58.0) continued to grow strongly even with a little easing for the month, and production (up from 57.2 to 57.5) and exports (up from 50.9 to 51.0) had a slightly faster pace of growth.

Employment growth (down from 54.0 to 53.9) was essentially unchanged for the month despite edging a bit lower for the month. After hiring nearly stalled last June, manufacturers have continued to add to their workforces, albeit at a modest pace.

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

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Michigan Has Added the Most Manufacturing Jobs Since 2012, with Indiana Hiring the Most in January

Indiana had the largest gains in manufacturing employment in January, according to the latest statewide data from the Bureau of Labor Statistics. Indiana added 4,600 net new workers, using seasonally adjusted data. Other states with the most manufacturing hiring in January were Missouri (up 2,500), Ohio (up 2,400), Minnesota (up 2,000), and New York (up 1,900).

Michigan added the most manufacturing workers over the past 13 months (up 18,100), assisted by strength in the recovering auto sector. Other states with the most net manufacturing job growth since the end of 2012 included Indiana (up 14,500), Ohio (up 10,000), Florida (up 10,000), and Wisconsin.

North Dakota continues to have the lowest unemployment rate in the country (2.6 percent), followed by Nebraska (3.5 percent), South Dakota (3.6 percent), and Utah (3.9 percent). North Dakota’s low unemployment rate is the result of the explosive growth in shale exploration in that state in recent years. Meanwhile, Rhode Island had the highest unemployment rate in January at 9.2 percent, with Illinois and Nevada close behind at 8.7 percent each.

February sate employment numbers will be released on March 28.

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

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Empire State Survey: Manufacturing Activity Picked Up Slightly in March

Sentiment edged somewhat higher in March, according to the Empire State Manufacturing Survey from the New York Federal Reserve Bank. The composite index of general business conditions rose from 4.5 in February to 5.6 in March. Nonetheless, overall optimism has taken a hit over the past couple months, mostly due from poor weather conditions, with the index down from 12.5 in January.

Weather wreaked havoc in February, with the new orders index slightly contracting (-0.2). In March, sales shifted to modest gains once again (3.1), which was a good sign. Just over 30 percent of respondents said that their new orders increased in the month, with 27.3 percent noting declines. Shipments (up from 2.1 to 4.0) and the average workweek (up from 3.8 to 4.7) also improved. In addition, pricing pressures for raw materials decelerated a bit (down from 25.0 to 21.2), with 74.1 percent saying that their costs were unchanged in March.

Meanwhile, the pace of hiring slowed somewhat (down from 11.3 to 5.9), but employment growth has been positive for three straight months with mostly modest gains. Still, 68.2 percent of those taking the survey said that hiring was constant for the month.

Looking ahead six months, manufacturers in the New York Fed district continue to be mostly optimistic, albeit less so than last month. Nearly 48 percent of respondents anticipate increased new orders in the coming months, down from 55.0 percent who said the same in February. Similarly upbeat assessments were seen for shipments, with a generally positive outlook for modest growth in both hiring and capital spending. Indeed, these data support the view that the current weaknesses will be temporary, particularly if the more-positive view of future growth comes to fruition.

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

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