Tag: hiring

Richmond Fed: Manufacturing Activity Continued to Expand at Fastest Pace in Nearly 4 Years

The Richmond Federal Reserve Bank said that manufacturing activity continued to expand at its fastest pace since December 2010. The composite index of general business conditions rose from 14 in September to 20 in October. It was the seventh consecutive monthly expansion since the winter-related contractions in both February and March. Indeed, much like other regional surveys, these data show an uptick in demand and production for manufacturers recently, with a mostly upbeat assessment for the coming months.

Looking specifically at current activity, manufacturing leaders in the Richmond Fed district noted sharply higher paces for new orders (up from 14 to 22) and shipments (up from 11 to 23). (continue reading…)

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Dallas Fed: Manufacturing Outlook Picked Up Somewhat in October

The Dallas Federal Reserve Bank said that manufacturers continued to expand in October, with the pace of growth in production easing ever-so-slightly. The composite index of general business conditions edged slightly lower, down from 10.8 in September to 10.5 in October. It has averaged 10.3 over the past seven months, which was progress from the 0.3 index reading in February. (continue reading…)

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Somewhat Better Manufacturing Data in China and Europe for October, But Weaknesses Persist

The HSBC Flash China PMI rose to its highest level in three months, up from 50.2 in September to 50.4 in October. It was the fifth consecutive monthly expansion in manufacturing activity in China, an improvement from the contracting activity levels experienced in the first five months of 2014. Yet, despite the better headline figure, many of the underlying data points reflect some easing in growth rates for the month, including new orders (down from 51.5 to 51.4), exports (down from 54.5 to 52.8) and output (down from 51.3 to 50.7). Hiring continued to decline but at a slower rate (up from 47.5 to 48.6).

As such, Chinese manufacturers are expanding but not by as much as we might prefer. This finding is consistent with the deceleration in other Chinese data, including real GDP, which slowed from 7.5 percent year-over-year growth in the second quarter to 7.3 percent in the third quarter. Fixed real investment (down from 16.5 percent year-over-year in August to 16.1 percent in September) and retail sales (down from 11.9 percent year-over-year to 11.6 percent) also declined. On the positive side, industrial production picked up, increasing from the year-over-year rate of 6.9 percent in August to 8.0 percent in September; yet, that remained lower than July’s 9.0 percent pace.

Meanwhile, the Markit Flash Eurozone Manufacturing PMI increased from 50.3 to 50.7. That is good news, as the September figure had been the lowest level since July 2013, when Europe first emerged from its recession. October’s reading was higher largely due to a pickup in output (up from 51.0 to 51.9) and employment (up from 50.1 to 50.6). Still, new orders (unchanged at 49.3) contracted for the second straight month, with exports (down from 51.6 to 50.5) easing. The Eurozone continues to face challenges in manufacturing, especially in terms of falling sales. The results also vary by country, with Germany (up from 49.9 to 51.8) improving somewhat, while French manufacturers  (down 48.4 to 47.6) continue to report weakness.

Closer to home, the Markit Flash U.S. Manufacturing PMI dropped slightly, down from 57.5 to 56.2. The pace of activity was down across-the-board, including new orders (down from 59.8 to 57.1), output (down from 59.6 to 58.0), hiring (down from 56.4 to 56.2) and exports (down from 54.1 to 51.9). While the index for new orders was at its lowest level since January’s 53.9 reading, it is hard to get too worked up over October’s decline for these indicators. After all, demand, production and employment continue to grow at decent rates, and manufacturers are reporting higher activity levels than earlier in the year.

Still, we would like to see better results to begin the fourth quarter, particularly for exports. Given the softness in worldwide markets, however, this weakness should not be a surprise.

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

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Philly Fed: Manufacturing Activity Continued to Ease, but Growth Remains Strong

The Federal Reserve Bank of Philadelphia said that manufacturing activity continued to ease, but growth remained strong in its district. The Manufacturing Business Outlook Survey’s composite index of general business activity has declined from 28.0 in August to 22.5 in September to 20.7 in October. While this figure has decreased somewhat, sentiment remains mostly positive. For instance, just over one-third of manufacturers in the Philly Fed district felt that business activity had increased in October, with 13.5 percent noting a worsening of conditions.

The pace of new orders (up from 15.5 to 17.3) picked up in October, which bodes well for future activity. This shift occurred largely because the percentage of respondents citing declining sales dropped from 22.1 percent in September to 18.9 percent in October. At the same time, rates of growth for shipments (down from 21.6 to 16.6) and employment (down from 21.2 to 12.1) have both decelerated for the month. Along those lines, the average workweek contracted slightly, down from 4.4 to -1.3, falling for the first time since February.

Manufacturers remained overwhelmingly upbeat in their outlook despite a decrease in the forward-looking composite measure (down from 56.0 to 54.5). In fact, 58.0 percent of respondents anticipate increased new orders in the next 6 months, with 58.5 percent seeing higher shipment levels. Regarding employment, 33.1 percent expect to add new workers in the coming months, with just 5.1 percent indicating possible declines. Capital spending was also expected to increase at decent rates, particularly for equipment, computers and software and energy-saving investments.

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

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NY Fed: Growth in Manufacturing Activity Slowed Considerably in October

The Empire State Manufacturing Survey from the New York Federal Reserve Bank showed growth in manufacturing activity slowing considerably in October. The composite index of general business conditions declined from 27.5 in September to 6.2 in October, its lowest level in six months. Indeed, one –quarter of those taking the survey said that conditions had improved in October, down from 46.0 percent who said the same thing in September.  As such, manufacturers in the New York Fed’s district were clearly more anxious this month, a disappointment after signs of relative strength in the sector from May to September.

A decrease in new orders (down from 16.9 to -1.7) helped to explain the change in sentiment. The percentage of respondents suggesting that sales had increased in the month dropped from 40.1 percent in September to 21.9 percent in October, a shift that produced the change in direction for the new orders index. Growth in shipments (down from 27.1 to 1.1) followed the same pattern, but with the percentage of firms saying that shipments had declined in the month jumping from 16.7 percent to 25.0 percent.

On the positive side, manufacturing activity has now expanded for 21 months, and businesses have reported rebounding levels of activity overall since earlier in the year. In addition, employment (up from 3.3 to 10.2) picked up somewhat in October. Pricing pressures (down from 23.9 to 11.4) have also eased.

Looking ahead six months, manufacturers in the New York Fed region remain mostly optimistic. While many of the forward-looking measures pulled back slightly in October, they still indicate expected strength in the outlook. For instance, 52.9 percent of respondents anticipate higher levels of new orders over the coming months, down from 57.1 percent in the prior survey. Nearly 24 percent expect to add more workers over the next six months, with 34.1 percent planning additional capital expenditures. These figures tend to indicate a brighter future for manufacturers, even if the current sales and shipments data are soft.

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

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NFIB: Small Business Optimism Edged a Little Lower in September

The National Federation of Independent Business (NFIB) said that small business sentiment edged lower in September. The Small Business Optimism Index dropped from 96.1 in August to 95.3 in September. Still, small business owners’ sentiment has largely improved after waning in the first quarter of 2014, when the index bottomed out at 91.4 in February. Nonetheless, after peaking at 96.6 in May (its highest level since September 2007), the index has eased somewhat. This suggests that small firms continue to have anxieties about economic growth despite recent progress. Moreover, the index remains below 100 – a level that would indicate health in the small business sector.

Indeed, many of the underlying data points were softer in September. For instance, the net percentage of respondents expecting sales to be higher in the next three months has fallen from 15 percent in May to 5 percent in September. Along those lines, the net percentage planning to hire more workers in the next three months has declined from 13 percent in July (a seven-year high) to 9 percent in September. In addition, capital spending plans over the next three to six months also dropped slightly, down from 27 percent in August to 22 percent in September.

Interestingly, the percentage of small business owners saying that the next three months were a “good time to expand” improved, up from 9 percent in August to 13 percent in September (its highest level since December 2007, the first month of the recession). As such, these data definitely have a nuanced perspective, showing both improvements in the economy and persistent challenges. Economic worries and the political climate were the main reasons noted for those suggesting that it was not a good time for expansion. Regulations were the “single most important problem,” cited by 22 percent of respondents. This was followed by taxes (21 percent) and poor sales (14 percent).

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

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Manufacturing Job Growth Disappointed in September for the Second Straight Month

The Bureau of Labor Statistics said that manufacturers added 4,000 net new workers in September. As such, manufacturing job growth has disappointed for the second straight month, with August’s figure revised from being unchanged to being down by 4,000 employees. Prior to August, the sector had averaged 14,429 additional hires per month on net, and there was (and still is) an anticipation for that pace to continue moving forward.

Instead, job growth in the manufacturing sector was soft in August. Durable goods firms added 7,000 new employees, with nondurable goods businesses losing 3,000 workers. There was increased employment observed in the motor vehicles and parts (up 3,300), fabricated metal products (up 2,000), furniture and related products (up 1,400) and primary metals (up 1,100). Yet, these were partially offset by reduced hiring for electrical equipment and appliances (down 1,100), chemicals (down 900), computers and electronic products (down 400) and petroleum and coal products (down 400), among others.

Average weekly earnings were slightly lower, down from $1,018.41 in July to $1,015.14 in August, essentially returning to July’s numbers. This still reflects improved movement long term. In addition, the average number of hours manufacturers worked per week remained unchanged at 40.9, with the number of overtime hours edging up from 3.4 to 3.5.

Meanwhile, the larger economy generated 248,000 new nonfarm payroll workers in September. This means that 7 of the past 8 months have had net job gains exceeding 200,000 per month, averaging 226,667 per month over the first three quarters of 2014. This reflects overall job growth that has improved from last year’s 194,000 average.

In addition, the unemployment rate fell from 6.1 percent to 5.9 percent, its lowest level since July 2008. However, one persistent challenge has been the labor force participation rate, which dropped from 62.8 percent to 62.7 percent. That rate was the lowest since February 1978.

Overall, the data are mostly positive, particularly for the U.S. economy as a whole. It is encouraging to see upward movement in job creation, with the unemployment rate falling to a six-year low. Still, there continues to be sufficient slack in the labor market, and manufacturing employment growth was well below expectations in both August and September. Manufacturers remain mostly optimistic about demand and production, and recent data on hiring plans would seem to indicate stronger job growth than what these figures show. We hope to begin to see healthier employment gains in the coming months. If not, this report tends to support a degree of cautiousness in the economic outlook that might dampen an otherwise positive expectation about the next few months.

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

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ISM: Manufacturing Production Continues to Expand Strongly, but Activity Eased Slightly Overall

The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index (PMI) continues to reflect a strong expansion, but activity eased slightly overall in September. The headline figure dropped from 59.0 in August to 56.6 in September, which was weaker than anticipated. August’s reading had been the highest level since March 2011, and the pullback in September stemmed from slower paces of growth for new orders (down from 66.7 to 60.0), employment (down from 58.1 to 54.6) and exports (down from 55.0 to 53.5). It is likely that softer growth abroad and geopolitical events have dampened some enthusiasm, particularly on the international sales figures.

Despite some reduced data points for the month, manufacturers remain mostly positive. For instance, the pace of production (up from 64.5 to 64.6) was marginally higher in September, with the index exceeding 60 – indicating strong growth – for four consecutive months. Likewise, the new orders index has measured 60 or higher for three straight months. As such, it suggests that manufacturing leaders continue to see strengths, albeit with less optimism that the month before. The sample comments tend to support this interpretation, with several of them noting increased demand, sales and shipments.

While it is disappointing that the employment index declined somewhat in September, the longer term trend line reflects improvements from earlier in the year. For instance, the hiring measures averaged 57.0 in the third quarter, a nice step up from the 51.9 and 53.4 averages in the first and second quarters, respectively.

Overall, manufacturing sentiment was a bit softer than expected in September, but the underlying data show strong expansions in both demand and output. Manufacturing leaders are mostly positive about the coming months. This is largely consistent with the findings of our most recent NAM/IndustryWeek Survey of Manufacturers, which observed two year highs in respondents’ outlook. Yet, business leaders are also keenly aware of possible risks on the horizon. This includes geopolitical events, slowing economic growth in key export markets, a still-cautious consumer, workforce challenges, and other possible downside risks.

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

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ADP: Manufacturers Added 35,000 Workers in September

ADP said that manufacturers added 35,000 net new workers in September, the fastest monthly pace of job growth in the sector since May 2010. With that said, the August number was revised down from its original estimate of 23,000 to 16,000. Note that this is still more than the zero jobs added in August according to the Bureau of Labor Statistics, but it is widely assumed that figure might get revised slightly higher with Friday’s employment data release. I expect Friday’s jobs report to be more consistent with the 12,500 to 15,000 per month average experienced over the past year for the manufacturing sector.

The ADP data show positive job gains in each of the past eight months, with January’s weather-related decline being an exception to an otherwise decent year. Over the past five months, manufacturers have hired 17,000 additional workers each month on average, reflecting a pickup in hiring since the spring.

In the larger economy, nonfarm private businesses added 213,000 employees in September, averaging 217,000 since January. Moreover, it was the sixth straight month with nonfarm payroll growth exceeding 200,000. Outside of manufacturing, the largest job gains in September were seen in trade, transportation and utilities (up 38,000); professional and business services (up 29,000); construction (up 20,000) and financial activities (up 5,000). Small and medium-sized businesses (e.g., those with less than 500 employees) contributed 63.8 percent of the net new jobs.

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

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Dallas Fed: Manufacturing Activity Picked Up in September

The Federal Reserve Bank of Dallas said that manufacturing activity picked up in September. The composite index of general business activity increased from 7.1 in August to 10.8 in September, and in general, the data continue to show stronger growth since being nearly stagnant in February. In fact, the paces for production (up from 6.8 to 17.6), capacity utilization (up from 3.6 to 20.2) and shipments (up from 6.4 to 15.9) were all up strongly in September, which was encouraging.

At the same time, there were also measures that expanding at a less-robust pace. New orders (up from 2.2 to 7.5) rose modestly, but with somewhat less gusto than the production figures. Just over one-quarter of those taking the survey said that their sales had increased in September, with 18.4 percent noting declines and 55.7 percent saying that orders were unchanged. Along those lines, hiring (down from 11.1 to 10.6) and capital spending (down from 6.6 to 4.4) both eased slightly, even as they both continued to reflect modest expansion.

The sample comments tend to reflect this nuanced view of the current economic environment, noting both strengths and some challenges. For instance, a chemical manufacturer said, “Our increased business activity is based on orders placed this time last year. We see some softening, especially in demand from Europe and China, while the U.S. remains strong.” Other concerns include cautious consumer behavior and wage and price pressures. A food manufacturer noted, for example, “We remain concerned that our consumers remain under serious financial pressure.” Indeed, where we have seen pricing pressures this year, it has largely been in the food category, with higher costs for meats, eggs, dairy and produce.

Manufacturers in the Dallas Fed region were mostly positive in September about the next six months, albeit less so than in August. The forward-looking measure of business activity dropped from 18.7 to 12.1. With that said, over 40 percent of respondents expect higher levels of production,  new orders, and shipments in the coming months, with nearly 30 percent planning to add new workers and 35.7 percent predicting increased capital spending. The one negative remains elevated pricing pressures, with 45.5 percent of those taking the survey seeing higher input costs over the next six months versus 9.1 predicted lower costs.

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

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